How much did you drive your first car?

Having just come back from a week out of town, I was perusing the hard copy of the past couple of copies of the O&GJ and noted one or two numbers that I am going to put in since they go along with some of the comments we have made.

Up in Alaska BP has drilled a well in the Orion field that has 5 horizontal (or laterals as they are known) wells feeding out from the initial vertical. The oil bearing rock is some 400 ft thick, but with the laterals the well has an exposure of 26,000 ft to the rock. As a result it is producing at a rate of some 3,000 to 3,500 bd.

In developing the new Central Region oilfield of the Du'ayban in Saudi Arabia the number 1 well is expected to flow 3,300 bd of a sulfur-free (or sweet) oil. The flow rate is interesting since it is in line with an earlier post where the discussion was on the drop in Saudi oil production per new well from around 5,500 bd in 1998 on its way down to 2,000 bd. What this signifies is that Aramco will have to drill more wells to get the same increase in production and since they only have a limited number of rigs this will further limit their ability to increase production.

The sulfur-free nature of the oil is good news, since an increasing amount of the oil coming out of the ground has sulfur in it (which is why it is called sour). But there are only a limited number of refineries that can cope with high sulfur content, and these are rapidly reaching capacity. In their recent meeting on Saudi mega projects there were three refinery projects discussed. However, should you have loose change in your pocket, you might want to note that the new 400,000 bd unit planned is going for the bargain price of between $4 and $5 billion. Oh, and it won't be ready for a few years yet, either.

Which is a bit of a pity since US refineries (which have a total capacity of around 17 mbd) are likely to have problems as more of the world's available mix turns sour. Current plans seem more focused on allowing the increasing quantities of sour to be processed abroad, since despite the President's plan for refineries on ex-military bases, it is hard to anticipate these appearing in any time frame that will do any good.

The declining estimate of the world increase in demand for oil this year mentioned yesterday, includes a reduction in the amount that Chinese and Indian demand is expected to grow. The only problem that I have with that is that I can remember when I got my first car, and when my kids got theirs. And do you know what? We sure didn't buy it so that we could just polish it so that it could sit in the front yard and be admired by the neighbors. It would be foolish to think that new car owners anywhere else are any different. And on my last trip to China there were lots of new roads being prepared leading into lots of tourist-type places. (Mind you they are preparing for the 2008 Olympics, but that doesn't preclude the Chinese from visiting there now).
Technorati Tags: ,

Got my license in 1971 and was provided with our El Camino with its 396 V8 (we owned 3 cars). Gas was about 25-30 cents, and it got about 12MPG. I worked for the minumum wage of 1.90/hr. Insurance on the family plan was about 200/yr. I was a HS Junior, but still managed to drive about 25,000 miles that first year, something California freeways made very easy to do. On top of that, Union76 was kind enough to issue me a credit card. Fast forward to today and we have an ad featuring Yao Ming driving an older convertible with an add-on GPS system. I wonder if the ad runs in China? In addition, there are many Chinese cities banning bicycles from the major roads they've been transiting for years. Here's an item saying, "Total demand for new vehicles is forecast to climb by 12 percent to 5.6 million units this year, with sales of passenger cars rising 15 percent to 2.6 million units."

The one thing that seperates India and China from the USA is the lack of suburbs, and a large proportion of people who cannot afford a car. So motor cycles and motor scooters abound. And of course, "Public Transit" plays a huge role in these countries, whereas it does not in the US. While still using gas/deisel, their consumption and range are more limited.

That said, growing demand in these countries is going to play havoc with the oil supplies post "Peak Oil"

One partial solution for these countries is EVs sse for example

Though of course the problem remains -- as to the sources of this electric power.

It's becoming obvious that for these energy reports they start with the answer they want and work backwards to get the assumptions. This is a time-honored method in business.

Re-reading your last paragraph, I'm wondering how you reach your conclusions. The latest estimates predict that oil demand in C&I will continue to grow, but just not as quickly as previously predicted. Based on recent statistics, this seems rational. But you have a "problem" with that because people tend to drive their new cars.


What statistics do you have about the rate of car buying and use in C&I? If you have them and didn't mention them, please give us a citation. If you don't have any hard evidence, then what is the source of your "problem"?

Bingo, Tim!!

This IS standard business and political practice - state the position you want and THEN go and find the numbers to support it. I have been told to find those numbers many times...

But I agree with HO here. The car was THE status symbol for people until the 1960's. By that time, we had raised the standards to TWO cars. Now the hot item is to own a hybrid, but use a limo, ala Hollywood.

People will seek to own cars in both countries simply because until recently, it was only the rich and powerful who had them. They will seek to own them because they feel they have "earned the right" to do so, and the parading of the "automotive talisman" is too aggrsssively promoted by corporations for others not to succumb.

And we got no business pointing the finger at them for doing what we have done for decades, and done to extreme excess here in TV land.

My first car was a grand torino station wagon, a hand me down, and a gas guzzler...

I sold my car and have never been happier :)

I will apologize for not citing the growth figures for cars in China and India, although karlof already did it for me for China.

Car sales in China this year are anticipated to grow 15%, India's car market grew 24% last year ( and is expected to rise 20% for the next two years.

My argument was based on the possible ineffectiveness of government trying to reduce demand by policy, against the natural urges of someone getting a car. We underestimated Chinese demand last year I am trying to suggest that we don't make the same mistake again.

Tim and J,

You say that "facts" are "fixed" around a predetermined policy outcome? Hmmmm.... Where else have I heard that recently?

If we could determine the average annual miles driven by Chinese drivers and the average fuel mileage of their auto fleet, we could estimate the increase in gas/oil used due to incresing auto sales. The same could be done for their commercial fleet. I bet the CIA has these figures; I wonder if they're in the public domain?

I doubt that anyone has reliable numbers on the annual miles driven by Chinese drivers. (Why would the CIA be expected to have reliable numbers? -- of all agencies) Even the Chinese government is likely hard pressed to conduct such a study and they have their hands full keeping their banks afloat. Think of what it would take to keep track of 3 United States, and then think of how much money the Chinese Giv't has to spend....

I work in a large scientific lab for a major university. Professors regularly fix the facts around policy there too. These "facts" often get around peer review because no one wants to offend the lab directors, who are often close friends or potential allies.

Interesting tidbit from the Energy bulletin and Khaleej Times.

According to Benito Livigni, a former manager of ENI and the United States’ Gulf Oil Company, Iraqi’s oil reserves are estimated at 400 billion barrels, far more than the known figure of 116 billion.

If true, this would make Iraq the largest oil producer in the world, ahead of Saudi Arabia, the report says


I am just relaying to you guys what I have been told to do while working for other corporations (like Hal..oops!).

As for those consumption numbers - you can bet the Chinese have them, and are using them to try and extrapolate how much they will need in the coming years. Which means the CIA has or wants them.

Wouldn't surprise me to see Chinese selling electric cars built for two purposes: reduce their consumption domestically and to have something we really need that our domestic car companies cannot deliver. Provided they don't sell all their bonds to hammer us into the dirt, of course.

And yes, I know about the EV1! But even a good product requires someone to push it. And GM didn't have a clue how to sell it. And they still don't get it or they would be re-introducing it again to pull themselves out of the swamp they built.

Tedman -

I love your post... Here in Texas the largest corporate asset holders are the various University corporations. They own more oil fields than any other entities.

So, even the most "giving" and "honored" and important profession, teaching, is corrupt at the core... Oh say it ain't so!

I have always felt that research grants tied to any corporation have their own price. This simply verifies what we have all suspected.

Working in Academia may be even worse than working for a multi-national, especially with all the overdone political correctness that permeates the campus air.

What type of car is a status symbol in China? In the USA, for a long time it was a Cadillac; now, if we're to believe the ads, it's any one of the massive SUVs. As for the CIA, if you've ever seen one of their Factbooks, you'll understand why I think they have that type of intel. On the other hand, it's likely easier to just look at gasoline and diesel consumption and increase them by the % growth of China's vehicle fleet. Wouldn't that ballpark guess satisfy our purposes?