The balance scale is swinging negative

As the picture is starting to develop for global oil supplies this winter many of the discussions seems to focus on the overall size of the demand/supply levels. And when you are talking about numbers on the order of 85 mbd a variation of 100,000 bd is not a very large number. Thus the seeming risks of small changes in production are not evident.

However if we focus more narrowly on the likely difference in range between available supply and overall demand, then the range between potential oversupply and shortage is somewhere in the region of 1 mbd or less. It is in this framework that we need to look at some of the likely influences on supply between now and the end of the year, as demand is likely to grow steadily from this point forward. It was Everett Dirksen who first said " a billion here, a billion there. Pretty soon it starts to add up to some real money" ( how much is that – see here ). And so it is with oil. A hundred thousand barrels here, a hundred thousand there. Pretty soon it adds up to a real shortage.

For while the major members that can increase oil production in OPEC are doing so, their number is small and some cannot increase at all, and others are declining. In this context, the recent announcement from Iraq is the most troubling. It has always been difficult to predict how much will be shipped from there, but the promise for the rest of the year of only 1.5 mbd is a drop from an anticipated 1.9 mbd that had been anticipated until very recently. And while in the overall context it may not appear much, when set against the 1 mbd balance it is a very significant hole. Particularly as the oft-quoted residual reserve, from Saudi Arabia, is not refinable.

Looking to the slightly longer term in a recent development the Chinese companies have shown where some of their investments lie.
According to the agreement, the acquisition will allow PetroChina to own 50 percent interest in Newco, a subsidiary of CNPC, by cash injection. It will give PetroChina access of Newco's oil and gas assets in 10 foreign countries including Kazakhstan, Venezuela, Algeria, Peru, Oman, Azerbaijan, Canada, Ecuador, Niger and Chad.
And bringing that investment closer to home, from here on their Canadian investment.
Chinese companies have been especially keen, with two deals done in recent months.

In late May, the large Chinese refiner Sinopec Group paid C$105 million for a 40 per cent stake in privately-owned Synenco Energy Inc.'s Northern Lights oilsands project.

Northern Lights is expected to cost C$4.5 billion to develop over the next five years and produce 100,000 barrels per day for more than 30 years.

In April, China National Offshore Oil Corp. bought nearly 17 per cent of privately held Canadian oilsands company MEG Energy Corp. for C$150 million.
There are also the discrepancies between numbers that Venezuela is supplying into the market, with variations as low as 1 mbd below their OPEC quota of 3.1 mbd.

It is when these numbers start to be collectively added that the Dirksen phrase very rapidly comes to mind. Or, if your tastes run to a more literary source, Dickens' Mr Micawber.

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The blog-blok kicks in for me in an hour or two.

It's been fun guys!!

Get prepared, live smart and enjoy life....

J in Houston

Thanks for all the help, drop by when you can.

All the best


If total production is 85Mbd and total demand is same, then 100Kbd becomes a very big number. If greater supply, it will be bought at the current price; if lower supply, then the price will continue to escalate as the bidding process commences.

As for Chinese faith in its oilsands, there isn't enough NG to power the mining process for as long as they anticipate. To me this shows some degree of desperation, as the Chinese are surely aware of the above fact. I would say that this proves the bidding has begun.

As long as we can borrow our children and grandchildrens future to increase our military they will use it to get to the oil they need. I found an interesting article that has the guts to say it alittle more like it is as far as the Oil problem and how they are solving it.

read that and maybe give us an article about the wars and military presence all over the globe to control Oil.

Any recent article or interview by Michael Klare, like

Problem is what's left of the fossil fuels won't last more than a generation or two, which makes agression to exercise control illogical and counterproductive even if one actor could gain control.

And while thinking about war, how do you suppose it will be conducted 100 yeaars from now--after liquid fossil fuels are history and consequent economic dislocation?

JD -

nice link!

I think he's the first American to say all of that in print.

And now that we've brought the spectre of WWIII into the picture, I think I need an adult beverage.

I'm glad I have friends in other countries, because my kids will not be fodder for this resource war. They will be long gone if the draft reappears.

We are going to become such a hated, isolated and ostracized nation... I thought my last trip was bad, getting spit on and flipped off and generally shunned. Things can get much worse if the military adventure sallies forth into central Asia. China and Russia will only be pushed so far, and I really believe Mad King George is dumb enough to toss his football if provoked.

karlof -

War without oil? No problem for the nuclear fleet. The carriers will just have to launch big solar gliders...LOL!

But let's say that civilization contracts a little more - 200 years?

Well, I guess we'll be sailing into war on ships. But more likely, we will be minding our own continental business.

Then again, we might be speaking mandarin too. The Aleutians do look like stepping stones, don't they? At least that's what some chinese friends of mine have said.

'Problem is what's left of the fossil fuels won't last more than a generation or two, which makes agression to exercise control illogical and counterproductive even if one actor could gain control."

Ok Lucy Splain this to me. Why are we the only country throwing our military all over the globe for oil??? Interesting huh??

JD -

I don't think interesting is the word - more like STUPID?

The rest of the world will only be bullied so far. And if we screw with the wrong people, selling bonds (dollars) will plunge us into an economic abyss. But I don't know if Mad King George can understand that kind of warfare.

If he pushes too far, the rest of the world knows how to bring us to heel.

And boy will that be painful.


Above is me...

Sumteimers is really getting me this morning!

Heres some more news from today about oil and money

Is there logic in Raw Capitalism? Yes, if you are a Libertine, like De Sade, Bush, Cheney, Clinton, etc. In relation to the rest of us, they are amoral, or immoral if you like (but won't hold in debate, which is why amoral).

The current policy DC is following is a highly refined version of Clay's "American System," which itself builds upon Hamilton's ideas, what is known politely as "Corporate Welfare," or "Friendly Fascism." It's interesting to consider that were it not for the great insistence upon the retention of traditional English rights in a written Bill of Rights we would have become a totalitarian state long ago. Remember, the oath pledges you to defend the Constitution from enemies foreign and DOMESTIC. The rationale for that document resides in its Preamble and provides a sobering beanchmark to measure all previous administrations.

Thanks JD - nice to see the company I work for on the buy list again!