DrumBeat: January 18, 2007
Posted by threadbot on January 18, 2007 - 10:05am
Oil plunges below $50 for first time since '05
NEW YORK - Oil prices briefly fell below $50 per barrel Thursday for the first time since May 25, 2005, after the government reported larger-than-expected jumps in crude oil and gasoline inventories.Light, sweet crude for February delivery fell to $49.90 in afternoon trading on the New York Mercantile Exchange. It spent only a few moments below the $50 threshold before climbing back to $50.40, down $1.84 from Wednesday’s close.
“There’s no doubt that this is significant,” said Phil Flynn of Alaron Trading Corp. “If you’re a bull, the only thing you can hold your hat on is they didn’t close below $50.” Story continues below ↓ advertisement
If that happens, Flynn said the next important psychological barrier could be $45 per-barrel oil prices.
Rogers Says Oil Will Rise to $100 After 'Correction'
Oil will resume its march toward $100 a barrel after a "correction," said Jim Rogers, who predicted the start of the commodities rally in 1999."I'm just not smart enough to know how far down it will go and how long it will stay, but I do know that within the context of the bull market, oil will go over $100," Rogers said in a Tokyo interview. "It will go over $150. Whether that is in 2009 or 2013, I don't have a clue, but I know it's going to happen."
Thomas Homer-Dixon: One of the problems would be that I don't think the conditions are ripe for the kind of paradigm change that I'm suggesting in terms of thinking of resilience. We had this enormous blackout in 2003 and it didn't get us thinking about resilience, it got us thinking about more of the same, just improving micro managing and tinkering with the grid in various ways to make sure it never happens again. But the idea of decentralized energy production, more off-grid production, or the ability of individual communities and households to reduce their dependence upon the grid, that wasn't raised at all. People unfortunately tend to think in sort of dichotomies about these things. For example, they think we need nothing but connectivity and the more connectivity the better (an example that comes up in Chapter 5). On the other hand, participants at a solar conference I attended tended to assume we want complete autonomy. In the end, we don't want either. This is sort of a goldilocks situation; we need the "just right" goal where you have a certain amount of connectivity but not too much. The problem is that to bring about change, this goal is going to have to be shared across the culture, and I'm not sure that it's there yet. So it's not going to be easy for a prime minister to change things all at once.
Byron W. King: Ethanol Q & A
Statoil Terminates Work on Snohvit Oil Development
New reservoir knowledge, technological advancements as well as the Norwegian government's overall management plan for the Lofoten area and the Barents Sea, were key factors when Snohvit licensees decided last summer to re-evaluate the possible development of associated oil reserves."The studies we have undertaken show that it still isn't possible to develop the oil reserves in a commercially viable manner", says Geir Pettersen, senior vice president for Statoil's Tromso Patch business cluster, which includes Snohvit.
China: Bike or car? Think twice
Their prominent picture story appeared to mark something more significant than a wedding announcement: the beginnings of a mini-backlash against the motor vehicle in the Beijing print and online media. Other environmentally-friendly events have been widely publicized, such as the "Driving One Less Day a Month for a Blue Sky in Beijing" activity held on the World Environment Day, June 5.
China to invest billions in energy-saving buildings
China will invest 1.5 trillion yuan ($193 billion) to make existing buildings more energy efficient by 2020 in a bid to save millions of tonnes of polluting coal, an official said on Thursday.Warning that energy waste was hurting economic growth, Vice Minister of Construction Qiu Baoxing said 350 million tonnes of coal could be saved in the next 15 years if existing buildings were renovated to make them more efficient and new buildings adhered to green standards.
But he added that China was already failing to meet existing energy efficiency targets.
Warming could cut China grain crops by over a third
Rising temperatures in China could slash grain production in the world's most populous country by over a third in the second half of this century, imperilling food security, the official Xinhua agency reported on Wednesday.
Burying UK CO2 Needs More Cash
The untested technology is likely to cost at least around 25 pounds (or 38 euros) per tonne of CO2 captured and stored, more than double the cost of emitting carbon, according to a new report by Poyry Energy Consulting for the UK's Department of Trade and Industry.
Chile torn over using Patagonia to create energy
Environmentalists are fiercely opposed to a scheme for four hydroelectric dams to power growth, claiming that large dams are not the answer, and that they will ruin the area's tourism potential.
Central Asia's coming energy power struggle
Niyazov's demise highlights the broader problems of Central Asia's post-Soviet regimes, which, with the exception of Kyrgyzstan, are run by Soviet-era bosses who, while not nearly as eccentric or egomaniacal as Niyazov, tolerate little dissent or opposition.Most of them are old, some of them are unwell. So, in the next few years, Central Asia will face leadership change on many fronts, with security apparatuses -- which, as in Turkmenistan, have been crucial to buttressing these countries' regimes -- likely to be important players.
Higher energy prices ‘inevitable’, says Piebalgs
Speaking exclusively to EurActiv, Energy Commissioner Andris Piebalgs says that new energy and climate-change proposals should lead to higher prices for consumers. But paying 5% more now will avoid much steeper price hikes in the future, he argues.
Era of cheap oil over: Venezuela company official
The era of cheap oil is over and prices will not go back to $30-40 a barrel again, according to Mr Luis F. Vierma, Vice-President (E&P) of Petroleos De Venezuela SA (PDVSA), Venezuela's national oil company.
Energy demand remains huge and growing
With the manufacturing and housing outlooks softening, analysts may have to lower energy demand expectations this year,” suggests senior analyst Phil Flynn at Alaron Trading in Chicago. But, he notes, demand’s apparent inelasticity to higher prices is confounding economists and total energy demand still will be huge. In fact, U.S. supply usually must meet demand of 99.5 quadrillion British thermal units annually. Total world consumption of marketed energy is about 425 quadrillion British thermal units.
One Shell Nigeria Flow Station Down After Staff Evacuated
Anglo-Dutch oil giant Shell said today that one of two flow stations in Nigeria from which it pulled workers at the weekend following inter-community clashes has gone down, reducing the company's crude oil output by 12,000 barrels per day.
Nigeria: Two Killed in Attack on Ferry to Bonny Island
A Dutch passenger and a Nigerian security guard was killed and eight others, including a South Korean, were injured Wednesday [17 January] in Nigeria in what appeared to be an armed robbery, an official at the Foreign Ministry said.
Pakistan: WAPDA allowed to import coal for power generation
The Planning and Development (P&D) Division has agreed to one of the major demands of the Water and Power Ministry and Water and Power Development Authority (WAPDA) to import coal for exclusive use of electricity generation, a senior government official told the Daily Times.
This Monday, January 15, Dr. Rafael Correa took his place at the helm of Latin America's fifth-largest oil producer. Ecuador, situated on the continent's Pacific coast, is the second-largest supplier of crude oil to the United States, according to the US Department of Energy.Rafael Correa is no Hugo Chavez. He obtained his PhD in economics from the University of Illinois, and has voiced his discomfort with the Venezuelan leader's characterization of George W. Bush as a sulfur-smelling devil. However, Correa has also made clear his displeasure with his country's relationship to the Yankee oil industry.
API: Energy Bill Will Discourage Refinery Investments
"HR 6 would be a step backward for U.S. energy security. Imposing taxes on the U.S. oil and natural gas industry is contrary to the goal of providing stable and cost-effective supplies of energy for American consumers and discourages the tremendous capital investments needed to meet the nation's growing energy needs."
Eastern Connecticut conference deals with energy costs
Hosted by the chambers of commerce of Eastern Connecticut and Mystic and the Connecticut Business & Industry Association, the forum was the result of a survey of Eastern Connecticut business executives who cited rising electric costs as a major concern.
Crude Oil: A Long Term Forecast
The EIA’s second prediction is chuckle inducing. For crude to be just above $59 in 2030 - not far from where it is now - means little will have changed on the whole. And how helpful of the EIA to let us know that $59 in 2005 will translate to $95 in 2030. That’s a wonderfully benign inflation rate… just over 2% per annum between here and there.
Tom Whipple - The Peak Oil Crisis: Congressional Hearings - Round #2
At the hearing several luminaries of the peak oil community testified that indeed the world was about to start running short of cheap, easy to find oil and that indeed there would be serious consequences for the industrialized world. This view was countered by the man from Cambridge Energy Research who testified that to the contrary, world oil production could continue to grow for decades, never really would “peak,” and this was a problem for future generations. Happy motoring everyone!
The History of PDVSA and Venezuela
The fortunes of the world’s most important petro-states rise and fall along with the successes or failures of their state oil companies. Whether it’s Saudi Arabia and Aramco, Kuwait and the Kuwait Petroleum Company, or Russia and Gazprom, the state gets its power from the company – and vice-versa.
John W. Simpson, 92, Dies; Pioneer of Nuclear Power
Mr. Simpson was a close associate of Adm. Hyman G. Rickover, known as the father of the nuclear Navy.
S.F. relaxes rules on solar power installation
SAN FRANCISCO - A Los Gatos businessman has successfully used state law to streamline The City’s permitting process so that history and height limits do not hold up installation of solar power systems.
Schwarzenegger to sign Low Carbon Fuel Standard Executive Order today
This historic event will be webcast live at Governor's Web site at 10am (PT).More information on the LCFS executive order can be found here and a great background article can be found here.
Survey Shows Strong Support For Offshore Wind Power
Delawareans are strongly in favor of offshore wind power as a future source of energy for the state, according to a survey conducted by University of Delaware researchers.
Geothermal Exploration Makes Neighbors Tremble
Using the earth's natural heat as an energy resource is a fine idea. But not necessarily for those who live near drilling sites, as people along the border between Germany, Switzerland and France are finding out.
IEA: Oil supply outside OPEC set to disappoint
Oil producers outside OPEC will pump less oil than expected this year, the International Energy Agency said on Thursday, increasing the burden on OPEC just as the exporter group is trimming supply.In its latest monthly report, the adviser to 26 industrialised countries forecast oil supply from non-OPEC will rise by 1.4 million barrels per day in 2007, less than the 1.7 million bpd expected last month.
"Non-OPEC supply is adjusted down significantly for 2007," the IEA said. "Norway, Mexico, Canada, Cuba and Ecuador underpin the revision, the former two following government announcements of markedly lower expectations for 2007."
Saudis to increase oil output capacity
Saudi Arabia plans to increase its crude oil production capacity nearly 40 percent by 2009 and double its refining size over the next five years to keep pace with growing global demand, the country's oil minister said Thursday.
Nigeria militants release 6 hostages
Five Chinese telecommunications workers and an Italian oil worker abducted in Nigeria's restive southern delta region have been released, militants and officials said Thursday.A rebel group that has carried out crippling assaults against the energy industry in Africa's oil producer announced the Italian's release in an e-mail and identified him as Roberto Dieghi.
Gazprom export sales rise by 43%
Russia's controversial state-owned gas monopoly Gazprom has said that its export revenues soared 43% last year to a record $37.2bn (£19bn).
House Dems target special breaks for Big Oil Thursday
WASHINGTON — After taking on the restaurant, drug and banking industries, House Democrats top off their first 100 hours of majority status Thursday with a swipe at Big Oil.
Oil Lease Chief Knew of Error, Report Asserts
A top Interior Department official was told nearly three years ago about a legal blunder that allowed drilling companies to avoid billions of dollars in payments for oil and gas pumped from publicly owned waters, a report by the department’s chief independent investigator has found.
Pelosi may create global warming panel
House Speaker Nancy Pelosi (news, bio, voting record), intent on putting global warming atop the Democratic agenda, is shaking up traditional committee fiefdoms dominated by some of Congress' oldest and most powerful members.She's moving to create a special committee to recommend legislation for cutting greenhouse gases, most likely to be chaired by Rep. Edward Markey (news, bio, voting record), D-Mass., a Democratic leadership aide said Wednesday.
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Here's something worth reading: "Ethanol From Biomass: Can It Substitute for Gasoline?" from a forthcoming book by Michael McElroy, a professor of environmental studies at Harvard University.
http://www-as.harvard.edu:16080/people/faculty/mbm/Ethanol_chapter1.pdf
So according to McElroy (Table 12.2), the ERoEI of corn ethanol is somewhere between 0.68 and 1.052. Interesting ...
Started reading the link above since I'm currently rather fascinated with ethanol, but quickly noticed that Pimentel is being repeatedly referenced so I stopped so would not waste any more of my time.
Myself, I find every nightmare I have about Dave Pimental also features starving Mexicans.
Even the IEA has to admit non-OPEC supply will not come close to their projections! Then it will be a lot worse than they say - because even this acknowledgement of reality is based on admissions by governments. So much for the expertise of the IEA, and its access to exclusive sources of information!
Your value add to this forum continues to be ZERO. The article that u quote says non-opec nations have reduced their Supply intentions to 1.4-mbd. The next paragraph says that projected Demand has been reduced to 1.39-mbd. You obviously do not grasp their term "call".
After the 2006 experience with its 1.75-mbd surplus during Q2/Q3, there is going to be great care not to over produce in 2007.
There is no inconsistency with their December status report:
http://www.theoildrum.com/node/2190#comment-149622
OTOH, u have persisted in confusing Fahrenheit with Celcius, Opec with non-opec, C&C with All Liquids, Supply with Production Capacity. I cannot remember a single post where "u got it".
We bear the task of watching u sit at your mom's computer throwing empty popcans from the cheaps seats...
Freddy,
You might wish to look up the correct spelling of the word 'you' before you start leveling too many criticisms at other posters. You might also wish to brush up on some grammar.
Thanks
What was that again, proven liar?
For the loser, schmukhovo, from the lunatic fringe. This one is from NASA ... not your high school:
Lying sack of shit, do you really imagine that proves your statement that this winter (not November) was the coldest since 1994 in the Yukon?
No, of course not, because you saw the link I provided, which proved the contrary.
You're just lying again.
So piss off, you semi-literate douchebag.
http://www.theoildrum.com/node/2113#comment-141885
Freddy Hutter on December 25, 2006 - 9:31pm
Bob, i'm in withdrawal for lack of skirts & bikinis up here. It was -44 a few days ago and november was the coldest since Yukon records started in 1944 (daily avg of -21).
NOAA used to have some awesome wwweb mapping of the submergent Gulf coastline, but methinx it got the axe 'cuz many were relating the rising waters to GW. The site also showed the emergent shorelines in Alaska where uplift is glacier related.
While i thot i was careful to refer to the NOV record, my search of the archive today for some references on farming brought up some posts where i said "winter" as well. Mea culpa.
I wandered over to THIS "Album" the other day that I've been to before and found a score of very strange little one person EVs.
http://www.austinev.org/evalbum/964
http://www.austinev.org/evalbum/947
http://www.austinev.org/evalbum/949
There's three and there are a whole bunch of others.
From the American Chemical Society:
This isn't a bad historical analogy of the Iraq War with Opium War.
So this sounds like an arguement to "Go Big" in Iraq -- and in Iran? -- and in the middle East? -- and in Venezuela? -- and....
As I compare that with Michael Klare's discussion about energo-fascim, the arguement to militarize the world energy crisis even further seems to fit under the "Energo-fascist" rubric.
The very practical geopolitical problem is that "our oil is under their sand, soil, or water" and is complicated by the problem we've created for ourselves by 1) increasing our dependency upon oil, and 2) militarizing the issue of energy.
Militarizing the issue of energy has meant that we really avoided facing the issue and now must be prepared to ratchet up the militarization of our culture and our planet in order to "kill for resources."
Can we now de-militarize the issue of energy, or have we been seduced and manipulated into a situation where we must support overt War Culture or suffer severe deprivation?
That seems to be the question -- will we try to maintain this dichotomy of militarization which enables people in the USA to continue "life as usual -- no change at all" for a bit longer? Or will we try to seek a true powerdown solution and an equitable global protocol for powerdown?
Not sure where this guy comes down, the last sentence of the piece is weird. Agree with you and main thrust of piece, it would be a level of transformation, historically unprecedented, but not unachievable.
The problem is the entrenched power in this country and the American people in general are completely clueless on this. Except I think, the American establishment understands vaguely that acceptance of defeat in Iraq means some big, as of yet not understood, change.
And what is the outcome when the other peoples of the world see this taking place? The "non-negotiable" lifestyle already consumes a disproportionate share of world resources, the number of civilians killed in the "democratization" of Iraq will not have gone unnoticed, nor will the fact of an America willing to act as an opportunist agressor equal to the FSU or the 3rd Reich.
I think at some point the peoples of the world rise up against the USA and declare that all persons are born equal and that each has the right to life, liberty, and the pursuit of happiness, free of American dominion.
"I think at some point the peoples of the world rise up"
And at some point Charlie gets the golden ticket, goes to Wonka's chocolate factory and all the rich arrogant kids meet their doom and Charlie gets to take over the chocolate factory.
Please study some history. Violence, propaganda, capitalism, and superior technology always win. We have a better combination of all that than most other countries.
Hah, and you should read the linked story because then you'd see the author's main reason for the Chinese defeat in in the Opium War:
That must explain our glorious victory over Vietnam.
Makes no sense to me. The analogy would hold if the Qing, after a sharp attack by the British, invaded England, and having routed the English stopped short of victory to invade France. Asia Times is stretching here.
Hah right, we're on cusp of victory in Iraq.
We had OBL cornered before taking our eye off the ball.
Commondreams just put up an article on their website from the toronto Star RE: the Doomsday Clock being reset by an eminent panel of scientists.
http://www.commondreams.org/headlines07/0117-06.htm
The two issues involved show how awkwardly intertwined energy, global warming, and war are.
Global warming is said by this "elite group of scientists" (Stephen Hawking is one of the group) to be more of a threat than terrorism.
I think folks should really let that sink in.
The group also has concerns about possible use of nuclear weapons, the resurgence of voices calling for more nuclear power generation, and the UK's plans to build more and better nuclear weapons.
I wonder who is listening...?
"It's Hard Work..."
Commodities have been falling, the dollar and bonds have been rising, all of which signal a coming recession. The only indicator not cooperating has been the stock market. Is this about to correct?
http://www.safehaven.com/article-6712.htm
One of my favorite leading indicators, SMH, is down for the third day in a row today, down quite heavily. I'm watching closely to see if it breaks below 33.
Bonds have been rising?
I think he means that the yield on 10-year treasury hasn't risen above 4,83 since August.
TLT (20 year bonds) up from 82 to 92 (now corrected slightly to 88) over the last six months.
Thks...interesting chart pattern on that (TLT). I would not be surprised to see that go back to the 82 level - or slightly lower.
Regards
What's interesting is that all stock markets with the exception of Saudi Arabia have been doing pretty well. I think it has more to do with the flows of capital into the markets than with the underlying economic fundamentals. There has been a boom in asset size of asset managers in almost every country since about 2002.
Take for example New Zealand, the NZSX has been doing quite well even though the economy is running at about 1.5% growth or less. Reason: Kiwis have discovered stock investing.
I think to predict the stock market one has to think, what will be the health of the asset management industry? It has to be favorable in countries like China, India. Debateable how healthy in the US, but I would say the machinery is chumming away relentlessly.
There's article article over at Econbrowser about oil prices, basically explaining the price drop by the speculators pulling out:
http://www.econbrowser.com/archives/2007/01/whats_bringing.html
Oil dives on inventory growth
Indeed, speculators created a frenzy last year - and that included most commodities. The de-frothing of the market surely affected markets the most.
As far as oil is concerned, however, there is another, more fundamental reason. Western consumers pay top price for their oil, i.e. their marginal demand has a much greater impact on prices than others'. A very significant portion of crude oil does not change hands at anything near the prices you see on NYMEX, as it is sold by producers domestically at heavily discounted prices (Russia, Venezuela, KSA, etc).
Thus, total revenue for exporters is HIGHLY dependent on marginal export demand and therefore each extra barrel they sell at a price above the domestic price is "profit" and this is why it is so difficult for OPEC to co-ordinate production cuts.
In this light, the role of the US as "swing consumer" is a very important determinant of prices. If its overall demand goes down by 3.5% (as it was in the latest 4wks), its IMPORT demand should theoretically be down even more (no sense buying the extra stuff from abroad if you can get it locally and save on transportation) - it works out to a theoretical 6% drop in imports. Since this is the "most expensive" oil, the pressure on prices is even more significant.
Enter mild winter in the US and Western Europe....and sometimes a cigar is just a cigar.
From today's Dear Abby:
Reports out:
Summary of Weekly Petroleum Data for the Week Ending January 12, 2007
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_pe...
U.S. crude oil imports averaged nearly 11.1 million barrels per day last week, up nearly 1.6 million barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged nearly 10.0 million barrels per day, or 73,000 barrels per day more than averaged over the same four-week period last year.
What are we to make of this? Imports up from this period last year, despite the fact that Saudi is cutting production. Oil prices are falling, so we aren't outbidding anyone for crude.
Regarding the rest of the news, all product levels were up across the board, which was in line with the predictions.
Take today off WT, I got you covered!
Bla Bla Bla, KSA in certain decline.
Burb Beep Bleh, Ghawar crashing, continuing certain decline of global production.
Burgle wurgle murgle, ELP
Boggle woggle nurg, Listen to my billionaire friend Hothgor.
That was not a very nice comment. It did not improve content of The Oil Drum in any way shape or form.
If you were in kindergarten, you would now be sitting in a corner.
Rick
Unfortunately, were not in kindergarten, and it isn't a very nice world full of wonderful self supporting comments and pats on the back. Your mom doesn't hold your hand through all of your steps, and *gasps* you have to actually battle for yourself.
My comments were meant in jest to make light of the situation, but they serve another purpose too: to simply point out how repeating the same thing really doesn't help TOD in any way shape or form.
Unfortunately for the rest of us, comments on TOD can sometimes affect things in the real world. People read what others type, and they think they are making informed decisions based on what was said. If someone tells you we will be entering a recession next year and backs it up with an 'historical analysis', you might act on that information and attempt to 'save' yourself and your family from a percieved threat.
Unfortunately, most threats are not perceived early in this fashion: they tend to crop up and bite you on your arse so to speak. Those same 'preparedness' steps that cost a good deal of money might have been necessary to pay for a medical bill, or cover a house accident that your insurance refuses to pay, or any number of other items.
Is it so wrong in pointing out the flaws in someone else's arguments? Is it bad to show them that the world is not as black and white as they perceive them to be? Surely you have noticed the distinct lack of WTs presence today after this latest news. I'm sure hes off some where brewing about how he will address this 'contrarian' argument from the EIA and he'll be back with a vengeance.
Unfortunately for us, he probably will not have adjusted his outlook and will continue to try to scare people into action. The sad thing is, if he would only lead by example, others would follow.
No, it is not wrong to point out the flaws, but your comment was not pointing out any flaws! It was a "nonsense" comment that did not educate anybody.
It is also why on most days, I just give up and stop reading after the first 10 comments or so.
I wonder why someone would deliberately, and consistently, try to make reading TOD posts so unpleasant?
Well, you do learn which names to ignore ...
I find it is like a bad habit...I should not read this one, I should not read this one...then I read it.
I find that the best thing to do when you disagree with a post is to read it out loud. All those, "burgles" and, "wurgles" of Hothgor had people looking at me strangely at work this morning.
Personally, I think it's good to have a few contrarians like Hothgor around. He's really grown on me. Now that they banned Oil CEO, he's one of the few disident voices left.
I have multiple working theories regarding Hothgor. One of my theories, based his poor research, is that he is actually pro-Peak Oil and he is trying to discredit the "No near term peak" crowd.
Man, that makes me laugh coming from you.
Yup, flapping delusional butterfly wings....
Whether you agree with his analysis or not, Westexas is only guilty of urging readers to economize, localize and produce. That looks like good advice whether we enter recession sometime in 2007 or not. That looks like good advice whether the peak happens in 2007 or not. What, in your opinion, is so offensive about ELP?
There may or may not be a recession this year. Hothgor thinks there won't be. I think there will be. Some other people think there won't be. Some other people think there will be. It's a debatable proposition. I don't think there's anything wrong with being of the opinion that there will be a recession this year and offering data to back up that opinion. Nothing wrong with being on the other side either. Everyone needs to make up their own mind about these things.
Get lost, Hothgor. You are a big pain.
Hothgot,
Take a step back, take a deep breath, and look at your reaction:
WT is arguing his case based on historical analogy, too many "coincidences", some HL theory, and a lot of common sense. Granted he does not have solid evidence for or against, and neither does anyone else either.
But you come in here, jump up and down like a little five year old wetting his pants, and belittle WT on even less evidence than you are accusing him of. Who is being hypocritical here?
Grow up.
EIA
It appears to me this is entirely weather related and will resolve over the next weeks. The warm weather in the east up until has reduced need while the big storms on the West Coast, Rockies and Midwest has reduced demand for some products as Airlines, Trucks and people have had restricted movement.
With refinery runs down to 87% its not suprising that crude backed up. Supposedly clearing up the Houston ship channel delays also contributed to the build. Bottom line S.A.'s mistake has been cutting back on Asian supplies and not ours since the fools in New York are setting the price for the world based on a couple of million barrels of oil inventory change each week what a joke. I think the S.A. decision to do so were based on political goals in knocking down Iran and Hugo.
Natty Gas draw above expectations market still goes down how do your rationalize that? Market is bearish on energy and its going to take a major change in mentality to turn it around
Anyone drawing an inference on Peak Oil based on this weeks inventory report needs serious help.
A clue to dropping distillate fuel demand is seen in American Trucking Associations reports of dropping tonnage. This is not weather related.
In 2004, commercial trucking used 51.4 billion gallon of diesel. (Rail used 4.1 billion gallons).
http://www.truckline.com/NR/exeres/240082F3-7160-4162-92A5-C834A84E2401.htm
Now that is an interesting piece of data. Thanks.
Can anyone comment if there is a connection between the tonnage and the economy? A lot of consumer goods that get transported have a low ratio of value/weight. If I compare a lot of what is on a Walmart shelf with Apple iPods, it is obvious that the same tonnage of iPods will create tens if not hundreds of times the revenue for Apple that it creates for typical Walmart merchandise. Since retail revenue does not seem to be down nearly as much as tonnage, are consumers buying higher quality and more durable goods in a time of economic uncertainty?
The whole Dow theory is based on this connection. It was started by Charled Dow over a century ago. Back then it was the "rails" average verses the industrial average. When rails started to drop, this meant that the industrail average would follow in a few months.
http://stockcharts.com/education/MarketAnalysis/dowtheory1.html
Now trucks are king instead of the rails but the principle is the same. A decrease in trucking activity foreshadows a decrease in industrial activity. Well, at least that is the Dow theory.
Ron Patterson
Ron, You're absolutely right. Trucking tonnage is a widely accepted economic indicator.
There is an interesting sidebar to this matter: Railway freight, measured by ton-miles, is growing even as the economy is slowing. In my opinion, the primary driver of the shift to rail is the cost of fuel, but other factors are also at work. A constant shortage of truck drivers, particulary longhaul drivers, and containerization (the most significant revolution in communications in the 20th Century)finding and imposing new efficiencies on the economy are two factors that come to mind.
The medium and long haul freight moving to rail, still largely uses trucks at the end(s) of the line, and is thus included in truck tonnage. Declining truck tonnage and increased rail 'ton-miles', in the context of a soft economy, suggests a historical change in the structure of freight transportation is occurring.
The peak oil event, which started circa 2000, continues to unfold.
Consumption of paper and cardboard is another widely accepted leading indicator. All those iPods need to be packaged and increasing demand for packaging is good news. Curtailed demand indicates a decline in demand for finished goods.
My father sold paper by the ton for manufacturing into folding cartons and paper tubes. He always said the paper industry was the first one to turn down in
a recession and the first one to turn up in
a recovery.
You can browse some statistics here:
http://www.bts.gov/programs/freight_transportation/
The take away message is that the total value of transported goods is dominated by high value items (electronics, cars, etc.), whereas the tonnage is dominated by things like sand and gravel. The level of the former is probably a better indicator of where we were, while the latter level tells us where we are going (fewer new housing starts, etc.)
So an increase in the value of freight signals a retail or consumer led boom while tonnage of freight signals an investment or real estate construction led boom?
I'm not an economist; nor do I play one on TV.
However, I meant that high value of shipments means that people were able to afford (or willing to go into debt for) that big screen TV during the time that the statistics were taken. That might imply some consumer confidence, but I don't think it really is a strong predictor of the future. That act doesn't ripple through the economy, since the factories have already been built--not to mention that this probably occured overseas. Housing starts (which would result in more sand and gravel being delivered), in contrast, continue to churn more activity as materials for the houses are used, commercial building goes in to supply the new houses, people move in and buy big screen TVs, etc.
Thanks! That is exactly what I was looking for.
I agree that the rail is displacing trucks. My point was a lot of trucks were sitting in truckstops the last couple of weeks due to the weather. Trust me I had customers raising hell because their deliveries were delayed. Overall trucks are easier to come by now than they have been in a couple of years some due to rail others due to the slowdown in the 4th qtr.
KansasCrude, I think you're probably right, and the geopolitical dimension to what we're seeing is fascinating.
For at least the last three months, Saudi officials have been talking-up a good game when it came to supporting OPEC production cuts and/or how a floor in the $60 area was desirable. They may not have intended to fully support their "talk," but they didn't intentionally squash OPEC's lukewarm efforts to contain the price decline.
Suddenly, in the last two weeks, Saudi Arabia's potion has turned around entirely. For example, beloved Saudi oil minister Ali al-Naimi was quoted widely this week - he has rejected an emergency OPEC meeting in response to the recent price decline.
This policy orientation flip is consistent with the hypothesis that Saudi Arabia has concluded it's in their long-term best interest to let prices dive for a stint so as to work in concert with US-lead efforts to pressure Iran. This hypothesis can not be proven at this time, and may never be provable. But it's interesting to contemplate as one reads news.
imo it is more likely that sa is unhappy that they and q8 are bearing the brunt of the cuts, and others, eg iran and venezuela are not sharing the pain. otoh, venezuela announced this week that they are now cutting, retroactive to jan 1, and if other laggards jump in as well sa will probably support more cuts.
How do you know that KSA princes are not (were not) shorting the futures market just before playing it like a yo-yo?
You can make a lot of loot on the swings if only you know when they're coming.
wt is a geologist and probably a good one, a geologist cant wait around for every last bit of data to act. a good geologist has to fly by the seat of his (or her) pants sometimes. I once knew a former exxon geologist. he worried the data to death. he could never make a decision because he was afraid of making a mistake.
You're absolutely right. I heard that the first thing they do to determine if you can be a geologist is to test your reflexes. You have to be able to catch passing flies in mid-air with your bare hands and things of that nature. Split second decision making is crucial. It's a lot like being a good pinball player. A fraction of a second too late and it's game over.
Hothgor, actually you have it right. World and Saudi crude oil production are down, as predicted by the HL models.
Again, I am puzzled as to why you feel compelled post continued snide comments when, as Deffeyes predicted, world crude oil production is down, and as I predicted, Saudi crude oil production is down?
Price is much more complex than production, dependent on supply/demand factors in a number of regions, which fluctuate with weather, economic activity, etc.
In any case. with the declining crude oil production that we have seen, it is a mathematical certainty that crude oil consumption has declined. Price--and perhaps military force--determine where the declining oil production goes.
In regard to my ELP recommendations, was I correct that you are recommending MMM?
Maximize spending?
Maximize your commute?
Maximize your consumption?
Until we see evidence of rising Saudi and World crude oil production, as I have suggested several times, why don't we just agree to disagree?
Exports are up, and we have 26 years of history to show that KSA will not crash. Both of which are completely against your assertions for the past 3 months.
Care to explain where all this oil came from? Or is RR right and the import 'crisis' of 2006 was nothing more then a continuation of a cyclical cycle that occurs every year.
US Total Petroleum Imports are up, from recent numbers, for one week. On a four week running average, they are still low. You are asserting that one week of import numbers in the world's richest country tells us something about the world export/import market?
As I predicted, for 18 months, through the first quarter of 2007, Saudi Arabia has had one response to changing supply/demand factors: Lower Crude Oil Production.
As I predicted one year ago, the top three net oil exporters are each showing lower net oil exports.
Weekly inventory and import numbers are not going to resolve the issue. As I have suggested several times, why don't we just suspend the discussion--at least until we see evidence of rising Saudi and world oil production?
In regard to my ELP recommendations, if I am wrong, people following my advice would have less debt, more money in the bank and a lower stress way of life.
If they follow your (implied) advice to maximize spending and consumption, what happens if you are wrong about your (implied) assertion that we can have an infinite growth rate against a finite resource base?
However, the key point is that the available production data indicate that I am right--that we do live in a finite world after all.
The history of a half empty glass is that there was always liquid in it but its future is certainly that there will never be more liquid coming out than already did (you can generalize that to any amount of liquid left, if you like). Your argument would make a three year old laugh and a 13 year old would get certain proof that adults are idiots.
"we have 26 years of history to show that KSA will not crash."
Hmmm sorry... not as in never ever or not this hour day or year.
I find this comment so absurd.
The only thing absurd is jeffrey's inability to comprehend a swing producer's role in the marketplace.
KSA has consistently stated its desired monthly production level since early 2004. In November 2006 KSA announced that they were raising it to 8.6-mbd along with a statement that its new MSC was 11.2-mbd. With NGL & proc gains, this pushes their max supply ability to 12.6-mbd if market forces warrant.
Unfortunately, every time KSA runs up from 8.6 and recedes, he interprets this as proof of Peak Oil. It is nonsense. Further, each time KSA faces quota restrictions, he interprets it as a cover for inability to meet even its 8.6-mbd base. Rubbish.
Macro events in play will allow WT's statements to go unchallenged (by KSA's production) deep into Q4 so we will have to listen to his baloney for a very long time...
If you define "every time" as a consistent prediction that 2006 was the most likely start of a permanent decline in Saudi production, based on the prior swing producer, Texas, that is correct.
Oddly enough, Russia and Iraq could find buyers for several hundred thousand barrels of additional oil in the first half of 2006, when the Saudis were claiming they couldn't find buyers, "even for their light/sweet oil."
From the fourth quarter of 2005, throughout all of 2006 and into the first quarter of 2007, Saudi Arabia has had one response to rising and falling inventories, rising and falling refinery utilization rates and rising and falling oil prices: lower oil production.
Anyway, as I have repeatedly suggested, since the production data are supporting the predicted Saudi production decline, why don't we just wait and see what happens, instead of arguing this over and over again every day?
If I were predicting falling exports, while Saudi, Russian and Norwegian exports were rising and if I were predicting falling production, while Saudi production was rising, I could understand the constant attacks by Hothgor and Freddy. But the opposite is true. The two key predictions I made last year (based on Khebab's work) have, so far, been accurate. Why the constant venomous attacks?
If I were Robert, and if I found myself on the same side of an argument as Freddy and Hothgor, I would very seriously consider switching sides.
If I were Robert, and if I found myself on the same side of an argument as Freddy and Hothgor, I would very seriously consider switching sides.
I don't "choose" sides based on popularity. My position is based on my view of the data.
SA has increased their rig count while tendering work on projects expecting to provide > 3 million barrels per day of light, extra light, and NGL's. On top of that, they are building massive expansions in refinery capacity to handle the shut in heavy oil they have on tap (ie the bulk of their shut in capacity).
WT, either you know something that Aramco doesn't, or you are going to look rather silly here in a couple of years.
Austex, Aramco is not a person who "knows" anything. Aramco is a company with a hierarchy. Up and down the chain of command you will find different opinions of everything. Then there is the "official" position, the one that is put out by the princes and higher officials, and that often differs considerably form the truth.
That being said, Aramco is not doing anything they have not been continiously doing for fifty years. They are building new desal planta, new power plants, new gosps and new water seperation plants. They have been doing that for over half a century because old equipment wears out or is outdated by better technology. And at the refinery they are doing the exact same many other refineries are doing. They are upgrading their equipment to handle much heavier and sourer oil because more and more of their oil is of the heavy sour variety.
And their building program is really not all that ambitious. At Khurais for instance, they have plans to build four new gosps, each capable of handling 200,000 barrels per day. But they will be building them in series, one at a time as they are needed. If the second one is never needed then it will never be built. And four gosps would only handle .8 mb/d, not 1.2 mb/d which they say the field will eventually produce.
Saudi's long range plans are based mostly on hope, not facts. And they are hedging their bets as one would expect they would. They are drilling a lot of wells, production wells as well as injection wells, and installing a lot of new water injection capacity. And their published estimates of the new oil these tired old fields will produce is exaggerated considerably.
Ron Patterson
Oh yeah, and I forgot to add the main reason that they are importing all those new drilling rigs. Saudi's old fields are declining, combined, at a rate of about 800,000 barrels per day per year. That means that in the next four years, they must come up with about 3.2 mb/d of new production just to stay even. And in my opinion, there is no way in holy hell that they can come up with that much new production.
Ron Patterson
The Khurais project actually includes three fields:
Khurais - 22.8 billion bbl
Abu Jifan - 2.6 billion bbl
Mazalij - 1.4 billion bbl
Between the three fields, there are currently 6 gosps already in place capable of processing 300 kbpd.
As part of the 10+ billion dollar project, approximately 2 billion dollars has been tendered to build out four additional gosps capable of 330 kpd each.
http://www.ori.milano.it/en/en/en/news.php
"Update on Khurais Oil project, Saudi Aramco"
BTW, they are stating that the 4.5 in treatment for water injection is not replacing aging equipment, but ADDITIONAL capacity.
So that's 3 multi-billion barrel fields, 10 billion dollars, and 4.5 mbp of water and you guys are telling me this project is only going to produce 150 kpd in additional capacity?
Unless you guys are telling me that they are really building a rice plantation in the middle of the desert, the numbers just don't add up.
Freddy: Assuming you are correct, why would KSA arbitrarily cut contracted volumes to Asian customers? If this is a ploy to raise prices, would they not raise the price arbitrarily to lessen demand? What we currently have is the interesting situation whereby the Saudi spokesperson talks the crude price down (lots of excess capacity, etc)yet they cut back on contracted deliveries. If they would like higher prices, they have a very strange way of showing it (which would logically tend to support WT's view).It seems like currently they want lower prices yet are depleting rapidly (crazy as that combination sounds).
We covered this last week, but in short, nobody sells on the spot market. It covers about 1% of transactions. Crude is sold by short/medium/long term contract. Albeit there may be price fluctuation clauses that slide scale with spot.
WRT to OPEC contracts, most likely incl a rider that allows the Vendor to scale back pro rata with future announced OPEC quota restrictions. The vulnerability to contract realities would affect the vote on quota issues or their implementation timing.
Several times we have seen Aramco give out bad news post "quota announcements". This week India is quite concerned and India has been given assurance that their contracted amounts are not in jeopardy of pro rate. This could be 'cuz there was no clause. Or just good public relations to keep a customer. Or keep a customer with a real nice price. Cancelled contracts or pro rata shorting may mean selling that affected product in a lower price environment. That's not cool either.
Wow..Freddy and Hothgor on the same thread. I'm going to stop reading now, before my entire brain gets sucked out of my head. Thanks, guys.
World and Saudi crude oil production are down, as predicted by the HL models.
One thing about it, though, and something I have only mentioned occasionally, is that the HL model doesn't say "when" production will go into decline. I asked you this before, and you said that it is possible to get to 60% of Qt and a country not be in decline yet. So what the model really predicts is that some time in the next few years, Saudi will be in decline. You can't say with any degree of confidence that it is this year or next year, based on the error bars in the HL.
What you can say is that at some point between 50% (or 53% or whatever) of Qt and 60% of Qt, Saudi production will go into irreversible decline. But that range of Qt will cover a number of years. Agreed? If not, why not?
HL is not precise, so one looks for other indicators, eg what sa is doing, not what they are saying. Exports down with prices up, and up higher than they said is desirable, is a strong indication that this year thru oct their production fell in spite of their best efforts, possibly excepting some high vanadium oil that most cannot process.
ANother sign is regarding their best efforts; rigs up 3x, and their stated objective that their target is now 7x from end 04 (up from their earlier target of 4.5x, which apparently no longer looks adequate), indicates they are trying hard, spending billions, etc. One must assume that production/well is dropping fast, obviously now down more than 3x in 2 years. This acceleration of effort looks, to me, more like blind panic than an orderly evolution.
Moving to expensive horizontal wells makes sense when the water approaches the gas cap, and is a very strong indication that the fields are nearing the end, certainly of high production. Their plan to produce from fields long since abandoned is simply one more sign that their old faithful giants are near the end of their productive life. What these not as good fields will ultimately produce is anybody's guess, but imo maybe 1/10 to 1/5 of their claims.
Most damning, imo... no new fields are under development, indeed none have even been found. All of these points simply buttress the HL indicator, and all point to sa being past peak. Other than their claims (or hopes) for the future, there are no indications to the contrary.
All of freddy's punters thought 06 would be up nicely from 05, all wrong. All have high hopes for future sa/q8/iran production. IMO the persian gulf has little other than very old, much depleted fields. New fields in the stans and s. atlantic basin will help, but opec in general, and the persian gulf in particular, certainly when excluding ngl's from qatar/iran, is in decline.
I think you making some huge assumptions. Obviously some of the fields that were mothballed have issues that the easy to get stuff do not. Only recently (last few years), has there even been a need for SA to seriously consider increasing their liquid supply in a significant amount. The technology and investment is obviously present to develop these sources now, and from what I can see they are doing so. You can take a look at the current projects that SA are currently planning by going to the OPEC website – not insignificant by any measure.
It is not obvious.
From memory, Khurais was in production from 1964 till the mid-1980s. Peak production ~125,000 b/day and down to about half that when last detailed Saudi reports were made (~1982).
Again, from memory, Khurais was water flood then, they are now also considering NG injection to maintain pressure.
There have been steady incremental advances in Petroleum Engineering, but no revolutions in the last two decades (3D & 4D graphics are significant and can help optimize fields, but they do not quadruple ultimate recovery) AFAIK.
Khurais was a marginal field (by KSA standards) in the mid-1980s. I think Khurais (past) could be considered a PetE failure; low & disappointing recovery %s.
None the less, the field was developed and produced for about 20 years. Oil was extracted, pressures, water/oil boundaries modified.
Now, some new approach is going to solve all problems and increase peak production by x10 the historic peak !
Some MAJOR breakthrough, not seen elsewhere, is going to increase production roughly ten-fold ! With a HIGH degree of confidence (take it to the bank !) and not a risky shot that MIGHT work.
Perhaps.
But if they gave Nobel Prizes for Petroleum Engineering, getting over 1 million b/day from Khurais is well worth one !
As I said, it is NOT obvious to me that the technology is there to get such large production increases out of Khurais, or any other mature field !
Alan
OTOH, I consider manifa/Munifa a near certainity (for at least 750,000 b/day, some slippage between projections and reality is always possible(. I give high crediability to redevelopment plans for this field. They just need to build the refineries to process the oil.
Best Hopes,
Alan
There are building massive amounts of new refinery capacity. From what I remember, at least 800k of it was for the heavy stuff they currently claim as excess capacity yet no one has the room to process.
That is why the SA imminent and sharp peak theory that is so flaunted around here doesn't add up when you take a look from an objective standpoint.
The Khurais upgrading project:
Khurais - 22.8 billion bbl
Abu Jifan - 2.6 billion bbl
Mazalij - 1.4 billion bbl
For the 10+ billion dollar project, approximately 2 billion dollars has been tendered to build out four additional gosps capable of 330 kpd each. An additional 4.5 mbd in water treatment/injection capability is being added.
Conclusion: 3 multi-billion barrel fields, 10 billion dollars of investment, yet you and Ron know more about these fields than the Aramco's and Halliburton engineers assigned to plan for it's development. Amazing.
As far as why these fields were mothballed, back in the 80's, why would anyone invest in additional production why you have an oil glut and millions in excess capacity? Only recently has it made sense for them to develop these fields.
Khurais was developed and producing (although in decline) yet they shut it down. Oil was precious in the 1970s and early 1980s, yet no move was made further develop this field to 1.2 million b/day. Instead they abandoned a producing investment at the first down turn.
The field has had two decades to rebound from earlier depletion and a return to prior peak production from Khuarias alone would pay for the quoted investment. Quite frankly, $10 billion is not a staggering sum in the oil fields.
You are making the incorrect assumption that because they are investing money, their expected production claims are truthful. The funds involved do not require the stated production rates to be justified.
OTOH, Abu Jifan & Mazalij are wild cards with no production history and I do not even know their oil quality or reservior structure. Their production will be in addition to Khurais. It is conceivable that these fields could produce close to 1 million b/day for a few years (porous rock, light oil, superb reservior pressure, horizontal wells, all the stars aline in the best of all possible worlds).
One might infer that the increase from 800,00 to 1.2 million b/day reflected the addition of the two smaller fields (from memory, Khurais was first touted @ 800 K then 1.2 million. Shortly afterwards the two smaller fields were mentioend). I do not know enough, so I can accept that these two fields might produce 400,000 b/day for several days (multiple by 400k by 365, and divide this into 4 billion and that # passes the smell test of they are highly productive fields with good geology).
I could accept 400,000 b/day from the smaller fields with greater ease than an inferred 800,000 b/day from Khurais. A problematic field with 20+ years of production will suddenly be able to more than quintruple production once re-engineered ?
Possible, but before the fact any plans are speculative. The error bars and confidence intervals, at best, are large. I still think that the 1.2 million b/day is a political and not a PetE #. The investment can be justified at production levels much lower than 1.2 million b/day.
Best Hopes for Saudi honesty,
Alan
I cannot think of a soul at TOD that has promoted annual growth by Saudi Aramco. KSA attained 10-mbd capacity in 1994. This past Autumn they reached 11.2-mbd MSC. Their target for 2009 is 12.5-mbd MSC. With this torrid pace over 15 years, they can hardly be a candidate for setting the annual production records that u imply me or others expect.
Like Jeffrey, u don't understand a swing producer's role wrt to disruptions due to geopolitical or natural occuring events. Aramco's stated supply rate is 8.6-mbd crude and 11-mbd with NGL & proc gains. Over the course of a year they will drift up and down and be subject to OPEC targets. Jeffrey and some others don't understand the "down" part.
Please don't attribute outlandish growth claims by forum members that were not made. KSA is not in a supply race with Russia. With demand destruction in play, many of us are surprised that 2006 global supply exceeded 2005 by one mbd. With the new price regime, many nations and companies will increase inventory in Q1. I am confident we will continue to see new global monthly, quarterly and annual records in 2007. But i also realize that nobody knows better than KSA the contract effects that high prices are having. They watched global GDP growth slip in magnitude and this metric will be valuable going into the future.
What the hell Hothgor?! Were you born an a**hole, or did you have to work at it? Why did you feel a need to post that piece of weirdness?
Price and production diverged. The bottom line is that demand (at least for the short term) is falling faster than production. The recent decline in prices has nothing to do with PO. As of today, production is still below 2005 and it continues to fall. Although we cannot confirm that 2005 was the peak yet because demand is fallen below production.
My impression is that WT is right. So or later production will fall below demand and prices will begin to rising again. It very possible that price of oil may be on a wild roller coaster as prices rise causing further demand distruction which results in prices falling again. This cycle may continue for many iterations. In recent times, the first iteration began in 2000 as demand exceeded production resulting in demand distruction in 2001. Then in 2003/2004 demand began to rise above production causing prices to spike. Now we are in another downward cycle. However if production steady declines, the periods between cycles will shrink and the moving average price will make a steady climb up.
FWIW: I believed back in late 2004 that demand distruction would occur, as it seemed improbable that prices would steadly rise. Although I has though prices would have fallen in 2005 due to demand distruction, and it was really until late 2006 that prices began to fall significantly.
I have a suspicion that refiners may use the dip in prices to build up inventories on speculation that prices will rise significantly in the future. Its may be that the build up in inventories will send prices even lower as traders see the build up in inventories as bearish sign. Because of the quick run up in prices, I believe that refiners built up cash reserves, which could be used to fund purchases to stockpile reserves for the next price swing.
Personally, I find westexas' (admittedly repetetive) updates on Saudi oil production and total exports and whatnot to be very valuable. When I first started reading the site, it wasn't repetetive (and there are probably plenty of new readers every day experiencing this). Nowadays I spend most of my time worrying about things other than peak oil and only read the site a couple times a week, and it's nice to have regular updates on the numbers.
What I don't find valuable is the constant unproductive flamewars that make up a good half or so of every single thread. Half the time I stop reading where the comments start because I know it's going to degenerate into a poo-slinging fest. There's plenty of insight and information to be had here on TOD, but I'm not about to parse 200 posts of flamage looking for it, at least not on a regular basis.
You guys should take a chill pill and act as if you were adults.
Thank you
Oh that comment was great! Humor always helps.
Total Net Imports 11,886 12,465 -4.6
Can you offer some insight into the numbers on this line?
"Oil prices are falling, so we aren't outbidding anyone for crude."
You can not make this conclusion. Demand incorporates ability to pay, which especially in the case of oil is derived from the ability to use the product profitably. If the price of oil drops to ten dollars next week, there will still be people who will be outbid, or more to the point, there will be local economies unable to use the product profitably at that price.
It may come as a surprise but the US is not the world. Nonetheless, a slowing US economy reduces the ability of other economies, even strong economies in industrially advanced countries, to profitably exploit the oil resource.
So yes, prices can be falling and 'we' can be outbidding others for crude (and its derivatives).
It may come as a surprise but the US is not the world.
That's the thing, isn't it? When U.S. imports are falling, that is taken as a sign that an export crisis is upon us. When U.S. imports are up, we get "The US is not the world." Can you see why I might have a problem with such reasoning?
So yes, prices can be falling and 'we' can be outbidding others for crude (and its derivatives).
After I posted that, I realized that what I should have said is "We are obviously not in a bidding war for oil." After all, rising prices and falling imports were used last year as evidence that a permanent export crisis was upon us. When exports rose in the summer, it was evidence that "We are outbidding others for crude." So, what do we have now? Falling prices and rising imports. This leads to "The US is not the world." This is my whole problem with the hypothesis: It isn't falsifiable. Every piece of evidence is used as either support for the hypothesis, or inconclusive. There doesn't appear to be any evidence that indicates a problem with the hypothesis. I suspect that even if KSA starts increasing production, we are going to hear things like "They are lying about their production numbers."
Thus my suggestion that we just wait for the EIA production data on Saudi Arabia. IMO, for the HL model to be wrong, the average annual crude + condensate production for Saudi Arabia would have to exceed 9.55 mbpd.
I found it interesting that you said "If" not "When" KSA starts increasing production.
Thus my suggestion that we just wait for the EIA production data on Saudi Arabia.
But of course if they are voluntarily reducing production as they claim, EIA data is going to show that production is down. We won't really have a good clue until prices start to rise. If they don't pick up production then, I would say that something is amiss.
IMO, for the HL model to be wrong, the average annual crude + condensate production for Saudi Arabia would have to exceed 9.55 mbpd.
Yet if they are really in decline, how could they possibly raise production even close to that level? There is a pretty large gap between where they are now and 9.55 mbpd. Are you suggesting that part of their current production may be voluntary?
I found it interesting that you said "If" not "When" KSA starts increasing production.
I put my confidence level on that "if" at about 90%. If demand stays down for a long period of time, then it is possible that they may go into involuntary decline by the time demand picks back up. But I don't believe they are currently in permanent involuntary decline. It is going to take higher prices to find out, IMO.
This comment is directed chiefly to WT and RR..
First off, thks vm for your informative posts. I find them very good - particularly because you disagree so! How valuable is a mutual admiration society, after all? :)
I will try to provide an explanation for the reason production AND prices are down. Here are some basic data:
1. The US imports roughly 65% of its total consumption.
2. Most oil exporters are highly dependent on oil revenue.
3. Most oil exporters sell oil to their domestic market at "subsidized" prices far below "market".
4. Western and Asian importers, the US included, pay "market".
In order to maximize total revenue, oil exporters want to sell as much oil as possible to the "market" buyers after satisfying domestic demand.
Enter the US: it is the swing consumer to KSA's swing production. If the US (and other "market" buyers) consumes less oil it will be the exporters that will feel the cut first, as the US at any given price will first consume its own production. For a 3% drop in US consumption, import demand will theoretically drop 4.6% and result in even stronger pressure in marginal prices.
Now, the exporter will try to maximize revenue for a while by lowering prices to compete with domestic US oil while keeping production cuts as small as possible. Keep in mind that his domestic price is much lower, so anything he gets over that is acceptable (to a point). But soon the exporter will have to lower production, otherwise he will totally destroy marginal prices.
OK..Mild winter in the US and western Europe cuts demand temporarily. Who's going to feel it the most? KSA of course - they are the world's biggest exporter. They respond by cutting prices fast and then slowly cut production to stabilize the market.
That is also why it is so difficult to enforce OPEC production cuts - most exporters need to keep pumping at near full capacity to maximize revenue to keep their people happy. And guess who are the two most recent OPEC quota "cheaters"? Iran and Venezuela. They depend the most on oil revenue AND have the cheapest domestic price.
I believe the drop from $78 to $60-ish was driven mostly by speculative position liquidations. The rest has to do with the mild winter effect. Among all this, the forward oil price curve also went into complete contango, further strengthening the above case.
One more point: You are Aramco and see that your order book is thinning. What do you do, beyond the above moves? You hedge in the futures market, selling the front month contracts...
Regards
If the production decline of over one mbpd since 2005 is purely voluntary, why would they have any problem with increasing production back to, and above 9.55 mbpd, on a moment's notice?
I'm just using 9.55 as the index number, since that is the average EIA crude + condensate number for 2005. The Saudis are claiming that they have as much as 464 Gb proven + probable + possible reserves. By their numbers, they are less than 20% depleted, so--based on their numbers--their peak production should be in excess of 25 mbpd.
If the production decline of over one mbpd since 2005 is purely voluntary, why would they have any problem with increasing production back to, and above 9.55 mbpd, on a moment's notice?
Do you expect demand to make a large step change up? I think what we will see is that as demand slowly picks back up, they will slowly start to ratchet production back up. If they are in decline, this shouldn't be possible, and we should have to wait until they reach 9.55 mbpd to see that. Based on the projected decline rates I have seen bandied about, if they are truly in decline they should never see 9 mbpd again.
Jeffrey said: "By their numbers, they are less than 20% depleted, so--based on their numbers--their peak production should be in excess of 25 mbpd."
By this statement, we see that u are entirely out of touch wrt KSA's biz plan. For three years, Aramco & KSA have been transparent in their intent to sell most of their P1 & P2 Reserves in the 2035 to 2060 time frame.
Coming from a nation that sold most of its EASY oil for less than ten bucks, i know it irks u to see somebody else doing it RIGHT. KSA knows that there will be what i have called "scarcity premium" built into mid Century pricing. Their margins will be obscene and they know it.
The USA and Russia have been outmanouevered in that respect. KSA cannot diversify its economy. Even this month's refinery growth is "short term" in the big picture. They have been prudent in developing their P1 Reserves to save it for future generations ... at the greatest REAL price. Congrat's to them.
Jeffrey said: "By their numbers, they are less than 20% depleted, so--based on their numbers--their peak production should be in excess of 25 mbpd."
By this statement, we see that u are entirely out of touch wrt KSA's biz plan. For three years, Aramco & KSA have been transparent in their intent to sell most of their P1 & P2 Reserves in the 2035 to 2060 time frame.
Coming from a nation that sold most of its EASY oil for less than ten bucks, i know it irks u to see somebody else doing it RIGHT. KSA knows that there will be what i have called "scarcity premium" built into mid Century pricing. Their margins will be obscene and they know it.
The USA and Russia have been outmanouevered in that respect. KSA cannot diversify its economy. Even this month's refinery growth is "short term" in the big picture. They have been prudent in developing their P1 Reserves to save it for future generations ... at the greatest REAL price. They continually shun Int'l pressure to gear up for demand driven expectations. They have a plan and they'r sticking to it. Congrat's to them.
Maybe the KSA has a plan.
However, with the population doubling every 21 years [with the trend strongly supported by religious beliefs] and high internal consumption per capita, they need may need a better plan. The adage that goes "My father rode a camel ... and my grandson will ride a camel" presupposes a lot more camel fodder than they have.
Even if they have the amount of oil that they claim, if they can work their way through that demographic nightmare, then "congrat's to them" will be in order.
You know what is going to happen 2035-2060? You know just what KSA is doing 2035-2060?
For those who believe in a traditional omnipotent and omniscient God, yes, God already knows what happens in 2060. Freddy doesn't know.
Why is this being argued? Why is Freddy not laughed out the door?
Yes, the seriousness with which people respond to a proven liar is a sight to behold.
Jeffrey said: "By their numbers, they are less than 20% depleted, so--based on their numbers--their peak production should be in excess of 25 mbpd."
By this statement, we see that u are entirely out of touch wrt KSA's biz plan. For three years, Aramco & KSA have been transparent in their intent to sell most of their P1 & P2 Reserves in the 2035 to 2060 time frame.
Coming from a nation that sold most of its EASY oil for less than ten bucks, i know it irks u to see somebody else doing it RIGHT. KSA knows that there will be what i have called "scarcity premium" built into mid Century pricing. Their margins will be obscene and they know it.
The USA and Russia have been outmanouevered in that respect. KSA cannot diversify its economy. Even this month's refinery growth is "short term" in the big picture. They have been prudent in developing their P1 Reserves to save it for future generations ... at the greatest REAL price. They continually shun Int'l pressure to gear up for demand driven expectations. They have a plan and they're sticking to it. Congrat's to them.
Freddy,
As I suggested up the thread, since Saudi production is declining, as I predicted, why don't we just wait for more production data, instead of arguing the same point over and over again every day?
Jeffrey, if in 42 years the KSA has a population 4 times as large as at present, even if they have the oil [I'm not saying that they do or don't] your exportland model certainly paints a grim picture for KSA exports.
I think you are generalising regarding what people who do not share all your beliefs think. Personally I do not care at all about where daily prices are.
Prices are arbitrary conventions between sellers and buyers. A diamond is only valuable to a seller because the buyer is willing to give him a lot of money for it. If female humans happened to be color blind or simply have no vanity, even perfect diamonds would trade for next to nothing, certainly not much higher than for their current value as industrial cutting tools.
Oil prices are high because a lot of US males have penis envy and are now forced to feed their moving genital enhancements more expensive fuel than they had anticipated. In Europe the same males have been priced out of the competition for the same fuel because of properly adjusted gas taxes which force them to drive much smaller status symbols. The competition for male supremacy is still going on, but it is kept on levels which are much better for the economies of the region.
In regions of the world where fuel is EXCLUSIVELY an economic necessity, ... well, there are no such regions, actually... you can see exactly the same male competition going on in Bali as in the US. The object of desire for most is simply a faster motorcycle or the most basic car imaginable rather than an SUV. The resulting fuel efficiency is more along the lines of 100mpg rather than 13mpg but in the end... the game is the same: much of the oil in this world is burnt for vanity, not for its economic value. Unless you understand that, ALL your musings about commodity markets, be it diamonds, gold, silver, copper or oil, are for nought.
I think you are generalising regarding what people who do not share all your beliefs think. Personally I do not care at all about where daily prices are.
Your post appears to be in response to my post, but it doesn't address anything I wrote. It does address a lot of things I didn't write. Was this response perhaps intended for someone else?
A diamond is only valuable to a seller because the buyer is willing to give him a lot of money for it.
Again with the diamonds. In my opinion, it is exceedingly ridiculous to compare demand for oil to demand for diamonds. My "demand" for diamonds is completely elastic. My demand for oil is not. Demand for food falls into the same category. If we hit peak diamonds, the price might go up like crazy, but nobody is going to starve because they can't afford a diamond. A diamond is a luxury. Food is not.
My response was more of a general note on the meaning of (short term) prices, which I believe is overestimated. Price is an indicator of the buyer's momentary willingness to purchase something, which means it is high as long as the buyer's purse is full and it decays with the buyer's purse going light.
We have copious amounts of information that the US buyer is willing to pay $75/barrel, at least for a short time. Therefor there is nothing to stop the price from going back there, or from going higher BUT the savings people are willing to sink into buying gas.
But let's take a step back.
High prices for diamonds exist because we look at them as luxury goods and status symbols. They have to be expensive to serve that function, or else anyone could afford them and they would lose their value as status symbols. Hordes of jewelers live off this psychological need and they live very well. But you will admit that if all jewelers went out of business tomorrow, the world would not collapse, right?
You can transfer that insight to the US vehicle fleet.
Large cars, like luxury cars are a status symbol. To most people they do not serve an economic function that would distinguish them from a small car. The essential difference between a luxury car and a large car is in the ratio between its initial purchasing cost and its operating expenses. Truly rich people buy luxury cars because they can afford the purchasing cost. And operating expenses are of no consequence to their budget. In contrast, not so rich people can not afford the purchasing cost of a luxury car.
The industry responded to this the only way they could: by offering physically large vehicles which are still cheap to make. They offered fake diamonds, if you like. The psychological need to distinguish oneself was met, but at the expense of being very dependent on gas prices which greatly change the operating expenses for a large car while being of basically no consequence to the luxury car market.
So what you have now is an oil market that is dominated by the needs of owners of large cars who have bought into a false dream. You are correct, your need for diamonds is completely elastic. But over the long term, so is the need of drivers of large cars. They will, eventually, let go of their bonds to the objects of their affection and drive less and ultimately replace their vehicles. But before that happens the accumulated buying power of these people is likely to exhaust the financial resources of all the rest of the world in the competition for oil.
At this point the world is probably scrambling to reduce its demand and the only people standing in this market are the Americans and probably the Chinese (?). Decaying prices at this point can mean all kinds of things, which is why I am not concerned about them. I am inclined to assume that either some of the production numbers we have access to are false (and PO has to wait for a couple of years) or that someone's pockets are getting light. Someone could be the rest of the world excluding the US or it could be all of the world. In which case we are seeing waste destruction at home. (I did not discuss the warm winter but in the long term it does not matter... that's just a minor periodic modulation on demand and will drop out as soon as we have a complete cycle or two.)
As far as food is concerned... I believe tortilla futures are way up...
I think Infinate is onto something here.
When I was growing up we owned cars we needed like a hole in the head - they needed gas we didn't have money for and most of the time didn't run anyway. I don't recall any talk of buying insurance, but compared to our meagre financial resources, they were a pure waste. Yet, I've seen many poor people prefer to ride in a car rather than take the bus or walk or ride a bike. And that does not even get to the not-so-poor people!
Look around you - if you're in the US, you'll see people buying and driving the "most car they can afford" and if that means a Hummer, that's what they'll drive around in. Often the people who can least afford an expensive gas-guzzler will be the ones living on macaroni and cheese to drive one.
It's true that in the US it's been made necessary to drive a car, but it's not like Americans were dragged into it kicking and screaming.
Most of what we "need" is custom, not actual need.
Yes, it does seem somehow unexpected - but I'll take a couple of quick shots.
1. The rest of the world has been responding to increased oil prices by making do with less - simply as normal behavior, in general, not as a sign of doom (though there is certainly some of that - Pakistan is looking increasingly awful). The only notable exception to this trend is the U.S., which is quite locked into high oil consumption, regardless of how much fat there is to trim.
In a way, this is a depressing thought - the U.S. gets flooded with what other people require less of - whether this is a case of Jevon's Paradox, or some subtle long term strategy of other societies is hard to tell - after all, at some point in the fairly near term, if not now, oil will become scarcer. Those societies able to survive with less will have a certain advantage. Having a competitor hobbled by gluttony would also allow plausible deniability - after all, it is the glutton's fault that they aren't nimble, which has the added virtue of being the truth (GM and Toyota come to mind here). The U.S. is not the world - and if it stumbles or collapses, there will be a number of winners outside the U.S., not just losers. And relying long term on oil is likely to be a loser's game.
2. Stockpiling, taking advantage of a price dip - and actually trying to reinforce that dip in price by buying more for less, then waiting for oil supplies to shrink, and make a good sum of money.
3. Stockpiling as a geopolitical chess move - better ability to buffer any shocks due to events, especially those in various planning stages.
Hard to know, and none of them (well, 2. maybe, and the Jevon's Paradox part of 1.) seem all that convincing
What I do find interesting is that this increasing amount of U.S. imports seems be occurring in a world with stable (at best) oil exports - someone is getting a smaller share, or some sources of crude/unconventional liquids are not well captured in the data.
Or things aren't as they seem - no surprise there.
Today's news from Tom Whipple is another look at the Senate's hearing on Energy Security noted above has gotten alot of air time.
The congressmen were "Shocked" by the News...
What a Load of Bull pucky.
Those Lying Ba$T'ds "This is the First We heard of this" is what they seem to be saying.
What yanked my chain about this is THIS.
Peak oil production
by Rep. Roscoe Bartlett
--- The SPEAKER pro tempore (Mr. Hall of New York). The gentleman from Maryland (Mr. Bartlett) is recognized for 60 minutes.
http://www.energybulletin.net/24896.html
60 minutes of ANOTHER Bartlett speech before an EMPTY HOUSE (most likely again).
This is the What? 3-5th time Roscoe has given an Hour long speech on this?
Then Listen to this again:
The Rise of “The Axis of Oil”—Big Trouble for the United States
http://www.globalpublicmedia.com/articles/836
Where the H3ll was Domenici the last two years when Bartlett was speaking to an empty house? Why doesn't anyone call theses senator's on this?
"We didn't Know" is BS
Lying Btards....
John
I've seen earlier Bartlett presentations, and I listened to the Senate Committee on Energy and Natural Resources' hearing into "The Geopolitics of Oil."
The Bartlett Presentations were 'ground-level' (or maybe even below-ground) views of the future of oil.
The Domenici hearing you reference was a global political view, which had some very stark predictions about the alignments that appear to be taking place among the nations (specifically Russia and Iran) who have large remaining reserves.
These are two cuts though the same energy apple, each exposing a different slice through the rotting core.
In any case, I'm guessing that the opening of Domenici's eyes to the geopolitical issues will allow him, and hopefully others, to the whole story of peak oil.
Well, Domenici's a senator, Bartlett's a rep. If that's not good enough, how about this: Domenici's not one of the sharpest tacks in the box.
But yeah, it's a little late in the game for a senator to be so ignorant.
Looks like Jim Rogers is going to have to wait a while for $100 dollar oil.
With the new numbers today it looks like T Boone has lost another big chunk of change also.
So much for OPEC quotas again - just like late 70's and early 80's.
And sadly, just about everyone on this site except a select few didn't see this coming :P
Yeah - I am in early 50's so I am seeing round 2. Bet if I make it to 80 I will see PO #3
in my lifetime.
see what? My friend, what price is oil when on average its still pulled out of the ground at less than $10, the rest is all bullshit. Did you make a lot of money shorting?
I believe I have seen "a select few" singing and freezing their butts off on a hill close to my house the other night. "The selected" were waiting for "Ye ol' Second Coming" or "Da Rapture" or something silly like that. I, on the other hand, went home and slept soundly. Not having been among the few who were going to be taken to heaven in the holy space ship did not rock my world.
To all those who think endless abiotic oil and a self-regenerating atmosphere (the two ingredients necessary for PO not to be real!) will keep everything as it was when they were three years old and to all those who believe that their wood burning ovens will save them from the pillaging crowds in a "Saint Mel Gibson Post-Apocalyopse" I say (and I mean it): you are the two sides of the same fool. You are so full of yourelves that you can't even realize how silly you look to anyone with even half a brain.
I see that there are several stories today concerning Nigerian oil production. The most recent (February 2007) issue of National Geographic has an article entitled "Curse of Nigerian Oil." It's worth a read if you can get hold of a copy. It's pretty grim. The article points to a multimedia supplement at NG Magazine's site but it doesn't look as though it has been posted as of this morning.
From Byron W. King's ethanol article:
Syntec asked the question yesterday what the most important considerations were in the debate over ethanol. In my opinion, they are:
1. Is it sustainable?
2. What are the potential negative consequences?
3. Is the energy balance high enough to offset (2).
4. Are there better alternatives?
Feel free to add your own. Those are the ones I see as the biggies, and the answers to those are yes, lots, no, yes.
And just think, if we werent farming corn, we would still be...
...loosing 1800 pounds of topsoil down the wind and the river due to erosion.
The Mississippi Delta wasn't built by man you know :P
Hothgor, geologic erosion shouldn't be conflated with agriculturally-induced erosion. The latter is of several orders of magnitude greater than the former. If you need data to be convinced of that, I will dig it up.
As to what are our most important considerations, sustainability would be my primary focus. If researchers and producers have time to work on developing viable cropping systems and they can do it without destroying the resource base, eventually the economics of it will tip the scales one way or another. What concerns me is that in the mad rush to grow huge quantities of corn, a lot of money is going to be wasted and a lot of non-renewable resources -- in particular, topsoil -- are going to be lost or seriously degraded.
But still this little guesstimate sounds off. The Big Muddy has always been muddy.
With ave corn yields of 150 bu/ac, and topsoil around 300 sq ft/ton/inch depth, depending on moisture levels, this would mean all corn cropland averages 1 inch per year loss, over all gradients of cropland. Current(2004) Illinois estimate have less than 10% fields with over 7.5 ton/ac/yr.
I agree with your upthread comment on Nigeria in National Geograhic. Good article.
doug, no doubt this is true. I made a general statement about geologic- vs. human-induced erosion rates and, like all general statements, one can find problems with it. There are simply too many variables within a given soil-geographic system -- slope gradient, soil texture, plant cover, organic matter content, moisture content, soil pH, etc. -- to give a "one size fits all" estimate of erosion rates. Hope I didn't "muddy" the waters.
Sorry, misread your intent. You were taking exception to B.King's estimate of soil losses. Yes, I agree. I skipped over his number too quickly. That strikes me as "way" high.
With ave corn yields of 150 bu/ac, and topsoil around 300 sq ft/ton/inch depth, depending on moisture levels, this would mean all corn cropland averages 1 inch per year loss, over all gradients of cropland.
What's the source for the topsoil information? I work that out to 80 lbs/cubic foot of topsoil. That seems pretty high to me, and is quite a bit higher than the density of pure water.
OK, I have done some digging, and I found some references that give a topsoil density in that range. So, that would mean 270,000 lbs per acre of topsoil loss. That seems high to me as well. I ran through the rest of the calcs, and I get 0.9 inches of topsoil loss per year. Again, I think this is too high. Too bad there isn't any contact info for the guy who provided this information, because I would like to quiz him on this.
Let's see, if we take your 7.5 ton per acre number, I calculate that this would be a loss of 0.05 inches of topsoil per year, or 1 inch every 20 years. My guess is that the guy is off by a factor of 10 on his calculations (or that he meant "per acre" instead of "per bushel").
Clearly topsoil is being lost from corn farming, but we don't know for sure how much. "How much" will tell us how long we can afford to stay on that unsustainable road.
Pimentel did a lot of work on topsoil loss.
He published a new study a year ago, which I can't find for free, but here's a
Cornell article about it:
Another quote from a 1997 article
And there's a number of reports at dieoff.org
With the falling water tables and topsoil blowing away, one must wonder how long China can support it current population.
That is a really great book. I think I will read it again, just to get more ammunition for arguments with silly cornucopians.
Ron Patterson
>That is a really great book. I think I will read it again, just to get more ammunition for arguments with silly cornucopians.
Cornucopians are like creationists. You might have better luck nailing jello to the wall.
Erosion rates are highly variable, but note the 7.5 ton figure was the high end for Illinois. Other fields are much less.
The comment of 1800 lbs per bu is ludicrous, I don't know if the author's error was intentional or not. But many factoids get thrown around with abandon, and applied in situations where they aren't supposed to be. It is frustrating.
You are correct that corn farming has erosion problems, and that etoh from corn is foolish. I believe our national mistake will correct itself, but don't know how long that will take. The vested $$ interests seem awful deep at this point.
Determining how much entails finding accurate baseline rates, a difficult task. In my opinion, extrapolations from pasture may or may not reflect natural pre 1800 rates. Improved conservation tillage has gone a long way in decreasing rates, along with moratoriums on crop farming erodable land. Etoh demand, though, may unfortunately cancel these trends.
I think there are some big discrepancies and ambiguities in the above statements about topsoil loss.Not yours specifically but what is being propagated on this site.
Back before better farming practices were developed much of my county, and the rest of this region, were shot thru with huge gullies. Gullies big enough to throw houses into. Massive gullies.
The use of Kentucky 31 fescue , correct tillage and many other advances corrected this and IMO actually created topsoil. I can drive by those places now and see nice stands of corn and other crops.
No-till has been very beneficial.
The data is in the hands of college and university ag profs and those who complement the farmers in agriculture.
What I see of late is a lot of bad information. More on the order of urban legends. 1800 lbs of topsoil per bushel is pure out and out stupidity and something that should be disregarded , without absolute proof, as hogwash of the first order.
Topsoil is being lost to corn farming? Robert how do you know this?
How much? Where? I don't have the figures but they shouldn't be hard to discover.
What I will concede is that if we pull out all the CPR , diversion grass strips, holding dams and HEL lands , which is the very thing all this bitching about farmers ripping off the government and taxpayers is over, we will definitely see the land degrade and losses as a result.
The way these forums tend to run as I see is someone just blasts out an opinion as though its factual. They don't even offer is as a personal opinion, nor even an IMO,they just say it as though its absolute and the factual. Others tend to take it and run. Then it just multiplies.
The land is different everywhere. Differing practices but no farmer whose livelhood depends on the soil wants to see it 'blown and washed away'. He needs that topsoil. We all do. Its our line of last defense.
Years of correct agricultural practices means we are not an Ethopia or other 3rd world country who has 'ate all its seed corn'.
We use good equipment and correct practices. We produce prodigiously.
Danger is that now some are wanting to remove all the practices.
This is not good. We need those uncropped areas. We need the wildlife. We need the brushy areas by the sides of the field.
I am going to post some data later on cost to grow corn for my region.
The input values are not stable. We can expect them to likely grow enormously in the future as the costs of energy that creates them grows.
Currently some farmers I hear are locking in 08 and 09 contracts at $3.85 or so. This is without a clue as to what their input costs will be in the future. I suspect it will cause them grief but they apparently have no clue as to what oil will likely be doing. No one is telling them. Its not on the news such that they see it. No one is talking about it to them. The ag agents are surely not.
Here is a link to the paper:
The impact of humans on continental erosion and sedimentation
Bruce H. Wilkinson†
Department of Earth Sciences, Syracuse University, Syracuse, New York 13244, USA
Brandon J. McElroy‡
Department of Geological Sciences, University of Texas, Austin, Texas 78712, USA
Comparing geological erosion and anthropogenic erosion.
Human-caused erosion is significantly greater.
However, the kicker at the end of the abstract is:
"In a context of per capita food production,
soil loss through cropland erosion is
largely insignificant when compared to the
impact of population growth."
Robert, I don't have time now to do the conversions but density measurements of topsoil should run from less than 1 gm/cm^3 (forest) to 1.6 or 1.7 gm/cm^3 (tilled field with low organic matter content). As a rule of thumb, an "acre furrow slice" is figured to be 1 ac * 6 inches deep and is estimated as 2 million lbs of soil (see http://www.oznet.ksu.edu/agronomy/soils305/bdensity.htm).
Old values of topsoil loss for corn are out of date. In many (most?) cases we have shifted from plowing to plant corn and later till in the debris from harvest, to seed drillers that just shove it in the ground and leaves the debris in place as mulch. Much less topsoil loss.
the late david love calculated that the miocene sediments in the rocky mountain region (which have been eroded away) are more than has been deposited in the mississippi delta. his conclusion is that lots of these sediments were blowin' in the wind.
I just posted this at the bottom of the "Revenge of the Shia" thread, wouldn't want anyone to miss out on my wisdom: ;-)
Two words I didn't see in this thread, (but I just skimmed):
DEPLETED URANIUM
We're turning Iraq, and the ME, into a radioactive waste dump. The region will simply not be habitable much longer. And those radioactive particles don't stay there, ya know...
Discussing the ME without including the effects of DU is like discussing the Iraq War without even mentioning oil!
The World Health Organization doesn't seem to agree with you.
Based on their analysis in that link, DU really isn't that big of a deal in terms of contamination concerns. Its radioactivity is low enough that it's usually the chemical toxicity that's a concern (it can damage your kidneys), but studies in (for example) Kosovo have suggested that DU contamination tends to be pretty localized ("a few tens of metres around impact sites").
Moreover, it's almost certain that the US is expending quite a limited amount of DU in its current conflict in Iraq. DU is mostly used against hard targets (e.g., tanks), and that's not the threat currently facing the US forces. Most munitions currently in use are almost certainly various types of high explosives, since those are more effective against infantry.
There's DU armour on some tanks, of course, but it's questionable whether those tanks are being used (the weight of the DU is hard on the machinery, and regular tanks are plenty protected against insurgents), and in any case the number of tanks significantly damaged is vanishingly small.
That's not to say I think either DU or the Iraq invasion are good; it's just that all available evidence suggests that your alarmism about DU in Iraq is basically unfounded. Compared to the shambles that is the security situation in Iraq, the hazards posed by DU are almost certainly very minor.
Dems trying to find more funding for Amtrak, and look who is helping them on the R side.....Weird. In the stateline area our local state senator (D) Judy Robson has been working on getting a line from Janesville, WI to Chicago
http://www.washingtonpost.com/wp-dyn/content/article/2007/01/16/AR200701...
Patrick
Notice the very interesting Divergence between the charts for Crude Oil and the stocks of oil companies...
Charts for Oil company stocks vs crude oil, and Oil Services Sector stocks vs Crude Oil:
http://stockcharts.com/charts/gallery.html?%24xoi%3A%24wtic
http://stockcharts.com/charts/gallery.html?%24osx%3A%24wtic
It appears that Mr. Market isn't overly concerned about the short-term drama over the decline in the price of oil. Good thing Mr. Market is not a college sophomore.
Sendoilplease,
I too noticed that. I have been following and trading options on XLE for a couple of years now. If you look at the one year, weekly chart it has formed a nice ascending triangle, great support at around $50.00 and higher highs. So far we haven't even hit support even with this substantial pullback...VERY BULLISH! I'll see if I can post the graph.
Saudis to Increase Oil Output Capacity
http://www.nytimes.com/aponline/business/AP-India-Oil-Meeting.html
Maybe if you repeat it often enough.......
Shows how goofy our information is - the SA oil minister is stating the SA crude production capacity is currently 9 mbpd. Taken literally, it would sound like a confirmation of Simmons' position. Was he misquoted? unguarded? misunderstood? Only his hairdresser knows for sure.
The NYT article comes from AP, and claims that Naimi said this at a New Delhi conference earlier today. There doesn't seem to be much reason to think the reporter made it up:
The comments by two officials at the conference were wrongly attributed by an Indian reporter and then picked up by the wire services and has taken up a life of its own. The correct direct quotes by each Saudi is below...
The confusion arises out of the statements at PetroTech 2007.
KSA & Aramco are always careful to articulate MSC, production & desired surplus capacity in their statements. This one mixes up two. And doesn't mention the third. It was not bad reporting.
The PetroTech Conf is taking place in New Delhi.
Nabilah Al-Tunisi, Mgr of Project Support for Saudi Aramco said yesterday:
"Altogether, these programs when completed will increase Saudi Aramco's total production by approximately 3.0 MMBD, which will boost Saudi Aramco's production capacity from 9.6 MMBD in 2006 to 12 MMBD by year end 2009."
The ambiguity was corrected by Minister Ali Al-Naimi today:
"Our first priority is a massive investment program to increase our sustainable production capacity to 12.5 million b/d by 2009. Additional projects have been identified for implementation after 2009, if warranted by market conditions. This expansion program will make a significant contribution to meeting the world's increasing needs for energy."
This is consistent with their recent statements as i summarizied at TOD: http://www.theoildrum.com/story/2006/12/18/85510/573#comment-139408 while the graph i posted last nite on Drumbeat illustrates OPEC growth intentions over the next 48 months.
Both speeches can be found here.
A summary today of her paper shows us their current plans:
Al-Tunisi notes that Saudi Aramco's expansion plans are designed to ensure that growing economies like India's will get the energy they need in a reliable manner.
Toward this goal, the company has embarked on an ambitious five-year expansion program that includes five mega-project crude oil increments concurrently. Those projects include:
Khursaniyah - 500,000 barrels per day (bpd)
Shaybah - 250,000 bpd
Nu'ayyim - 100,000 bpd
Khurais - 1.2 million bpd
Manifa - 900,000 bpd
Taken together, these increments will raise Saudi Aramco's production capacity to 12 million bpd by year-end 2009.
If there is inconsistency in announcements, it is that they range from her "12" to his "12.5" to last month's "12.6" ... all dealing with MSC ... not production. There also is some inconsistency of surplus capacity ranging from "1.5" to "2" to "2.5" but the picture is clear: EIA, IEA & CERA's hopes for 12 to 18-mbd supply levels in 2020 to 2030 time frame are based on fantasy that KSA wishes to dispel with every public opportunity.
When Naimi, or anyone else, says:
".... oil resources are sufficient enough so that they can meet future energy demands for the next 30 years."
They lose all credibility. Period.
Anyone that says Khurais will ever produce 1.2 million bpd loses all credibility. It is extremely unlikely that Khurais will ever produce 200,000 bpd.
Ron Patterson
A problem child if every there was one.
Alan
Maybe you should call up Aramco's and Haliburton's engineers and tell them they are wasting their time, as well as the billions of dollars they are investing in this field. Sounds like you know something they don't - heck maybe they will even throw you a few bones for giving them a heads up.
BTW - the estimated total is closer to 1.3 mbd including the NGL's.
http://www.hydrocarbons-technology.com/projects/khurais/index.html
Given the fields prior history, 100,000 to 250,000 b/day is a reasonable expectation, and will pay for a LOT of infrastructure. I suspect that Aramco knows that, but the talking heads wanted a larger #.
Besides Haliburton gets paid regardless of results.
Best Hopes for Luck,
Alan
Whatever you're beliefs are, I can conclude that one of the following two statements are correct:
1) Aramco is wasting billions of dollars as well as endless engineering hours
2) You guys are wrong
3) Aramco can make money on it's investment with, say (illustration for example) 75,000 b/day and $40/barrel oil. Aramco expects to get between 150,000 and 200,000 b/day and reported this to higher ups.
Higher ups, for political purposes, added a 1 to the front of the higher estimate.
Alan
... or perhaps there is a "3)" such as "maybe it will produce more, but 100,000 to 250,000 bbls per day is still a lot of oil and either way the investment should be profitable."
Notice how ARAMCO used to claim their current capacity was 11mbpd to which they were adding 300tbpd in 2006, but now it turns out to have been 9,6mbpd all along?
The XLE and OIH are both consolidating at trend support, churning, unable to retrace even half of their most recent rally.(118 to 151) This resting place can also be attributed to Option Expiration, as the largest open interest lies at 130 OIH, and 55 XLE.
On a more optimistic note, GE sold a plastic division and bought a driller at the begginning of this year. This could be putting a floor on the Oil Service companies. Also, these transactions support the longer term perspective that Oil will be trading above 50 dollars.
They bottomed way before oil itself. Remember when OIH came down from 168 while oil kept going up. It was anticipating this correction. Also the canadian dollar along with XLE and OIH has been showing substantial relative strength to oil. That portrends much higher oil prices in 6 months IMO. The puts on the OIH have soared too yet they cannot push it down. I think we formed an imp bottom.
"...Also the canadian dollar along with XLE and OIH has been showing substantial relative strength to oil."...
I am not sure what currency strength you are alluding to? The canadian dollar is strong relative to which currency(s)?
The(cad)remains stuck in a 1 year trading range against the dollar.
..."The puts on the OIH have soared too yet they cannot push it down. I think we formed an imp bottom."
Although aggregate open interest in the calls is greater then the puts. The seller's of the calls need to hedge by buying stock, temporarily bidding up the shares. I do agree with you in that there is a greater open interest of puts in the 125 and 130 strikes. Assuming the pro's are selling puts to the panicy public, they would need to short stock, at this level and at a greater hedge ratio, artificially lowering the price. The fact that the OIH has held up is indeed bullish.
Yet more ambiguous info here. I show the OIH making a lower high and so far a higher low then the one formed in October. We shall see if the low holds.
Northeast nuke plants alerted after Minnesota glitch
This is the "common design flaw" that nuclear plants are subject to. Throughout the history of nukes, all those plants of a common design can be suddenly and unexpectedly shut down for an indeterminate period when a common design flaw is discovered.
A major reliance on nuclear power will need a variety of designs to limit this risk. The trend is very much the other way today.
At least twenty Toshiba-Westinghouse AP-1000 reactors seem likely to be built in the US. If/when a common design flaw is discovered and we are suddenly short 22+ GW, what then ? There will not be enough NG in future years to make that much power up, regardless of cost !
Best Hopes,
Alan
This is a bit naive...
Common reactor design is highly desirable from an economics and a safety perspective. Operationally you discover failure modes sooner, and are able to correct them on your entire fleet, and you are able to realize productivity gains for your entire fleet. The cost of custom reactors for every site swamps the cost of extra downtime for maintenance. In addition, you're proposing ignorance and uptime is better than knowledge and downtime... what you're asking for is an eventual catastrophic failure.
Yes, I also think Alan was overstretching something here. If we go for 20 different, each one poorly tested designs the most likely outcome will be ending up with 20 different and poorly understood sets of technical problems. This is exactly the opposite direction of how mass production and technology evolve - you may have many designs in the research phase, but you always end up mass producing only the best one/s. The fixed costs of introducing and developing new designs in production is always high, and in the case of nuclear power they can be mind-boggling.
There needs to be a balance between custom & standardization.
I was told that if Three Mile Island had been a Westinghouse reactor instead of the far less common Babcock & Wilcox reactor, widespread outages in several areas of the US would have resulted. The UK found they "had a problem" when EVERY reactor had to be downrated when it was discovered that common carbon nuts had been used in every one. The desire to keep the lights on impacted safety decisions then.
New GE & Arriva (and CANDU ?) reactors need to balance the Toshiba-Westinghouse AP-1000 models. If South Texas builds 2 or 3 AP-1000s, build something else in North Texas.
I see a risk in what seems to be developing in the US. The next twenty reactors ordered seem likely to all be AP-1000s. A mix of ten AP-1000s, five GE ABWRs, two Arriva Advanced EUPR and three CANDU ACR700s would be far preferable IMO. And hope/plan that all ten AP-1000s are not in the same regional grid.
We can exchange operating knowledge around the world (first 4 AP-1000s will be in China, first two EUPRs will be in Finland & France) and discover design faults and operating efficiencies that way.
BTW, Toshiba-Westinghouse has an alternative modern design based on the excellent Combustion Engineering design (W bought CE nuke) but it is not being pushed. Instead the AP-1000 is.
It is a risk to have a common design for all of any technology.
Intel has AMD and used to have Motorola to compete against with good results.
Airbus cannot get the A380 properly wired, so Boeing has the 777-300ER & 747-8I/F as alternatives. The 787 is running away with the market while Airbus struggles with the A350 design. The 737 & A320 split the market fairly evenly.
I sense/guess that T-W AP-1000 is heading for 80% world wide market share and 100% US market share. This is not good IMO.
Alan
I believe you are right. If memory serves me correct, which i'm 99 percent certain it does, France has a common design policy, not implying that proves the superiority of common design.
Alan, a high posting frequency imply a relative high risk of making unfounded statements. I'd like to thank you for sharing your knowledge and your points of view. You and a handful of others truly is the main contributors at TOD. And of course, you should be posting more.
It's not difference in opinions and "competition" between different stances that make up progress in intellectual work. It's when the the contributing individuals add together their logic senses, intuition, creativity and knowledge in general, progress is being made.
You would be correct in saying that the French build to an evolving standard, changing the design periodically in an evolutionary way.
The last four reactors built in France were the N4 series design. A common design flaw, limited to the N4 reactors
Fortunately, this design flaw did not apply to the earlier French reactors and France built no new reactors after the four N4 reactors.
Had all French reactors suffered the same design flaw (as did all British reactors earlier), and had the flaw taken longer to become known, France would have had no choice but to operate reactors unsafely while emergency repairs were made on selected reactors.
Canada also has an evolving design standard for their CANDU reactors.
This is an issue of philosophy. I do not support unique designs at each site. But I also see a risk in having nothing but carbon copies of the same reactor everywhere. Others do not see the same risk.
Best Hopes,
Alan
PS: thanks for the kind words. Yes, one must tread carefully when posting on this exacting blog. Errors are to be found out QUICKLY ! The readership is large, diverse and with a variety of technical backgrounds.
I still remember the debate on the Fall of the Roman Empire and the after-effects.
http://today.reuters.co.uk/news/CrisesArticle.aspx?storyId=L1880556&WTmo...
I foresee another round of WTC 7 discussions. :-(
What's so bad about another round of WTC 7 discussions?
Hello Donal,
The simple way to protect workers from an accidental fire in a skyscraper under construction is not only to have plenty of fire extinguishers on hand, but also require that the fire sprinkler & fire hose systems be activated and pressurized to the uppermost floors ASAP as construction proceeds upwards. I am not familiar with UAE construction codes, but you would think the mortgage & insurance companies would require this simple set of rules to protect their investment and the workers.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Meanwhile, Burj Dubai has reached 400 metres height, on the way to 940 (?)
Blood coal
Hello Leanan,
If PO + GW Outreach doesn't spread: at some point on the Hubbert Downslope, we can expect desperate Americans to endure the same unsafe working conditions in our own coal mines.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Give us your tired, your poor, ...your bitumen...
U.S. Oil Industry Urge Canadian Oilsands Execs to Step It Up
Ha! Ha!
Don't we have a carrier battle group that we can dispatch to Fort McMurray?
That's great.
The more pressure for faster development, the sooner the whole thing will self destruct.
There was an initiative for syngas power announced this week, people are too nervous about nuclear. $1.5-billion plant would supply oil sands
See more over at TOD Canada.. The Ontario Teachers Pension Fund is 50% owner, nice way to retire: over the destruction of your own country. What's wrong with you people?
Now, the net energy return on oil sands is already scraping along the zero line, while using relatively easy and cheap natural gas.
Anybody want to take an estimated guesstimate at what happens to the net energy, or EROI, when the feed has to come from syngas?
The article mentions interest in transporting some of the bitumen to the US for processing. How can this be economical, not to mention have an EROI over 1? From Wikipedia:
Bitumen is the residual (bottom) fraction obtained by fractional distillation of crude oil. It is the heaviest fraction and the one with the highest boiling point.
Yeah, that'll go down a pipeline smoothly. And then, what energy source will we use to convert it? Nuclear? Methane from Canada?
I know! We'll use the Colorado Oil Shale!
Some great links posted by Stoneleigh today over in the Round-Up at TOD Canada:
http://www.theoildrum.com/node/2196
Hello TODers,
Most of us have read the recent postings on skyrocketing tortilla prices in Mexico, but it maybe jumping to a new price level as Mexico is now building corn-fueled ethanol plants:
http://www.truthabouttrade.org/article.asp?id=6862
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In addition, Mexico is gearing up to supply its own ethanol industry. Lawmakers are contemplating legislation that would require the state-owned oil company Pemex to oxygenate its gasoline with corn-based ethanol. Two plants are already under construction in the rural state of Sinaloa, where officials are looking to create employment and provide farmers with a reliable outlet for their harvests.
Mexico has shed nearly 30% of its farm employment since NAFTA was implemented. Many of the jobs belonged to subsistence farmers who have fled for the United States.
Some rural advocates say another wave of migrants will be headed north next year, when all remaining tariffs and quotas on agricultural products are lifted as part of the NAFTA agreement.
-----------------------------------------------
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Southpaw,
Two days ago, you wrote:
I've been thinking about what you said, but am slow to respond. Here's a book your husband might find useful:
Political Ponerology, The Scientific Study of Evil Adjusted for Political Purposes, by Andrzej Lobaczewski.
Lobaczeswki is a Polish psychologist who lived in Nazi and Soviet controlled Poland. He and his colleagues studied how evil grows in a political and economic system. His thesis is once you understand the system, it's easier to defend yourself. Here's a relevent quote:
Here is a good review of the book.
http://www.cassiopaea.org/cass/political_ponerology_lobaczewski.htm
Ric Williams
WSJ: High Prices Prod Developed World To Curb Oil Use ($$$)
Good find, Calorie. Thanks for sharing that.
That's quite a statement above. May not mean a hill of beans.
This has to be a reality check for those who see consumption relentlessly rising.
It turns out we developed nations respond to high prices after all.
One thing to remember.
Demand is not the amount of oil burned. Demand is the oil burned plus the oil added to inventory. If those with storage wish to lower inventory than demand will drop faster than actual use.