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Energy Literacy Advocates (ELA) is a non-partisan, non-profit, public education and advocacy group dedicated to improving the energy literacy of all sectors of our democracy in order to empower a comprehensive national energy policy that is responsible and sustainable. Stay tuned for updated energy news!

Tuesday, January 5, 2010

Oil Investment Now vs. Supplies Later

Obviously with oil resources becoming geologically more difficult and financially more costly to extract the level of exploration and production has a significant impact on future oil supplies. With major oil companies decreasing their capital expenditure budgets (and the little guys having trouble even getting credit so that they can drill) the future of oil supplies does not look good - especially if there is a rebound in global economies.

The excerpt below is from ASPO-USA's year end "best of" article series, and well articulates this issue. If you want to read more about oil supplies with those who are hard-core into it (no recommendation from ELA staff here - just another data source) try visiting the Oil Drum.

As the International Energy Agency has been warning for years, a slump in upstream oil investment now means an oil supply squeeze later; the only question is when and how bad it will be. IEA Director Nobuo Tanaka warned in November that “Sustained investment is needed mainly to combat the decline in output at existing fields, which will drop by almost 2/3 by 2030.” Tanaka added that global upstream spending was budgeted to drop $90 billion, or 19%, during 2009 vs. 2008—the first decline in a decade. While some of those declines are offset by lower costs for exploration and production work, the remaining deferred investment means less oil five to ten years out.

The super-major investor-owned oil companies report that they will maintain the bulk of their planned capital expenditures going forward. Total SA plans to keeps its capital investment budget at $18 billion, Chevron will trim theirs 5% from 2009 to $21.6 billion in 2010, while ConocoPhillips will cut their capital budget by 10% to $11.2 billion. It is the smaller companies, those that are more reliant on credit to finance drilling and other field operations that are already in more of a bind. Additionally, a large number of OPEC projects have been delayed.

The investment slowdown has already impacted Canada. During 2009, the nation’s production declined slightly for a second year in a row, despite their enormous tar sands resource. But building tar sands facilities costs more than any other commercial liquid fuel operation, so those investments were the first to be delayed and cancelled. In fact, when oil dropped below $40 a barrel, some tar sands operators shut down their operations, since at that price their costs exceeded revenues.

What few analysts mention is that the impacts of this “above ground” investment slowdown will combine with the geologic limits that are impacting an increasing number of countries worldwide.

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

posted by Jamie Lang at 10:48 AM 0 comments

Tuesday, December 1, 2009

Peak Oil in the News

In one of the more high profile articles yet (it gained worldwide attention) the UK's Guardian covered a story about the International Energy Agency (IEA) and their World Energy Outlook 2009. At odds is the track record of the IEA in projecting oil supply and demand, and therefore prices, and the possibility of political manipulation of these otherwise data and model driven reports. The IEA is a quasi governmental agency funded by 28 mostly first world countries with oversight provided by a board of directors consisting of the "oil ministers of member countries." That said it would be foolish to believe decisions made at the agency are completely devoid of politics. Regardless the article correctly notes that the IEA has been consistently reducing their projection of global production as of late - a significant event given the former optimism. Note this article does incorrectly frame the issue as one of oil supplies running out (they are not and few claim they are).

The highlight of the article was a statement by an un-named senior official at the IEA: “the US has played an influential role in encouraging the Agency to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves…. [he] questions the prediction in the last World Economic Outlook that oil production can be raised from its current level of 83m barrels a day to 105m barrels. ‘The IEA in 2005 was predicting oil supplies could rise as high as 120m barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year. The 120m figure always was nonsense but even today's number is much higher than can be justified and the IEA knows this. Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further.’”

Text of the article follows.

Peak oil: the summit that dominates the horizon
By Terry Macalister
The Observer, Sunday 29 November 2009
http://www.guardian.co.uk/business/2009/nov/29/peak-oil/print

Crude is still being discovered; existing fields are not being exploited to the full. So it's hard to predict the exact point at which the world's dwindling reserves will precipitate a crisis. But it's coming

Massive new oil finds off the southern states of America and Brazil plus exciting discoveries in currently non-producing countries such as Ghana and Uganda sit uneasily with claims the world is running out of crude.

BP recently boasted about a "giant" strike on the Tiber field in the Gulf of Mexico and BG, the former exploration arm of British Gas, talked of its "supergiant" at the Guará prospect off South America, yet critics argue they cannot make up for the fast depletion of existing fields.

These "peak oil" believers say the high point of oil output could even have passed already. They argue it will take 10 years to develop the likes of Tiber while a string of similar discoveries would have to be made at very regular intervals to move the peak point back towards 2030 the projection used in some scenarios put forward by the International Energy Agency.

The debate has intensified in recent weeks after whistleblowers claimed the IEA figures were unreliable and subject to political manipulation – something the agency categorically denies. But the subject of oil reserves touches not just energy and climate change policy but the wider economic scene, because hydrocarbons still oil the wheels of international trade.

Even the Paris-based IEA admits that the world still needs to find the equivalent of four new Saudi Arabias to feed increasing demand at a time when the depletion rate in old fields of the North Sea and other major producing areas is running at 7% year on year.

"The fields which are producing today are going to significantly decline. We are very worried about these trends," says Fatih Birol, the chief economist at the IEA, who has gradually ramped that depletion figure upwards and has expressed deep concerns at a huge fall-off in the current levels of investment in the sector.

Birol and the wider industry are certainly well aware that the days of "easy" oil are over. The big international companies such as BP and ExxonMobil are struggling to find enough new oil to replace their exploited reserves year-on-year and Shell found itself on the end of a major fine for exaggerating its reserves report to the Securities & Exchange Commission in the US.

The energy groups used to rely on the easily exploited shallow waters in the Gulf of Mexico, politically friendly areas of the Middle East and geologically simple reservoirs off Britain to feed their refineries and petrol stations. But as these wells begin to run dry, Big Oil is being forced into ever more physically or politically demanding areas to bring home the crude – at much greater financial cost.

The Tiber find is just one example. There may be as many as 4bn barrels of oil in place – as much as the North Sea's Forties field – but the hydrocarbons are located in 4,100 feet of water, which makes them very expensive to extract. And BP admits there can be no guarantee exactly how much can be recovered from the lower tertiary sands of the Gulf.

The same is true of BG's find in the Santos Basin off Brazil. The company says at least 2bn "recoverable" barrels are in place, part of an estimated 150bn in what are, again, very deep waters – and in a part of the world that has bittersweet memories for the foreign oil producers.

Peter Odell, professor emeritus of international energy studies at Erasmus University in Rotterdam but with close links to Opec, says the new finds really are highly significant. "It shows the industry is capable of finding more oil than it uses and shows we have not come to any peak."

But that is not accounting for politics and the rise of the "resource nationalism" that has made the multinationals persona non grata in some of the great oil-bearing regions. BP was among the companies that saw its assets seized in a $30bn grab by president Hugo Chavez in Venezuela during 2007, while Exxon resorted to London's high court to try to wrestle back its interests there.

Developing countries such as Venezuela, Nigeria and Russia have increasingly been moving down the road to self-reliance, developing their own state-owned firms at the expense of the international players. But this can mean that western know-how and finance is sacrificed, slowing down the rate of oil development if not losing new reserves completely.

BP, Shell and Exxon have all had tussles with the Kremlin over their oil holdings in Russia, while Shell has found the government in Nigeria increasingly truculent over attempts to re-open the Niger Delta oil wells shut down due to guerrilla action.

The western firms see part of their salvation coming from being able to enter markets from which they have previously been barred, such as Iraq. But, leaving aside continuing questions about physical safety, both BP and Exxon have signed deals there in recent weeks on terms so tight they would have been inconceivable only a few years ago.

Exxon repeatedly threatened to walk away from any new involvement in Iraq – still one of the biggest reserve holders in the world – but in the end accepted a paltry deal, under which it would be paid $1.90 per barrel produced. It had been arguing for $4 but originally wanted control of the reserves, not just what amounts to a service fee for production.

Increasingly, Big Oil is also moving into environmentally sensitive areas that put it in collision with environmentalists, such as the Barents Sea off Norway, the waters around Alaska and – if it can get its hands on it – the Arctic itself.

In the meantime, the oil companies have moved into all sorts of "unconventional" projects such as "gas-to-liquids" (converting natural gas into petrol and diesel) and, most controversially, the tar sands of western Canada. These reserves offer enormous new quantities of oil but can only be extracted by mining or other methods which themselves require large amounts of energy and water.

The Athabasca sands being developed by Shell and others in Alberta are a number one hate target for Greenpeace and the new breed of socially responsible investment funds run by the Co-op and others. They could hold reserves of 170bn barrels, making Canada number two behind Saudi Arabia, but are only considered commercially viable if the crude price remains above at least $50 a barrel. In the first three months of the year, Shell alone lost $42m on its oil sands operations as the price of world oil slumped from its 2008 high.

The oil companies cut back their exploration and development spending in the face of lower crude prices and reduced demand from a recession-hit world. But as central banks continue to pump money into their economies, stock markets recover and China's industrialisation kicks back into gear, demand for oil has been growing.

And this is expected to continue. The IEA predicted in the just-published 2009 World Energy Outlook that oil demand would grow from 85m barrels a day today to 88m in 2015 and reach 105m in 2030. The organisation presumes that the challenge of meeting that demand can equally be met with a mixture of higher Opec production and considerably more output from unconventional sources.

These assumptions became the centre of an explosive debate three weeks ago after the Guardian spoke to IEA insiders who expressed deep concerns about the methodology and "politicisation" of the figures. Some senior figures are unhappy about what they see as over-optimistic forecasts coming out of the agency which represents the interests of 28 consumer countries, particularly the US.

One whistleblower said: "Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible, but there are fears that panic could spread on the financial markets if the figures were brought down further. And the Americans fear the end of oil supremacy because it would threaten their power over access to oil resources."

These expressions of concern have stoked the fires of the "peak oil" community, which has been warning for some years that global politicians are failing to move fast enough to conserve oil and move to a low-carbon economy. The dissidents include experienced oil investors such as Matt Simmons of Simmons & Co, committed green entrepreneurs such as Jeremy Leggett of Solarcentury, as well as many more impartial MPs such as John Hemming and apparently independent academics.

Kjell Aleklett, professor of physics at Uppsala University in Sweden, is one of the latter. His new report, "The Peak of the Oil Age", claims crude production is more likely to be 75m barrels a day by 2030 than the "unrealistic" 105m projected by the IEA. This would clearly lead to massive price escalation in a world that expects to see demand grow to feed the expanding economies of China and India even while politicians try to grow wind, solar and other low-carbon energy sources.

Aleklett, who runs the Global Energy Systems Group at Uppsala university, describes the IEA's report as a "political document" developed for consuming countries with a vested interest in low prices and says he too has talked to sceptics inside the Paris organisation.

The IEA has dismissed suggestions of internal ructions over the figures and has dismissed as "groundless" suggestions that the US was influencing the outcome of its forecast deliberations.

Meanwhile it has defended its overall projections and pointed out that 200 "independent" experts are given sight of its findings, satisfying its demands for peer assessment. Birol says: "We are very proud of our analysis and independence. We have a lot of critics. It's not possible to make everyone happy."

But the row rumbles on. John Hemming has just written to the IEA challenging a range of its figures while urging the UK government to take "peak oil" more seriously. The UK Industry Task Force on Peak Oil, which includes a variety of companies such as Virgin, Scottish & Southern Energy and Stagecoach, has also written to ministers calling for action.

These critics are united in their fear that "economic dislocation" is likely once the world wakes up to the potential for shortages and the price of oil races back up, not only to last summer's $147 a barrel, but more likely to $200. They point out that the world's big recessions tend to have been generated at least in part by sudden escalations in energy costs.

"The risks to UK society from peak oil are far greater than those that tend to occupy the government's risk thinking, including terrorism," says Will Whitehorn, a senior Virgin executive. "We fear this is because of over-estimation of reserves by the global oil industry, underinvestment in exploration and production, or a combination of the two."

The Department of Energy and Climate Change denies it is complacent, saying it accepts there is a "significant challenge" to attract the kinds of investment needed to keep the oil flowing.

It points out how it has been working with governments individually and collectively to speed up crude production levels while joining the other G20 members in calling for more transparency from producing countries over key aspects of energy output and depletion.

"We are training ministry officials in Nigeria and Iraq, for instance, to help them with licensing and other aspects of oil which will help them speed up the rate of production," explains a DECC spokeswoman.

She declines to comment directly on the IEA figures that caused the recent row but points out that Britain relied on a wide source of information and not just the agency's figures.

The UK Industry Task Force, which will produce a new report in January, is still upset that the Wicks review on energy security published this summer concluded "there is no crisis" – a position accepted by the government. Leggett, a member of the task force, argues that it was a similar lack of urgency that led to the implosion in the financial markets.

Labels: oil supply/demand, peak oil

posted by Jamie Lang at 2:00 PM 0 comments

Tuesday, November 3, 2009

Where Do Oil Industry CEO's See Oil Prices Headed?

For those who wonder what oil industry insiders are thinking about the future of oil prices we bring you a second installment of commentary from the Oil & Money Conference from our friends at ASPO-USA. The commentary speaks for itself, and clearly there is reason for concern about the future of oil prices. (See our first post on the Oil & Money Conference Here).

Commentary: Oil & Money Conference—What the CEOs and VPs are Saying
By Steve Andrews
On October 20-21, the 30th Oil & Money Conference, convened in London by Energy Intelligence and the International Herald Tribune, attracted roughly 500 attendees, many from the industry press (most of them working for the conveners). Held under tight security at the opulent Intercontinental Hotel, a half-dozen oil ministers past and present plus two dozen CEOs and VPs of oil producing, service companies and other industry players shared their views.

No statements were as ground-breaking as the O&M conference two years ago, when the Wall
Street Journal and others covered stark warnings by Total’s CEO Christophe de Margerie, Libya’s oil minister Shokri Ghanem and former Saudi Aramco VP Sadad al Husseini that world oil production was going to undershoot demand in the foreseeable future. But all three were present again, and all three echoed their previously-stated concerns, especially in light of the late-2008/2009 downturn in investment by a growing number of players outside of the super-major investor-owned oil companies. In fact, the majority opinion was a warning about the looming impacts of climate change decisions and project investments on prices and supplies over the next few years. A few comments from key presenters:

Optimists
Abdalla El-Badri, Secretary General of OPEC, said that among the reasons for extreme price
volatility during 2008 is “…the peak oil theory, which in OPEC we don’t believe in. We know that we have a lot of resources, we can supply the world with oil for the foreseeable future.” He focused on the new level of trading volumes of paper barrels, pointing out that from 2003 to late 2008, the daily paper barrels trade increased from 900 million barrels to 3 billion barrels a day—roughly 35 times the amount of oil actually consumed per day.

Tony Hayward, CEO of BP Plc, stated that “I do think the market is driven by the fundamentals of supply and demand…Between 2004 and 2008, the growth in demand meant almost all of the world’s spare capacity had been consumed. As we came into 2008, spare capacity was probably
somewhere just a bit above a million barrels a day…Declining production from existing fields,
coupled with new demand, mean we’ll have to find ways of bringing on-stream nearly 50 million
barrels a day of new capacity between now and 2030…The problem in meeting that goal isn’t
geological. It’s political. We have the natural, human and financial resources…We need secure and reliable access to those resources. If the conditions are right, industry will invest.”

Harsh Realists
Christophe de Margerie, CEO of Paris-based Total SA, in his lunchtime talk said that, “…demand
[will be] constrained by supply, and not the opposite. Demand will take time to recover, but
production capacities are taking more and more time to come on-stream. It is our responsibility to be critical and vocal. It has nothing to do with being provocative. When I still hear people say we will develop more than 100 million barrels of day of production, I want them to come here, now, and tell me where is it going to come from? Because it is not possible. Now the good news: we’ve made good discoveries and the reserves will last longer. Brazil is a brilliant result. But no production from those discoveries before 2016, 2020. Well, I’m not in charge of the road shows for Petrobras. It’s great, but it’s not for tomorrow. So tomorrow we will be short of capacity.”

Jim Mulva, Chairman and CEO of ConocoPhillips, stated that “the world economic downturn has
caused the largest decline in oil demand that we’ve seen in 25 years. It took approximately 8 years to get oil up to $147…but they lost more than two-thirds of that increase in about 8 months; and today, with the oil price around $75 a barrel we really don’t know whether that $75 a barrel is going to hold or not…And reserve replacement costs in our industry have more than doubled…Reserve replacement costs are not falling as quickly as the oil price [did].”
Mulva commented on gas-to-liquids during Q&A: GTL “is quite a challenge…It’s a pretty capital
intensive process and you have to ask whether that’s really the right way to go. I don’t think so and I think the markets pretty well said that…I don’t remember the numbers but I do remember certainly that GTL did not compete with LNG and it’s more complex, more costly.

Paolo Scaroni, CEO of Italian oil company ENI, said that comparing a cap-and-trade system to
carbon taxes, “I prefer a carbon tax because it seems to me easier to apply, more clear, something that can be implemented right now…But it is the only way in which we can push forward what I think is the real answer, short term, to the CO2 fight…which is energy efficiency. Energy efficiency should be the name of the game starting tomorrow.”

Sadad al Husseini, former VP of oil exploration and production for Saudi Aramco and now an
industry consultant, started by saying “I am not a peak oil or flat oil or plateau oil [person]; I think we just need to be good engineers and try to see what’s going on…It’s the short term and the long term—you’ve got to look at both the recent volatility and the longer term direction…
“In the long term, and that’s kind of where we probably miss the boat, we are depleting reserves. The clock is ticking. The replacement rate has not been very good…If you want to push production beyond say 70 or so million barrels a day, you have to move into higher cost alternatives. “Other sources of energy we’ve talked about this morning…is coal going to displace oil? The cost of clean coal is going to almost double the cost of electricity….Is [natural] gas going to displace oil? The top 10 gas reserves holders have about 77% of the reported gas reserves…How realistic is it to count on them as a future alternative to oil?...We get a little bit too facile with our talk about alternatives and switching and so on—there’s a problem with every source of energy. “…as you go up to say $90 a barrel, you’re consuming 4.5% of the global economy [for oil]. That in itself is a ceiling—you cannot go indefinitely into more expensive alternatives without destroying [the] economy and therefore destroying demand. So we do have a ceiling on prices and how much expensive alternative fuel we can put into the market.
“…in spite of the fact that oil prices were going up, North American production was going
down…We’ve had a very exciting development in Brazil with the subsalts, but on the other hand
there’s Venezuela coming down and the rest of South America hardly moving. Another example:
West African production is climbing very steadily, but Nigeria is declining; in North Africa, Libya has increased but flattened out and the others are generally flat. So the relationship between real high prices and increased production does not hold when you don’t have the resources.
“One of the projects I do with my friends in Morgan Stanley is to track global projects…Here are 273 non-OPEC projects, country by country, [and assuming] a 6.5% decline rate; at an 8% decline rate you need even more [projects]. Here are the OPEC projects including Iraq, Iran, Saudi Arabia, at a 3.5% decline rate; at a 5% decline rate means more intense production [is needed]. Combining OPEC and non-OPEC and looking at the global replacement rate, which should be around 4.5 million barrels/day per year, assuming conservative decline numbers, you just don’t have enough projects…Even if you have a very moderate increase in demand of about ½% per year, that shortfall becomes very substantial. I’m not saying this is the forecast—of course a lot has to be done to avoid this—but this is the reality as it stands today.

Nobuo Tanaka, Executive Director of the International Energy Agency, said that at their recent 35th anniversary meeting of the IEA, “certainly the issues there were the oil market, the gas security…but the most important and focused issue was climate change.” To achieve the “450 [CO2 parts-permillion] Stabilization Scenario…we have to peak out the demand of fossil fuels by 2020. This is the new finding of our 2009 World Energy Outlook.” “To achieve the 450 Scenario, we need first energy efficiency; but at the same time we have to invest in renewables, nuclear and carbon capturing and storage; and the cost as a whole is about 10 trillion US dollars between now and 2030.” In response to a question, he admitted that IEA was previously criticized for being too optimistic; “now we are criticized for being too pessimistic.”

Steve Andrews, a co-founder of ASPO-USA, was granted a press pass to cover the pricey O&M
conference for the Peak Oil Review—an intriguing decision by the Energy Intelligence group.

Labels: economy, oil supply/demand

posted by Jamie Lang at 2:13 PM 0 comments

Thursday, October 29, 2009

The Future of Oil - Peak or Plateau (or Does it Matter)?

The following is an abridged version of John Hess's (Chairman and CEO of Hess Corporation - an integrated oil and natural gas company with operations in 18 nations) comments at the October 21 Oil & Money Conference, courtesy of ASPO-USA. Keep in mind these are the remarks of an oil company executive and industry insider. His list of facts are one of the most honest, succinct, and accurate representations of the oil future that I have seen.

John Hess, Hess Corporation, October 21, 2009:
Our industry is at a crossroads. In the past few years, oil supply has struggled to keep pace with demand. But the financial crisis has reduced demand by 2 million barrels per day, creating excess inventories and lower prices. But once economic growth recovers, it is likely we will return to the market conditions of one year ago. The price of $140 per barrel oil was not an aberration; it was a warning.

Over the past several years, many people in our business have expressed confidence that we can meet the challenges ahead. Oil producers have suggested that the remaining global endowment of up to 3 trillion barrels of recoverable oil meant that we should not be concerned with a prospect of shortages. Higher prices, advancing technology and sound government policies would enable supply to keep up with demand. Consuming nations viewed these issues quite differently, criticizing producers for rising prices, blaming oil for climate change and implementing policies to develop alternatives to hydrocarbons

The approaches of both consumers and producers are based on hope, but what we need is a sober reality. Given the long lead times of 5-to-10 years from oil discovery to production, we need to act now to avert an oil crisis.

When my good friend Nick Brady was Secretary of the Treasury in the United States, he sometimes referred to the need for “Truth Serum.” Nick knew that good facts lead to good policy; bad facts lead to bad policy. In the interest of creating good energy policy, let us administer the truth serum and establish the facts.

Fact No. 1: Eighty-five percent of the world’s energy comes from hydrocarbons. While renewable energy will be needed to meet future energy demand and contribute to reducing our carbon footprint, hydrocarbons will fuel the world’s economy for decades to come. Renewable energy does not have the scale, timeframe or economics to materially change this outcome.

Fact No. 2: Once the economy recovers, oil demand is projected to increase by 1 million barrels per day each year, as world population grows from 6.8 billion today to 9 billion by 2050. The introduction of higher mileage standards in the U.S. and the gradual phasing in of electrical power into automotive drive trains will only moderate growth in automotive fuel demand. That is because nearly one billion vehicles on the road today could grow to approximately two billion vehicles in the next 30 years. Keep in mind: The U.S. has 1000 cars for every 1000 people; China has 10 cars per 1000.

Fact. No. 3: Supply. We are not running out of oil. The issue is not our endowment of oil resources, it is the world’s production capacity. Additions from exploration last replaced annual production in 1987. The easiest oil has been discovered. Costs are increasing for new barrels, where wells can be drilled in water depths of over one mile to targets up to six miles deep, and discoveries can take over a decade to develop.

Oil field declines are running at more than 5 percent per year. That means we have to add at least 4 million barrels per day each year just to keep production flat. Yet non-OPEC production is in the process of, if not peaking, reaching a plateau. The U.K. Energy Research Centre just published a report that there is a significant risk that worldwide production of conventional oil could peak before 2020 and enter terminal decline. If we do not act now, we will have a devastating oil crisis in the next 5-to-10 years.

We will need the courage to act to prevent this crisis and make the commitment to change our behavior – not just in demand; not just in supply; but both.

The United States must take a leadership role. With five percent of the world’s population but 25 percent of its oil consumption, the United States can no longer blame oil producers for rising prices. We need to have the courage to demand 50 miles per gallon as the national standard for all vehicles; gasoline hybrids and diesel could get us there. A gasoline tax of $1 gallon would boost conservation and help pay down the federal deficit by $120 billion per year.

In non-OECD nations, energy subsidies that the International Energy Agency (IEA) estimates cost $310 billion per year unnecessarily inflate world oil demand and obscure the true cost of energy, resulting in wasteful energy usage.

In terms of supply, the petroleum industry spends about $400 billion a year to find and produce oil, but that is not enough. With 80 percent of global reserves essentially off limits to outside investors and only 6 percent of OPEC’s oil revenues reinvested in energy infrastructure, something has got to change. The role of the national oil companies is critical; they need to invest more or allow others to partner with them.

We need a balanced approach going forward. It is not a decision of “either/or” but “and.” In addition to more oil supply and energy efficiency, we need a greater role for natural gas AND cleaner coal AND nuclear energy AND renewables.

Meanwhile, we must also establish realistic objectives for reducing greenhouse gas emissions that do not throw the world economy into reverse. Many governments want to limit global warming to no more than 2 degrees Centigrade. To meet this target, annual CO2 emissions would have to be reduced from today by more than 80 percent by 2050. But is this realistic? With world population growth and rising living standards, holding global CO2 emissions flat by 2050 would be a huge achievement in itself.

As the global system gets increasingly stressed over competition for resources, there is more and more protectionism among consuming nations and resource nationalism among producing countries. Nations are building walls to disengage from one another when they should be building bridges to collaborate.

Going forward, we need new models of collaboration. Over many decades, international oil companies and producing countries have worked together in a way that has been purely financial – through contracts that are either tax and royalty or production sharing. In the future, we need to build stronger bonds of trust. The investment model needs to be focused not only on oil resources but building the capabilities of host country’s human resources. We must redefine what it means to get a return on investment.

Second, we also need a global forum dedicated to energy policy. Without a common framework on energy, sustainable economic development will be impossible. I would suggest this challenge for the G-20, which represents represent six of the seven biggest oil producers and the 14 largest oil consumers. Its mission is sustainable economic growth. Energy not only fits this objective, it is essential for its success.

In conclusion, what kind of world do we want to leave to our children? If we do nothing, there will be severe consequences. Skyrocketing prices could become a way of life in a crisis-led world.
In a world where we all make concessions and put global interests first, we will all win. If consuming nations led by the United States commit to conserving energy, we could save 5 million barrels per day of incremental demand over the next 10 years. If producing nations led by OPEC commit to building more oil production capacity, we would add over 5 million barrels per day of incremental supply over the next 10 years. In this world, prices would be stable and our global economy could prosper. Does this scenario sound impossible? I do not think so.
The stakes have never been higher. We must build a balanced and comprehensive approach to energy security and protection of the environment to ensure sustainable development. We must unite and work together as an industry, communicating one message, having the courage to act and collaborating for the global good. In this world, there will be a bright future, not only for oil, but for many generations to come.

Labels: oil supply/demand, peak oil

posted by Jamie Lang at 12:09 PM 0 comments

Monday, October 19, 2009

A New Lowest Price Set for Oil?

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

posted by Amanda Voss at 4:38 PM 0 comments

Tuesday, September 29, 2009

Saudi Minister Touts $75 As Optimal Price for Oil

As oil prices continue their market fluctuations, Saudi oil-minister Ali al-Naimi highlighted $75 as the best price for oil. According to al-Naimi, $75 earns oil producers enough profits to keep up supply, while being just high enough to encourage continued alternative fuel development and investment.

Whether $75 represents the perfect median price is debatable, but the 1970s demonstrate that once pain at the pump dissipates, consumers return back to the norm. While the price Americans pay for gasoline has returned once again to "acceptable" levels, the question for us is whether or not we've learned our lesson. Will inexpensive fuel derail continued investment in alternatives, or have we put the blinders back on? If the blinders are back on, history warns that our inflexible demand for oil will be tested again.

For more on al-Naimi in the New York Times, click here.

Labels: energy sources, oil price, oil supply, oil supply/demand, peak oil, renewables

posted by Amanda Voss at 12:11 PM 0 comments

Monday, September 21, 2009

Federal Reserve Meeting Alters Oil Prices

Energy prices fell sharply in the face of the G-20 Economic Summit in Pittsburgh, and a US Federal Reserve meeting. The Federal Reserve will determine whether to remove certain economic props put in place at the end of 2008.

Domestic fuel demand has dropped in America since the beginning of the recession, while China reported an unexpected drop in demand last month.

Other energy data reinforces the drop in energy demand: US oil stockpiles are up, and heating oil reserves are at a 27 year high.

For more, click here.

Labels: economy, oil price, oil supply/demand

posted by Amanda Voss at 12:47 PM 0 comments

Thursday, September 10, 2009

Oil Production to Remain Steady; Global Demand May Raise

Joint statements will impact American energy and the oil markets, as today OPEC agreed to maintain current levels of oil supply while the International Energy Agency (IEA) raised its global demand forecast.

IEA based its increased predictions on strong growth in the Chinese demand, with above average demand from the US market. This demand has helped keep oil at or above $70 a barrel, and drove a 62 percent increase in the price of oil this year.

Based on demand data, OPEC, which supplies roughly 40 percent of the world's oil, has pledged not to cut supply over the next few months.

For more, click here.

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

posted by Amanda Voss at 12:09 PM 1 comments

Friday, September 4, 2009

Oil Prices Drop due to OPEC, Economy

On the news that OPEC will maintain their current supply levels, oil neared an eight-week low in price. Additional details on US unemployment kept prices lower. The price of oil, per barrel, is predicted to close at, or lower than, $68.

OPEC, which supplies 40 percent of the world's oil, is scheduled to meet September 9 in Vienna. OPEC has orchestrated over 70 percent of the supply cuts this year, but is not predicted to cut supply at its upcoming meeting.

An additional factor dropping the price of oil is the end of the summer driving season in the US.

For more details, click here.

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

posted by Amanda Voss at 12:02 PM 0 comments

Monday, August 17, 2009

Oil Prices Remain Steady Despite Storm

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

posted by Amanda Voss at 7:01 PM 0 comments

Thursday, August 13, 2009

US Demand for Gasoline is Down

The Department of Energy reports that US demand for gasoline is down 8.2%, as compared to this time last year. Overall the DOE report predicted a 2.7% decline in demand for oil.

The price of oil, which has stabilized around $70 per barrel, fell slightly after government reports showing continued loss of jobs and lower than expected retail sales. However, many analysts forecast that oil will be a prime commodity as the economy revives, and its price could jump quickly.

For more analysis, click here.

Labels: economy, oil price, oil supply/demand

posted by Amanda Voss at 12:45 PM 0 comments

Wednesday, July 29, 2009

Oil Values Fall as Stockpiles Surge

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

posted by Amanda Voss at 11:44 AM 0 comments

Monday, July 13, 2009

Prices Drop, Stockpiles Up for Oil

Crude oil prices continue to fall, due to growing stockpiles and declining demand. Oil prices touched $58 today in trading, down from the $73 high a month ago.

Near future prices will hinge primarily on economic reports, including inflation and consumer confidence indexes.

A further factor in the price of oil are attacks on Nigerian production areas by domestic opposition forces.

For a more full economic synopsis, click here.

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

posted by Amanda Voss at 11:55 AM 0 comments

Wednesday, July 1, 2009

Oil Prices Reveal Mixed Data

As oil prices have risen to new highs for 2009, above $70 a barrel, Energy Information Administration data also revealed that stockpiles are growing.

Prices rose due to attacks at Nigerian oil facilities. At the same time, U.S. petroleum stockpiles grew by 2.1 million barrels.

Oil prices continue to mirror economic and political uncertainties worldwide.

For a more in depth study on oil prices and oil data in The Wall Street Journal, click here.

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

posted by Amanda Voss at 9:09 AM 0 comments

Thursday, June 25, 2009

Oil Price Bubble Could Strike Again

During joint talks between the European Union (EU) and OPEC, officials warned that another oil price spike could threaten economic recovery.

OPEC is calling for greater transparency and regulation, particularly in the global economic market, to prevent another price bubble.

Oil is currently trading at $68 dollars per barrel, far below the record of $150 set last year.

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

posted by Amanda Voss at 9:26 AM 0 comments

Wednesday, June 3, 2009

Unpredicted Drop in US Demand for Gasoline

Bloomberg - On the heels of a seven month peak in oil prices, news of burgeoning inventories and an unexpected drop in demand pushed the cost of oil back down today.

Especially noteworthy was the major decline in US demand for gasoline. Demand fell 900,000 barrels to 17.7 million barrels a day last week, the biggest decrease since January 9. Gasoline consumption slipped 518,000 barrels to 9.02 million, the biggest decline since January 2005.

“It was surprising to see gasoline demand drop, because of the Memorial Day holiday,” said Mike Zarembski, senior commodity analyst at OptionsXpress Holdings Inc. in Chicago. “It’s probably a sign that consumers are cutting back on driving because of the run-up in retail prices.”

The peak U.S. gasoline demand period traditionally lasts from late May’s Memorial Day holiday until Labor Day in early September, as Americans take to the highways for vacations.

To read the full article, click here.

Labels: gas prices, oil prices, oil supply/demand

posted by Amanda Voss at 1:21 PM 0 comments

Thursday, May 28, 2009

OPEC Confident of Demand Recovery

Bloomberg - At the conclusion of the most recent Organization of Petroleum Exporting Countries (OPEC) summit in Vienna, OPEC ministers decide to leave production quotas unchanged, as optimism rises over expectations of recovering demand.

Saudi Arabian Oil Minister Ali al-Naimi stated that“prices are good, the market is in good shape,” and that this fact lead the group not to alter its target outputs.

Mike Wittner, head of oil market research at Societe Generale SA in London, felt the most significant development of the conference was the forecast of demand recovery, occuring currently, in the Middle East, Asia and Latin America.

The OPEC decision precedes the U.S. Energy Department's release on oil data today. General trends point towards declining oil stockpiles, which indicate growing demand.

To read the full article, click here.

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

posted by Amanda Voss at 11:12 AM 0 comments

Tuesday, May 12, 2009

Amidst Rocky Market, EIA Releases Oil Forecast

Demand for oil has fallen to 2004 levels, according to Energy Information Administration (EIA)numbers. The EIA has revised down in its demand predictions for the U.S. in 2009, as well as its output numbers from OPEC.

While numbers might be falling, China appears on the EIA's radar with growing demand forecasted, even for the economic downturn of 2009. Based upon China's recent purchases, oil rose above $60 a barrel - a six month high - in the markets on Tuesday.

To read a full analysis in The Wall Street Journal, click here.

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

posted by Amanda Voss at 10:46 AM 0 comments

Friday, May 8, 2009

Price of Oil Rises to 6-Month High

The Wall Street Journal - Oil prices rose above $58 Friday afternoon, fueled largely by optimistic economic news and jobs outlooks. The price represents a 6 month high.

Also bolstering oil prices is speculation over what actions OPEC will take May 28 in Vienna. OPEC may agree to cut oil output at its May 28 meeting, but analysts doubt such a move will be made, given the recent strength in oil prices and the still-fragile global economy. A huge glut in inventory - especially in the U.S., where crude stockpiles are at a 19-year high - might argue for such a move, but the near 80% jump in prices from the year's low in January argues against it.

The rise in price parallels historical annual trends, where gasoline prices usually peak during the months of May and June.

To read the full article, click here.

Labels: economy, oil price, oil supply/demand

posted by Amanda Voss at 1:28 PM 0 comments

Friday, May 1, 2009

Price of Oil Posts Gains to Five Week High

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

posted by Amanda Voss at 4:46 PM 0 comments

Drilling Rig Count Suffers Rapid Decline

Steve Andrews, an advisory board member, was kind enough to share the above slide with us this week. In layman's terms this means there is a serious lack of investment in the rigs we use to drill for oil and natural gas in this country. That means when (and I say when, not if - recessions don't last forever) demand increases again we face the usual 2-5 year start up time from when the call is made to drill until the first product goes to market. As Steve put it, regarding the decrease in rig count "While we had a longer decline and larger percentage crash between 1981 and 1985, nothing has approached this crash in terms of speed and depth combined." Scary!

Labels: energy, oil supply/demand, peak oil

posted by Jamie Lang at 2:55 PM 0 comments

Tuesday, April 21, 2009

Asia Ministers, OPEC Discuss Energy Spending

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

posted by Amanda Voss at 8:52 AM 0 comments

Tuesday, April 14, 2009

A New Oil Peak: The Peak of Consumption?

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

posted by Amanda Voss at 9:27 AM 0 comments

Monday, April 13, 2009

IEA Releases New Demand Forecast

Oil prices dropped back below $50 a barrel in Monday's trading, as investors reacted to slipping stock markets and an International Energy Agency (IEA) forecast for a drop in global crude demand.

The IEA is an energy policy adviser comprised of 28 countries. The organization said Friday that demand this year will likely fall by 2.4 million barrels a day to 83.4 million barrels, or 2.8 percent lower than last year.

"In other words, the IEA lowered its estimate the equivalent of the daily output of Iraq," analyst and trader Stephen Schork said in his daily Schork Report. While the percentage seems minor, markets reacted to the new forecast, sending the price of oil down.

To read the full Associated Press report, click here.

Labels: economy, oil price, oil supply/demand

posted by Amanda Voss at 10:29 AM 0 comments

Thursday, March 26, 2009

Some Investors Predict Oncoming Energy Price Surge

The New York Times is forecasting that investors are laying the groundwork for a dramatic upsurge in the energy and commodities markets, in spite of signs suggesting the overall economy is still deteriorating.

While demand is down, many oil analysts predict that the oil price has bottomed out.

The data "suggest the market balance between supply and demand is tighter than it was a year ago when we were trading $110 a barrel," Citigroup energy analyst Tim Evans said. "Over the longer cycle, I don't like to bet against OPEC."

To read the full article, click here.

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

posted by Amanda Voss at 4:33 PM 0 comments

Friday, March 20, 2009

Oil Prices Surge, Fall As Week Ends

Despite reaching a high in trading not seen since December, at the close of markets Thursday, oil declined in trading this morning on news that the dollar was strengthening against the euro.

Increasing U.S. stockpiles of oil also drove oil prices down.

Oil continues to reflect the volatility of the market, and the economic downturn. Market speculations on oil prices are currently being gauged against predicted timeframes for national and worldwide economic recovery, contents of national oil stockpiles, and consumer and industrial demand.

To read today's market analysis for oil commodities in Bloomberg, click here.

Labels: economy, oil price, oil supply/demand

posted by Amanda Voss at 7:11 AM 0 comments

Monday, March 16, 2009

Saudi Oil Minister Advocates the Critical State of Fossil Fuels

Monday, March 16 - Saudi Arabian Oil Minister Ali al-Naimi emphasized today, that "Given their massive scale, non-renewables will remain the world's energy workhorse for many decades to come."

These comments came after the latest OPEC meeting, where members agreed to hold production steady, given the tenuous state of the world economy.

In extolling the continued need for, and reliance upon, fossil fuels, Naimi additionally accentuated the issue of lagging technology in alternative fuels. "... there is no excuse to pin our hopes only on alternatives which today are just supplemental energies," he said. "Our immediate focus, then, must be to make fossil fuels cleaner and more efficient."

To read the full article in Reuters, click here.

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

posted by Amanda Voss at 8:31 AM 0 comments

Friday, March 13, 2009

IEA Lowers Forecast Again

From the Associated Press -

"The International Energy Agency on Friday lowered its estimate for global oil demand in 2009 as the crisis curbs demand in the United States, Russia and China.

The agency said demand would drop for a second consecutive year for the first time since 1982-1983.

In its closely watched monthly survey, the IEA cut its forecast for demand this year by 270,000 barrels a day to 84.4 million barrels a day — 1.5 percent lower than a year earlier.
The Paris-based agency said demand for oil last year was estimated to have slid 0.4 percent to 85.7 million barrels a day.

The IEA said that "the eventual resumption of global demand growth will largely depend upon much stronger economic performance than is currently the case" among the world's biggest energy consumers, and that the latest indicators are "not encouraging."

Members of OPEC have responded to lower demand by cutting output.
The IEA estimates that global oil supply fell in February to 83.9 million barrels a day, down 1 million barrels a day from January and down 3.4 million barrels a day from a year earlier."

To access the link to this article, click here.

Labels: energy, oil price, oil supply/demand

posted by Amanda Voss at 10:53 AM 0 comments

Tuesday, February 3, 2009

Markets Eye Weight of OPEC Cuts

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

posted by Amanda Voss at 10:16 AM 0 comments

Wednesday, January 28, 2009

Oil Prices Rise on Stimulus News

The Associated Press - NEW YORK (AP) — Oil prices rose Wednesday despite another government report showing that U.S. crude stockpiles are growing as consumers and business slash spending on energy.

Traders on the New York Mercantile Exchange instead looked to Washington, where the House was expected to approve an $816 billion economic stimulus plan that could help jump-start the ailing economy.

Supporters of the massive stimulus bill say it would create up to 4 million jobs. The bill, which includes roughly $550 billion in spending and $275 billion in tax cuts, could be signed by President Barack Obama by mid-February. If so, it would lead to more energy spending by manufacturers as they ramp up production, and perhaps millions of Americans who have lost jobs since last year.

To read the full AP News Release, click here.

Labels: economy, oil price, oil supply/demand

posted by Amanda Voss at 3:36 PM 0 comments

Monday, January 19, 2009

Sign of the Times: UAE Takes a Green Stance

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

posted by Amanda Voss at 9:23 AM 0 comments

Thursday, January 15, 2009

Predicting Oil Futures

New York Times - The atmosphere of uncertainty for 2009 is mirrored by what has happened to oil. During 2008, oil prices fluctuated erratically, recording the most volatility since 1990, when Iran invaded Kuwait. Now, many in industry are stumped over what the futre holds for oil.

According to the Times, "The problem for the companies is not just that prices are lower, but that they have become volatile — historically, a sign of an unstable market whose direction is uncertain. Between Christmas and a week ago oil prices soared 40 percent, only to reverse course almost as sharply in recent days. Just last week, the price of a barrel of crude oil dropped by nearly 12 percent in one day alone."

New trends - unimaginable from the first half of 2008, when suppliers were trying to keep up with demand - include a boom in land and sea storage for excess oil. Investment in new drilling and oil exploration has halted.

To read more about predicitions for oil in 2009, and to access the full Times story, click here.

Labels: economy, oil price, oil supply/demand

posted by Amanda Voss at 8:48 AM 0 comments

Thursday, January 8, 2009

Venezuela Signals Compliance with OPEC Regulations

In a move designated to demonstrate support of the latest OPEC rulings on supply cuts, Venezuela cut sales to the U.S., China and Europe.

Venezuela, the biggest oil exporter in the Americas, is making the reductions as part of an agreement to cut 189,000 barrels under the OPEC deal reached Dec. 17 in Algeria to arrest a slide in prices.

To read the full article in Bloomberg, click here.

Labels: oil price, oil supply/demand, u.s. energy policy

posted by Amanda Voss at 8:45 AM 0 comments

Monday, January 5, 2009

China, U.S. Racing to Stockpile Oil

Both the U.S. and Chinese governments are expanding efforts to stockpile oil while low prices persist in the markets. The U.S. Department of Energy announced Friday, January 2, that the U.S. would aim to fill its Strategic Petroleum Reserve to capacity this year.

According to the Wall Street Journal, the Chinese are not far behind. China recently completed a four-base strategic reserve complex, and plans to add 102 million barrels of oil during its first acquisition phase. When nonstate oil distributors and refiners are added into the picture, China may boast a total of a billion gallons of idle storage capacity.

While U.S. acquisitions are not expected to have a drastic impact on oil prices, industry experts are watching Chinese purchases carefully.

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

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

posted by Amanda Voss at 7:48 AM 0 comments

Tuesday, December 30, 2008

A View from the Other Side: Energy in the Tehran Times

December 30, 2008 - The Tehran Times, Iran's leading international paper, posted its own synopsis of oil prices, the energy market, and the world's future energy outlook. We have posted excerpts below, and have included a link to the full text of the article, in English.

In response to the negative effects of low oil prices, the article reported, "Moreover, lower oil prices are likely to impede the massive investment needed to meet rising demand by 2030, delay introduction of energy-saving technologies, and make alternative fuels less competitive. The tight credit environment will also make it more difficult for energy firms to obtain the necessary funding for financing the capital-intensive growth in production capacity, especially necessary for expensive and difficult offshore production, exploration and development, and heavy oil, oil sands, or oil shale production."

The article also discusses the growing threat of energy nationalism, the future supply crunch, and the sleeping giants of China and India.

To read the full article, click here.

Labels: energy policy, energy sources, oil price, oil supply/demand, peak oil

posted by Amanda Voss at 8:48 AM 0 comments

Thursday, December 18, 2008

OPEC Confirms Predicted Cuts; Oil Production Slashed by 2.2 Million

December 17, 2008 - Effective January 1, 2009, OPEC producers have agreed to slash oil production by 2.2 million barrels. While the move was expected to boost oil futures, the price of oil remains below $40 a barrel. Some doubt remains in the markets about whether OPEC members will adhere to such strict cuts.

When questioned about the cuts, OPEC cited the need to preserve oil prices so as to maintain medium- and long-term energy supply goals and investments.

The 2.2 million barrel per day production cut represents the largest cut in OPEC history. OPEC controls roughly 40 percent of the world's oil.

To read the full synopsis from the Wall Street Journal, click here.

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

posted by Amanda Voss at 8:24 AM 0 comments

Monday, December 15, 2008

Price of Oil Rises as OPEC Confirms "Sizable Cuts"

December 15, 2008 - Crude oil surged past $50 in trading upon remarks by OPEC’s Secretary-General Abdalla El-Badri. El-Badri opened up the December 17 OPEC meeting agenda, stating the group would make "sizable cuts" in production, and would ask for collaboration in these cuts from Russia.

OPEC pumps 42 percent of the world’s oil, and is projected to lower output targets by at least 2 million barrels a day, or 7.3 percent at the meeting Dec. 17 in Oran. Analysts expect Russia to be asked to cut production by 200,000 to 300,000 barrels per day.

Reflecting the uncertainty of the markets, oil, which lost 70% of its value from July, has gained 13 percent in the previous week, its biggest five-day gain in four years, on speculation production cuts will revive prices.

To access the full article in Bloomberg, click here.

Labels: oil price, oil supply/demand

posted by Amanda Voss at 9:23 AM 0 comments

Thursday, December 11, 2008

International Energy Agency Predicts Continued Demand Drop for Oil

December 11, 2008 - The Wall Street Journal reports that International Energy Agency (IEA) predicted Thursday, in London, that world crude-oil demand would officially enter its own recession, with oil consumption contracting for the first time in 25 years because of the deterioration in global economic activity. The last time demand for oil contracted was in 1983.

Other indicators bolster the IEA's forecast: spare production capacity among OPEC is currently at a six-year high, and the world's leading oil consumer - the US - is posting record demand declines only predicted to continue in 2009.

To access the full Wall Street Journal article, click here.

Labels: economy, oil price, oil supply/demand

posted by Amanda Voss at 9:02 AM 0 comments

Wednesday, December 10, 2008

Crude Oil Prices Rise on Speculation of Collaboration between Russia, OPEC

December 10, 2008 - On the economic markets, oil rose to $44.72 amid speculation that Russia would collaborate with OPEC in issuing oil production cuts. According to Bloomberg, OPEC and Russia are preparing to launch “significant” production cuts. Russia is the world’s second-largest exporter after Saudi Arabia.

OPEC meets December 17 in Algeria, and is expected to substantially cut oil output. Oil has lost 30 percent since the supply cuts issued in October. Production could be cut by as much as 2.5 million barrels per day.

While the success of production cut strategies hinge largely on market recovery, some analysts estimate that OPEC would like to see oil reach $100 a barrel soon.

To read the full article, click here.

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

posted by Amanda Voss at 8:55 AM 0 comments

Friday, December 5, 2008

Oil & the Economy: Prices Continue to Fall

December 5, 2008 - On news that U.S. employers cut 533,000 jobs in November - the most since December, 1974 - oil plummeted to below $42 a barrel. Oil has lost $5 over the past five days.

As the economic woes dragging oil prices down are not likely to rebound quickly, OPEC is indicating that they will cut production levels at the scheduled December 17 meeting.

To read more about falling oil prices, and to track 2008 NYMEX valuations of crude oil, click here.

Labels: economy, oil price, oil supply/demand

posted by Amanda Voss at 10:39 AM 0 comments

Thursday, December 4, 2008

China Eyes Fuel Price Reform, Gasoline Tax

December 4, 2008 - China plans to implement a variety of energy policy changes, beginning in January 2009. Proposed changes include the addition of a retail fuel sales tax and the adjustment of fuel prices to reflect the drop in oil on the world's markets. The Chinese government currently sets the price for oil within the country.

Ten years ago, China first proposed a fuel tax to raise revenue for road and infrastructure maintenance. Officials cite the new fuel tax as a measure to encourage resource conservation.

The Chinese government hopes a reduction in fuel prices will stimulate economic activity.

To read the full story, click here.

Labels: energy policy, oil price, oil supply/demand

posted by Amanda Voss at 1:16 PM 0 comments

Wednesday, August 13, 2008

Americans Ditching the Car

It looks as though the inelasticity of gasoline prices is finally giving way to increased conservation by the American public, as evidenced by the article below:

Americans ditching the car

By Kenneth Musante and Aaron Smith, CNNMoney.com staff writers

NEW YORK (CNNMoney.com) -- Americans drove 9.6 billion fewer miles in May compared with a year earlier, according to a report Monday from the Federal Highway Administration.
"We have seen the longest decline in vehicular miles traveled since we started collecting this data," said U.S. Transportation Secretary Mary E. Peters in a conference call with reporters.
Peters said that in the first four months of this year, Americans traveled 40.5 billion miles less compared with the same period in 2007. She said the decline in usage means less tax revenue for highway system.
Many of these commuters are flocking to trains, buses and bikes, or telecommuting from home.
Rising gas prices are to blame for the driving decline, and the use of public transportation is soaring, said Virginia Miller, spokeswoman for the American Public Transit Association, a private trade group.
"It does seem that we are on track to beat last year's record [public transportation] ridership," she said, noting that the 2007 tally of 10.3 billion public transit trips was a 50-year high.
"That can really only be explained by the large increase in gas prices," said Miller.
Gasoline prices soared in May, rising for 24 consecutive days in the month, and breaking the psychologically significant $4-a-gallon barrier in many states, according to data from motorist group AAA.
The FHA said that driving in May experienced the third-largest monthly drop since the agency, a division of the U.S. Department of Transportation that manages the nation's highways and bridges, began collecting data 66 years ago. It was the largest drop for any May, a month that usually sees driving increase due to the Memorial Day holiday, the agency said. Three of those largest monthly declines have occurred since December, as unusually high fuel prices take a toll on drivers.
Trains, buses, bikes, telecommuting
Many of these drivers switched to public transportation. Usage jumped in the first three months of the year by 88 million trips from a year ago, for a total of 2.6 billion, according to the most recent figures available from the APTA.
Some of the most dramatic increases occurred in the light rail systems in Baltimore, Minneapolis and St. Louis, the commuter rails of Seattle and Harrisburg, Penn., the buses of San Antonio and Denver, and the subways and elevated rails of and Boston.
The Boston Globe reported Monday that the Massachusetts Bay Transportation Authority broke a ridership record of 375 million passengers in fiscal year 2008, which is 21 million more than the prior year.
Other commuters, like Eric Creese, a senior database administrator in Eagan, Minn., switched to muscle power for commuting. Creese, a former triathloner, said that high gas prices inspired him to "get back" into biking.
"I asked myself, 'Why drive 150 miles a week when I can save my car, my money and do something good for my body and environment,?'" said Creese, who said he has biked 1,000 miles to work since May and saved about $250 in gas.
Now Creese runs a Web site - GasFreeCommute.com - for bike commuters, with calculators to estimate calories burned and gasoline saved. His co-workers have logged their miles on his site, totaling 5,400 so far.
And if commuters really want to save money, they'll stay at home, said Chuck Wilsker, president and co-founder of The Telework Coalition. Wilsker estimates the nationwide tally of telecommuters to increase by 4 or 5 million workers this year, from an estimated 28 million at the start of 2008.
"If you want to quickly reduce your commuting costs by 20%, leave your car at home one day a week; if you want to reduce your costs by 40%, leave your car at home two days," said Wilsker, who telecommutes from his suburban Maryland home to Washington, D.C.
Not only does Wilsker save on gas, but he said he saves on automotive wear and tear, lunch and dry cleaning.
"You know what I'm wearing?" said Wilsker. "I'm wearing shorts, sandals and a tank top. I'm sitting here working from home. My dry cleaning bill is none."
Feds get squeezed on taxes
As high fuel costs led many to rely on other forms of transportation, such as mass transit, and to cut back their miles on the road this year, the reduced driving also sliced tax revenue that would normally go toward highway maintenance, the FHA said.
The federal tax on gas generates 18.4 cents per gallon of regular gas sold and 24.4 cents per gallon for diesel fuel, which gets pumped in to the federal Highway Trust Fund. Some states also add a tax of their own to fund various projects.
The FHA budget totaled $42.18 billion in fiscal year 2008. The Bush Administration has requested $40.14 billion for fiscal year 2009.
As Americans drive less, new ways are needed to fund the national road system, the highway agency said. Even though fewer drivers are using the highways, funding is still critical, party because of a backlog in highway projects.
Peters said she would unveil a new plan on Tuesday to "fundamentally reform our nation's transportation." She said much of the plan will focus on calculating a better cost-benefit analysis for maintaining the national highway system, as well as "weaning ourselves from the gas tax over time."
First Published: July 28, 2008: 9:45 AM EDT

Find this article at: http://money.cnn.com/2008/07/28/news/economy/driving/index.htm?cnn=yes

Labels: economy, oil price, oil supply/demand

posted by Jamie Lang at 12:01 PM 0 comments

Monday, June 30, 2008

The Wall Street Journal Focuses on Peak Oil

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

posted by Amanda Voss at 11:51 AM 0 comments

Tuesday, June 17, 2008

Bloomberg: $250 Per Barrel of Oil?

After another day of record-setting oil on Wall Street, Alexei Miller, chief executive officer of OAO Gazprom, the world's biggest natural- gas company, predicted crude oil will climb to $250 a barrel in the "foreseeable future.'' If the "foreseeable future" includes $250 a barrel for crude oil, food prices double, plunging the U.S., Japan and Europe into deep recession. Companies go bankrupt. Airlines are nationalized. Sport-utility vehicle sales dry up as gasoline tops $7 a gallon.

Yet as these remarks touched off a storm of investing and options contract negotiations for fuel, criticism over Miller's prediction also grew. Tom Kloza, chief oil analyst for the Oil Price Information Service in Wall, New Jersey, is skeptical about Miller's prediction because it may benefit Gazprom. "It's silly to take people with incredibly vested interests as having an unfettered, unbiased opinion,'' Kloza says. Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pennsylvania, says the firm's economic models break down if the price of oil goes over $200 a barrel. "The U.S. goes into deep recession, as does most of Europe and Japan, and that takes much of the developing economies with it,'' he says. "I don't see how we get to $250 because the economy is broken long before that, and demand falls and that causes prices to fall.''

To read more of this article, click here.

Labels: economy, oil prices, oil supply/demand

posted by Amanda Voss at 11:07 AM 0 comments

Friday, May 30, 2008

Searching for Precedence in Today's Energy Crisis

Fears of an energy crisis, according to columnist Gerald Seib, mean 2008 Presidential candidates must grapple with answers neither easy or cost-free. Yet Seib notes that America is not without historical examples in overcoming energy issues, and contends that the oil shock of the mid-1970s, and the Arab oil embargo of 1973 offer valuable lessons to today's policymakers.

Then, as now, a weakening U.S. dollar placed upward pressure on oil prices, eventually leading to a quadrupling in cost. While attempts at government price controls on oil proved, historically, to be a particularly bad idea, Sieb cites two government steps which were effective: first, an increase in energy supplies, and secondly, policies aimed at reducing consumer demand. The 1970's saw the creation of Corporate Average Fuel Efficiency (CAFE) standards, which required auto makers to produce fleets that got better gas mileage. The standards required that new-car gas mileage, on average, double over the following decade. When combined with a national speed limit set at 55 miles-per-hour, CAFE standards helped lower demand for oil by 2 million barrels per day.

While energy transition is not simple or quick, improvements in America's energy portfolio combined with increased efficiency have proven historically useful in lessening a crisis. To read more about the policy precedents of the 1970's and potential contemporary applications, click here.

Labels: election 2008, energy policy, oil supply/demand, u.s. energy policy

posted by Amanda Voss at 9:06 AM 0 comments

Tipping Point for Consciousness is Economic

Is sheer market economics dictating the recent surge in hybrid and compact flourescent light bulb purchases? The U.S. is at a "tipping point," with people beginning to factor energy use into everyday decisions, says Lee Schipper in The Wall Street Journal. Schipper, who has studied energy consumption for decades, declares the driver isn't ecology, bur rather "Sadly, it's economics. No pain, no gain."

Columnist Jeffrey Ball attributes Europe's energy consumption patterns - where the average resident consumes less than half as much oil each year as the average American - to high energy taxes, rather than environmental awareness. These economic penalties make conservation rational and not just virtuous.

For the full text of this article, click here.

Labels: economy, energy sources, environment, oil price, oil supply/demand

posted by Amanda Voss at 8:51 AM 0 comments

Wednesday, May 28, 2008

Oil Industry Itself Facing Short Supplies

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

posted by Amanda Voss at 10:55 AM 0 comments

Tuesday, May 20, 2008

Goldman Sachs Forecasts Continued Rise in Oil Prices

Tuesday, May 20 - On Wall Street the price of oil hit $130 per barrel amidst market fears of inflation and supply concerns.

Amidst these concerns, Goldman Sachs issued a forecast that crude will reach $135 a barrel in the third quarter of 2008 and rise to $145 in the fourth quarter. While Saudi Arabia announced that they would increase production by 300,000 barrels a day (b/d) to 9.45 million b/d during June in order meet demand from US customers and President Bush, under pressure from a vote in Congress, halted additions to the US Strategic Petroleum Reserve, these measures are widely dismissed as too little to affect prices.

For the full article, click here.

Labels: economy, oil price, oil supply/demand

posted by Amanda Voss at 1:19 PM 0 comments

Tuesday, March 4, 2008

Oil Supply and the Economy

ELA readers will note there are two distinct arguments going on right now about oil supplies. One is about the geological oil supplies remaining, the other is about effective affordable oil supplies remaining.

This article discusses geologic oil supplies and the future, but note it does not address the affordability of these supplies (remember we stopped burning wood for heating needs long before all of the world's forests were chopped down - why?, because coal came along as a cheap solution - we need a similar transition to sustainable energy sources now).

This article discusses the effects of increased oil prices on the economy - perhaps a more relevant consideration than when geological supplies will peak.

Labels: economy, oil supply/demand

posted by Jamie Lang at 3:57 PM 0 comments

Monday, February 11, 2008

World Oil Decline Rate

The following letter excerpt appeared in the February 4th, 2008 edition of the Oil and Gas Journal in response to a recent study by Cambridge Energy Resources (CERA) that estimated an average 4.5% annual decline rate in oil production (view the press release accompanying this study here):

"The January 17th 2008 press release by Cambridge Energy Research Associates…reported the world’s oil supplies were to rise to 112 million b/d by 2017. This rise is in spite of CERA’s other conclusion that the world’s oil fields are declining in capacity at the average rate of 4.5%/year. These conclusions are clearly suspect.
"Although it is unlikely that global oil production is likely to drop significantly in the next few years, major sustainable increases are equally unlikely. Given the current global production of 86 million b/d and CERA’s 4.5% decline, global capacity would have to increase by 7.5 million b/d each year for the next 10 years to reach 112 million b/d. This is a total of 75 million b/d of new capacity in 10 years. Even excluding the effect of declining rates, achieving 112 million b/d within a decade represents a massive leap of 26 million b/d in global capacity.
"To put this in perspective, 75 million b/d of new capacity is the equivalent of eight new Saudi Arabias or 14 new Irans in just 10 years. Considering the reality that Saudi Arabia, with 25% of the world’s best proven reserves, is already investing $50 billion to increase its production capacity by 2 million b/d, where does CERA expect the additional 24 million b/d of production capacity to come from, let alone the replacement for the 51 million b/d of declines?"

Dr. Moujahed Al-Husseini, GeoArabia; Manama, Bahrain
Dr. Sadad Al-Husseini, Saudi Aramco (retired); Dharan

Labels: oil supply/demand, peak oil

posted by Jamie Lang at 4:35 PM 0 comments

Friday, January 18, 2008

Addressing the Demand Side of Oil Supply

This opinion editorial by the Denver Post does a nice job of addressing what so few are willing to: the fact that demand side solutions to our economic oil equation are rarely addressed.

Read the article here...

Labels: energy policy, oil supply/demand

posted by Jamie Lang at 3:53 PM 0 comments

Monday, December 31, 2007

Shock Treatment: High Oil Prices and the Economy

The article below, from the Economist, highlights why our economy is more resilient to oil price increases presently while still pointing out the serious danger of energy complacency.

SHOCK TREATMENT
Nov 15th 2007

Why the economy has absorbed high oil prices fairly easily, and why it may no longer
OIL prices have a special place in economic folklore. The two nastiest global recessions of recent decades were preceded by huge and sudden rises in the price of oil, first in 1973 and then in 1979. These twin spikes, both engineered by the Organisation of the Petroleum Exporting Countries limiting its oil shipments, are still the textbook example of an economic "shock"--a sudden change in business conditions. Abrupt increases in the oil price have prompted anxiety about stunted growth ever since.
Higher oil prices hurt the economy because they act like a tax increase. Firms that use oil face higher costs which, if they cannot be passed on in higher prices, might mean that some production becomes unprofitable. Consumers paying more for their petrol and heating oil have less to spend on other things. If they look for higher wages to compensate for a drop in purchasing power, that will only lead to job losses.

Oil-producing countries benefit from higher crude prices so the impact on global demand depends how their extra income is spent. But even if oil windfalls are spent largely on goods produced by oil importers, the abrupt shift in the distribution of global income will still be destabilising.
Given the gloomy history, the lingering unease about higher oil prices is understandable. A demonstration of this came on November 13th when, after a rough few days, stockmarkets rose on news that the oil price had fallen below $93. After all the talk of breaking the three-figure barrier, a drop towards a mere $90 spurred a relief rally.
Yet for all that, something has changed. Today's oil prices would have been unthinkable until very recently. Six years ago, when a barrel of crude could be bought for as little as $20, oil prices at today's levels would have raised fears of deep recession. Notwithstanding the spectre of past oil shocks, crude prices have risen to ever-dizzier heights without derailing a five-year period of strong global growth.
But why has the oil bogeyman become less scary? Two new papers*[1] by three well-known economists set out to explain. They come to similar
conclusions: oil shocks do not hurt as much because oil is used less intensively than before, because the economy is more flexible and because central banks are better at controlling inflation.
What makes oil special is that it is a uniquely dense and portable form of energy. It is not easy to switch to alternatives very quickly, so disruptions to supply are damaging. Yet improvements in energy efficiency mean dependence on oil is not what it once was. Rich countries use less than half as much oil as they did in 1970 for each inflation-adjusted dollar of GDP. So although prices in real terms have returned to levels last seen in the 1970s, their impact is not as powerful when set against the diminished economic importance of oil (see charts).
The blow from dearer oil is less powerful than it was and compared with their rigid state in the 1970s, today's more flexible economies are better able to take a punch. Higher oil prices have some unavoidable direct consequences on companies' production costs and on prices paid by consumers for oil-derived products. Wider damage to jobs and output depends on how well these increased costs are absorbed. If workers insist on higher cash wages to maintain their spending power, firms'
costs will take an additional hit, resulting in lay-offs, higher unemployment and depressed demand. To the extent that workers take it on the chin, accepting higher oil prices as a temporary tax increase that lowers their real take-home pay, the collateral damage will be smaller. The rigidity of the 1970s economies, where union power and indexed contracts meant wages were unyielding, only magnified the adverse effects of oil shocks. Today's flexible jobs markets allow oil shocks to be absorbed less harmfully.
If consumers are more forgiving of oil shocks, it is partly because they have become more accustomed to volatile prices and partly because they have greater trust in policymakers to keep inflation under control. Dearer oil has pushed up consumer prices, but expectations of future price increases have remained remarkably stable. That in turn reflects a belief that central banks will act where necessary to keep a lid on inflation. There is a self-fulfilling aspect to that faith.
Employees are less pushy in seeking inflationary wage deals and firms think twice about raising their own prices. As a result, central banks do not need to respond as aggressively as in the past to the inflation caused by higher oil prices. A less jerky monetary policy makes for greater stability.
PUMP-ACTION PROBLEMS
Both papers help tell us why oil shocks hurt much less than they used to. But that is not to say that oil prices no longer matter at all.
Neither analysis takes the run-up in oil prices over the last year into account. The rise in crude prices since the summer has been rapid even by the standards of the 1970s shocks and comes at a particularly bad time for America, the world's largest oil user. Consumers are now having to absorb a flurry of punches. Falling house prices, tighter credit conditions, rising unemployment, as well as higher prices at the petrol pump, all cloud the outlook for consumer spending.
Moreover, part of the cost of absorbing past oil-price hikes has been higher consumer debt and a huge trade deficit, both of which make America's economy more vulnerable. And though the Federal Reserve's credibility has allowed it to cut interest rates in anticipation of a downturn, the persistence of oil-led inflation may yet shift expectations of future price pressures, forcing the central bank to keep monetary policy on a tighter chain. America's economy no longer has the glass chin that it had in the 1970s. But a combination of powerful blows could still have a shattering impact.

*"The Macroeconomic Effects of Oil Price Shocks: Why are the 2000s So Different From the 1970s?", by Olivier Blanchard and Jordi Gali.
Massachusetts Institute of Technology Working Paper 07-21 (August 2007).
"Who's Afraid of a Big Bad Oil Shock", by William Nordhaus. Preliminary draft (September 2007) prepared for Brookings Panel on Economic Activity.

Labels: economy, energy policy, oil supply/demand

posted by Jamie Lang at 2:43 PM 0 comments

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Energy Literacy Advocates Newsroom

Tuesday, January 5, 2010

Oil Investment Now vs. Supplies Later

Tuesday, December 1, 2009

Peak Oil in the News

Tuesday, November 3, 2009

Where Do Oil Industry CEO's See Oil Prices Headed?

Thursday, October 29, 2009

The Future of Oil - Peak or Plateau (or Does it Matter)?

Monday, October 19, 2009

A New Lowest Price Set for Oil?

Tuesday, September 29, 2009

Saudi Minister Touts $75 As Optimal Price for Oil

Monday, September 21, 2009

Federal Reserve Meeting Alters Oil Prices

Thursday, September 10, 2009

Oil Production to Remain Steady; Global Demand May Raise

Friday, September 4, 2009

Oil Prices Drop due to OPEC, Economy

Monday, August 17, 2009

Oil Prices Remain Steady Despite Storm

Thursday, August 13, 2009

US Demand for Gasoline is Down

Wednesday, July 29, 2009

Oil Values Fall as Stockpiles Surge

Monday, July 13, 2009

Prices Drop, Stockpiles Up for Oil

Wednesday, July 1, 2009

Oil Prices Reveal Mixed Data

Thursday, June 25, 2009

Oil Price Bubble Could Strike Again

Wednesday, June 3, 2009

Unpredicted Drop in US Demand for Gasoline

Thursday, May 28, 2009

OPEC Confident of Demand Recovery

Tuesday, May 12, 2009

Amidst Rocky Market, EIA Releases Oil Forecast

Friday, May 8, 2009

Price of Oil Rises to 6-Month High

Friday, May 1, 2009

Price of Oil Posts Gains to Five Week High

Drilling Rig Count Suffers Rapid Decline

Tuesday, April 21, 2009

Asia Ministers, OPEC Discuss Energy Spending

Tuesday, April 14, 2009

A New Oil Peak: The Peak of Consumption?

Monday, April 13, 2009

IEA Releases New Demand Forecast

Thursday, March 26, 2009

Some Investors Predict Oncoming Energy Price Surge

Friday, March 20, 2009

Oil Prices Surge, Fall As Week Ends

Monday, March 16, 2009

Saudi Oil Minister Advocates the Critical State of Fossil Fuels

Friday, March 13, 2009

IEA Lowers Forecast Again

Tuesday, February 3, 2009

Markets Eye Weight of OPEC Cuts

Wednesday, January 28, 2009

Oil Prices Rise on Stimulus News

Monday, January 19, 2009

Sign of the Times: UAE Takes a Green Stance

Thursday, January 15, 2009

Predicting Oil Futures

Thursday, January 8, 2009

Venezuela Signals Compliance with OPEC Regulations

Monday, January 5, 2009

China, U.S. Racing to Stockpile Oil

Tuesday, December 30, 2008

A View from the Other Side: Energy in the Tehran Times

Thursday, December 18, 2008

OPEC Confirms Predicted Cuts; Oil Production Slashed by 2.2 Million

Monday, December 15, 2008

Price of Oil Rises as OPEC Confirms "Sizable Cuts"

Thursday, December 11, 2008

International Energy Agency Predicts Continued Demand Drop for Oil

Wednesday, December 10, 2008