Saudi Arabia Announces They Will Produce More Oil

CNN is reporting that Saudi Arabian King Abdullah and the country's petroleum minister Ali I. Al-Naimi, at their Jeddah Energy Meeting, have announced an increase in production from 9 mmbpd to 9.7 mmbpd effective July, and will increase investments in oil projects which will allow for 12.5 mmbpd by the end of the year.

Saudi Arabia will increase its daily oil production to 9.7 million barrels from 9 million to counter the sharp rise in international oil prices, Saudi King Abdullah said Sunday.

The country's petroleum minister, Ali I. Al-Naimi, said that the increase will take place in July.

It would be Saudi Arabia's highest production rate since 1981.

Al-Naimi also said the government will invest in oil projects that would allow the nation to produce 12.5 million barrels per day by the end of the year.

Did he mean that productive capacity would be 12.5 mmbpd by the end of the year or more likely the investments would be made by the end of the year in order to try to get to 12.5mmbpd in the future? (The latter more likely, though the phrasing, as usual, was odd)

King Abdullah's remarks came at the end of the Jeddah energy summit, where he also called for OPEC to set aside $1 billion for a strategy to ease the oil price crisis. He said $500 million should be given to developing nations to help them get the energy they need.

King Abdullah said there are "many factors that made oil prices high." Along with increased demand, he also cited oil speculators and an increase in taxes in consumer nations.

Is this newsworthy at all? March 2008 production was already 9.2 mmbpd. The May increase took it to 9.5mmpbd (+300,000), so there is 200,000 remaining for July. E.g. no new increase.

Thoughts? Links? Analysis? Charts? Graphs? Translation?

(Rembrandt will follow this post with a more detailed analysis shortly)

I thought it was interesting that the King reportedly put current production at 9.0 mbpd. In any case, my comments on the Drumbeat thread are linked below, with an excerpt shown:

Last year, in March, one of the objection to the Saudi HL plot was that the observed production decline was sharper than what the HL model predicted. I responded that I therefore expected to see a production increase.

This year, one of the objections to the Saudi HL plot is that we are seeing increasing production. I have responded that I expect to see a resumption of the production decline, probably in 2009.

We can say that it is quite likely that Saudi Arabia will have shown three straight years of annual production below their 2005 rate, at about the same stage of depletion at which the prior swing producer, Texas, peaked.

Could be crude only(not total liquids).

I'm sure it is, but many media reports were claiming current crude production of 9.45 mbpd, and the EIA showed 9.2 mbpd for the first three months of the year.

Exactly. As others have pointed out, the Saudi's less than a month ago announced a production increase of 300K barrels to 9.5M. It seems that no matter how often the Saudis claim to increase production, the amount being produced never seems to actually top 9.5M barrels.

Here's my latest graphic of mothly KSA production through April 2008 (note that their first peak occurred in November 1980);

The HL for KSA from annual data looks as follows (the 2005 arrow shifted a little in converting from Excel to jpg):

and on a monthly basis:

Funny looking Hubbert Curve. Are you sure the final shape won't be a slowly-declining plateau to a cliff?

That is, just keep burning 'til it runs out?

Regards, Matt B

Would not be the first time there would be a cliff. But if the trend continues, then the pronouncements of the Kingdom are fairly meaningless. AND to flatten the curve requires considerable growth of not "capacity" (the US has a "capacity" of 20 million barrels per day, it's just unable to pump that much from the existing "capacity"), but real production making the cliff even more probable.

Matt, it's not the normal Hubbert curve but a "linearization" of a Hubbert curve. It's a mathematical technique to estimate the total oil reserve from the oil production so far.

Maybe an HL expert can explain further.

Thanks, Bob. I get a little overwhelmed by all these charts; and for that matter, the nitty gritty. No doubt I should be seeking more mainstream answers to my simple "What The?" questions (though many of you do dumb it down for me; thanks!), but of course easy answers are hard to find.

Regards, Matt B

from bloomberg :

``The Saudi announcement of a possible increase in capacity to 15 million barrels a day is a robust statement; it would be a huge increase,'' ENI SpA Chief Executive Officer Paolo Scaroni said in an interview in Jeddah today. ``The world is worried about the shortage in spare capacity and any improvement will change this sentiment.''

Zuluf, Shaybah Fields

The further daily capacity includes 900,000 barrels from the Zuluf field, 700,000 barrels from Safaniyah, 300,000 barrels from Berri, 300,000 barrels from Khurais and 250,000 barrels from Shaybah, Naimi said.

...i do hope naimi has some viagra to pump up these old geezers

I loaned out my copy of Twilight in the Desert. I remember the other fields, but what is Zuluf ?

Old field being redeveloped ? Onshore, Off shore ? Heavy, Light ?



hi alan!

zuluf is an offshore field in production since 1973, according to the bible,p.201..zuluf's production is 400-500,000 bbls/day.

" 2004,the field had clearly become very mature and was exhibiting an array of aging problems...a 2001 SPE paper described.." a litany of operational problems...such as gas slugging, gas humping, and phase segregation"

...gas humping?...hmmm...may need that viagra after all!

So to add 900,000 bpd to a field producing (a few years ago) 450,000 bpd would mean tripling its output. In a 35 year-old field. Viagra indeed.

i sometimes wonder if the saudis ( not that i'm dissing the saudis..they have their own rocks and hard places to deal with)...try to sell their sour heavy crude that is their "supply cushion" to no takers..and then say , "look, the market is oversupplied!

June 22 (Bloomberg) -- Saudi Arabia MAY raise its oil production beyond a planned 200,000 barrel-a-day increase in July if the oil market requires extra supply, Saudi Oil Minister Ali al-Naimi told consumers at a summit in Jeddah.

I get the feeling that the Saudis are taking rhetoric lessons from Ben Bernanke for the fine art of weasel words. Every press release they give (2-3 per week)offers up different numbers with weasel words like "may" "could" and "possible."

15 million takes the prize. A bit of verbal price manipulation going on here, me thinks.

I have three questions ... (well more than three actually, but three will do!)

Even if KSA offer an 200,000 extra barrels-a-day, at what price will they offer it, and to whom?

Just because KSA is prepared to produce more, why assume the world's exporters won't still export less?

How do we know that supply and demand will be balanced at or below today's price even with this alleged extra supply?


If the Saudi's actually get a barrel of oil down to $100 (even if just by jawboning), and reduce the price of gas by 25% (say, US$3.20 a gallon), wouldn't that increase the use of oil/gas and make it necessary for them and others to eventually pump even more oil over the 10-12 million bpd? Are the Saudi's smart enough to realize this (yes, of course), and if so, what possible pressures are being put on them, or are they putting on themselves, so that they feel led to promise increasing output?

Logically, it doesn't make sense, so there has to be some kind of tangential reasoning going on here. You can only delay the inevitable, unless of course they really do believe there is plenty of oil out there (wherever there is).

Perhaps the Suadis are acutely aware that all around them is an American military force, controlled by a country that does not want to hear that tribute from a troublesome client state is no longer as easy to dig up as it used to be.

The whole exercise this weekend by the Saudis has a whiff of panic about it, attempting to soothe disgruntled customers and divert attention from themselves. It think we will see plenty more of these hurriedly arranged meetings this year and bit by bit MSM might just start to ask better questions each time the meetings fail to deliver anything.

Zuluf and Safaniyah are both heavy sour crude of the sort that the world can unlikely refine - so that is 1.6 mmbpd that will likely be of little use until new refineries are built or existing refineries are upgraded. Maybe some refinery upgrading work is coming through making this grade of crude more marketable?

An additional 300,000 bpd from Berri seems optimistic - this is an old and substantially depleted field. Khurais and Shaybah expansions are in the pipeline.

A growing proportion of Saudi production is NGL - which in Saudi is dominated by ethane.

Hello Euan,

Looking on your SA forecast it looks as their ability to increase crude production (at best) is limited.
But how do we know the exact production for SA?
SA production figures are (as I understand it) derived from counting tanker loads.
Looking on EIA data their production is exact 100’s or 50’s, and even their NGL numbers stay constant throughout the whole year.

This tells me that some qualified guesswork is involved in finding SA production figures.
Why all this focus on SA? Many countries are in steep declines and if SA should increase their production for some time and from whatever source(s) this could offset the collective decline from some countries for some time.


This focus on SA (though an important oil producer) takes attention away from the BIG PICTURE.

The focus is on KSA today because the OECD + others have gone there cap in hand begging for more oil to combat global warming. It seems they have actually come away with nothing - re-affirmation of recent announcements and a bit of tweaking on the timing of new projects.

I agree that declines in Russia and Nigeria beginning to fall apart faster than ever are all important points in the big picture.

The message must begin to sink in with OECD governments that we are well and truly f*cked - and that their inaction for the last decade is turning an energy crisis into an emergency - hey a good topic for a post!


Sadly I think your comment is spot on. This seems more like a roadshow scrambled together in an effort to convince consumers that soon things will be BAU.
This seems like a SNAFU.

The interesting part of it is the seemingly lack of political will and talent to do anything about demand/consumption.

Euan, your comment;
….that we are well and truly f@kced-“ is that like in FUBAR? ;-)


"The focus is on KSA today because the OECD + others have gone there cap in hand begging for more oil to combat global warming."

Brilliant example of how our politicians speak in forked tongues and act at cross purposes

The focus is on KSA today because the OECD + others have gone there cap in hand begging for more oil to combat global warming.

That has to be Quote of the Year.

Brilliant one, Euan!

Does anyone know where I can locate information about planned new refineries and upgrades to refineries so that they will be able to handle heavy sour crudes?


Its an interesting project for someone who has time to pursue. Al I know is that Total have a JV in Saudi to build either 1 or 2 new refineries to refine this heavy sour crude - 400 to 800,000 bpd - others here will know more about this than I.

The new Reliance refinery in Jamnagar India is expressly designed to process heavy sour crude from KSA. When operational later this year, it will be the worlds largest refinery.

Highly significant. This will allow Saudi to raise production - and help solve the energy crisis in India.

Installing 600,000 bpd new capacity ready to go 2008.

Well, the BP refinery in Whiting, Indiana (400,000 bpd)is starting a project to enable them to handle heavy crudes. Estimated project completion is 3 to 4 years out.

Kind of leaning towards 'circle-jerk ' here, lol. Another lame attempt to keep a lid on things by repeating old time-worn rhetoric...

Difficult to make diesel with NGL!

But not from methane. Shell pride themselves in their clean and friendly GTL technology, turning Qatari natural gas into a clean environmentally friendly designer diesel fuel.

And once this natural gas has been used to make GTL, it is recycled for export to Abu Dhabi - who would you believe are short of nat gas - and then it gets used again, turned into LNG for use in Europe - where it gets turned into electricity and used to heat damp, drafty homes. One of natures miracles. Re-usable Qatari nat gas.

Has this process been patented yet?$$$$$$$$$$$$$

Recycled (?)

It looks like methane may be a byproduct of the process, but the process itself consumes vast quantities of methane. Do you have some numbers for methane input, versus synthetic fuel output + methane?

At an industry meeting a couple of years ago, during a Q&A, I asked the president of ExxonMobil Production his opinion of GTL versus LNG, and he said he favored LNG, because of net energy considerations.

Stage 1: 15(CH4) ------- C15H32 + 14(H2)

Stage 2: C15H32 + 23(O2) ----- 15(CO2) + 16(H2O) (this is the clever Audi turbo diesel part)

Stage 3: 2(H2O) + CO2 + pixie dust -------- CH4 + 2(O2)

Stage 4: 15(CH4) etc

The only pollutants are O2 and H2 which can be combusted to make pixie dust + water used for irrigation which lowers the need for energy used in desal plants.

All this energy crisis stuff is just made up. Folks just don't understand the fundamentals.

Oh. I shall return to tending my herd of unicorns.

Prices on Viagra just went through the roof.;-)

Limited time period surge (as opposed to sustained) capacity certainly can be brought on-line. Abqaiq is idle (AFAIK) and can pump for almost a year (and then rest).

The odd phrasing was certainly meant to confuse. One would be hard pressed to get a custom valve delivered by Dec. 31, 2008 if ordered today, much less an extra 2.x million b/day in production capacity !

If July is hot, and Saudi is burning crude to keep the air conditioners humming, KSA production may be 9.7 million b/day, but exports may not increase much.

Just first thoughts,


The odd phrasing was certainly meant to confuse. One would be hard pressed to get a custom valve delivered by Dec. 31, 2008 if ordered today, much less an extra 2.x million b/day in production capacity !

I think the odd phrasing was a CNN misquote. Other news stories quote the date being the end of next year, not this year, eg:

Saudi Arabia's capacity will be 12.5 million barrels a day by the end of 2009

Assuming this is correct, is that any change from their previous announcements?

From Associated Press:

…For the remainder of the year "Saudi Arabia is willing to produce additional barrels of crude oil above and beyond the 9.7 million barrels per day which we plan to produce during the month of July, if demand for such quantities materializes and our customers tell us they are needed," al-Naimi said in the speech, a copy of which was obtained by The Associated Press in advance.

"...if demand for such quantities materializes and our customers tell us they are needed," al-Naimi said

eg: if indicators of demand such as historical high prices happen to come about and are sustained for a few months?

"if we sell out of oil at $130/barrel, we will produce more... but we ain't gonna slash the price"

May: extra 300,000 bringing total to 9.45mbpd
June: extra 200,000 bringing total to 9.7mbpd

There is no extra being promised here, its the same Khursaniyah based increments that have already been announced. The only interesting thing happened with the send June announcement when they bought the 200,000 Khursaniyah phase 2 increment forward - which they previously said would require them burning off the gas rather than processing it (the gas plant isn't finished yet).

Of course, there is no way to know if 9.7 is actually 9.7 as we would count it.

The Saudis are always doing this, making multiple announcements of the same thing. It won't make much difference to the markets, but it gives respect to the Western leaders who come cap in hand looking for help.

...but it gives respect to the Western leaders who come cap in hand looking for help.

I am sure one came with a cudgel.

Watching Late Edition. Both Republican and Democrat applauded the Saudi move. "It's supply and demand". They're right on that one, but the US should focus on (reducing) demand rather than (temporary increasing) supply, IMHO

I am sure one came with a cudgel.

We sent our over with a blowtorch. Unfortunately, the explosion at the Gas facility in WA meant we had nothing to fuel it with.

the 200,000 Khursaniyah phase 2 increment forward - which they previously said would require them burning off the gas rather than processing it (the gas plant isn't finished yet)

Ah, so here we are, burning off gas to get to the oil quickly. Just another reminder of just how desperate we have got, to burn away our future energy reserves to get what we need today for a few dollars less.

Can anyone guestimate how much URR will be lowered by force pumping this increase to the market now?

Who cares about damage to the oil fields - we need our fix now!

Being addicted to oil isn't a metaphor anymore...

Indeed, the only way of making sense of the current madness is to see it as an addiction.

Gordon Brown begging his dealer to sell him more for his next fix.


No consideration is being given to monthly depletion.

My GUESS is that Abqaiq is going to be reopened for as long as it can produce (6 months ? 1 year ?) and then rest for another 4 or more years. I think the next big Aramco project slipped from Dec. 09 to January 2010 (with more slipping possible).

Another alternative is to flare NG or "produce" from storage (Aramco is reported to have as much as 90 million barrels).


My guess is the dregs fields (like Abqaiq) are going to continue to be held back as surge capacity for a war. What's Iran's exports? 2-2.5Mbpd? That's what the buffer the Saudi's keep referring to is for.

I can't see them pumping that to make an SUV driver happy in the meantime.

What is giving folks the idea that Abqaiq is not producing? Or being held back?

Compare Naimi's quote in Bloomberg cited above with Matt Simmons' comments on each of the listed fields in "Twilight in the Desert". Either Simmons is dead wrong or Naimi is a bold faced liar. I suspect it is latter. There has been a lot of commentary about why the Saudis would obfuscate the issues. I believe the answer is fear of their own people. The "Royal" family has been blundering the countrie's wealth for decades in order to live an opulent lifestyle. (How much do the Royals have on deposit in London, NYC and Zurich?) History has not been kind to such rulers when the people learn what has happened. I believe the Royals are mainly concerned with continuing to fool their own population about the amount of oil left in the KSA. Fooling the rest of the planet is a secondary concern.

Yes. I think people forget that these guys don't need a long term plan for that pile of sand-they are welcome anywhere.

My initial thoughts/questions:

1. Any ideas about the proportional increase in light sweet in that discussion from extant fields? And what's the draw off light sweet from the new fields?

2. This is so typical of KSA's ability to push off the decision point..."we'll have more oil, really, don't change anything." Until one day, we realize that they don't.

The obfuscation, the uncertainty, really makes my head hurt.

He who controls the spice, controls the universe! The spice must flow...

It is a common political tool, used best by BushCo in the last elections and subsequent invasion of Iraq. Make a claim (the more outrageous, the better). Let everyone except it as "truth" and then weeks, months later, when things don't turn out 100% like the claims, give some half-assed explantion for the lack of delivery. Or, better yet, accuse those trying to hold you accountable as the ones that did not understand the initial claim or distorting what was said in the initial claim.

THIS has the earmarks of pure Rovian gameplan written all over it. He may be out of the public eye which is probably where he likes best to operate. When will the world stop these games and call foul in any meaningful way? My ideal brain awaits...

From BoomBerg:

Earlier today King Abdullah met with world leaders to discuss rising oil prices. The King spoke briefly with reporters after the meeting.

“Hey, last week I was mucking around in my desk and found an old note about how we promised that the correct price for a barrel of oil was around $22 to $28 a barrel. And then the energy minister told me that oil was selling for over $130 a barrel. I was shocked, shocked I tell you. I just haven’t been paying attention lately as I’ve been real busy… the wives, the kids, the cousins, the uncles, cleaning up after the camels, tinkering with my 747… and I just plain forgot about that note.

But anyhow I’m here to reassure you about the state of our reserves. After all, we are the bedrock, the cornerstone, the optimus prime of petroleum production. And I can further promise you that we will not only reestablish our position as the world’s premiere producer but that we will forever be the biggest producer this side of Sagittarius. And we will continue to expand production until the sun turns into a brown dwarf or the entire universe gets sucked into a black hole. Or maybe even longer than that.

Now about those reserves… it seems that while we are correct about our trillion zillion of proven reserves, we weren’t talking about barrels. What we actually said was trillion zillion bhairrels of oil. A bhairrel is just like a regular barrel but a little smaller. Well maybe a lot smaller. But it would look like a full sized barrel to fennec or a great giant barrel to a desert scorpion.

But we want to work with you to solve the price problem. What we propose today is that car manufactures begin to make cars that are one tenth the current size. By doing this it will seem as if we have ten times as much oil. And for you in the west, why do you persist in even using cars? I have seen Star Trek and know that you have teleporters. So here’s my proposition… you give the poor of the world your teleporters and I’ll give you $20 oil.”

He who controls the spice, controls the universe! The spice must flow...

Indeed, ones again CHOAM has sent out its ambassidor to appease the houses: "the Spice is secure and plentiful..."

Meanwhile behind the curtains at the meeting between King Abdullah and world leaders:

    The King: "The power to destroy a thing is the absolute control over it. You have agreed I have that power. We are not here to discuss or to negotiate or to compromise. You will obey my orders or suffer the immeadiate consequences."

Brown: "Yes, you could do that, but you must not. You would blind yourself, too, and condemn us all to slow death. Have you any idea what it means to be deprived of the spice liquir once you are addicted? Civilization crippled. Humand become little isolated clusters...

"There is no escape - we pay for the violence of our ancestors."

I wonder how is it that people who've read books like Dune or H2G2 can grasp PO instantly. Is it the insight and form of thinking that those books represent, or is it that certain people tend to read such books?

"When we control the spice, all eyes will turn to Iraqis. It is the legend."

oh that's horrid. I love it.

Yes, I think Dune prepared many of us...if only Herbert had been able to push the "spice" idea further to get to the differences between light sweet spice and heavy sour spice...and the slow backwards slog away from time travel as the supply of light sweet spice expired and all the problems that would cause.

Jesus, I am a geek.

More on Herbert and CHOAM:

"Few products escape the CHOAM touch ... Logs, donkeys, horses, cows, lumber, dung, sharks, whale fur — the most prosaic and the most exotic ... even our poor pundi rice from Caladan. Anything the Guild will transport, the art forms of Ecaz, the machines of Richese and Ix. But all fades before melange. A handful of spice will buy a home on Tupile. It cannot be manufactured, it must be mined on Arrakis. It is unique and it has true geriatric properties ... But the important thing is to consider all the Houses that depend on CHOAM profits. And think of the enormous proportion of those profits dependent upon a single product — the spice. Imagine what would happen if something should reduce spice production."

— Duke Leto Atreides, Dune


When one person is dependant on a resource and it's destroyed... That is a tragedy.

When a whole society is dependant on a resource and it's destroyed... That is a genocide.

History shows this, time and again.

BTW, Dune does remind me a bit of the KSA in other respects...

Too bad the Saudi's don't have 'Oil worms' that replenish their fields...

Jesus, I am a geek.

Not as geek as I'am, having read all the prequels to the series as well, four times...

The other day a friend of mine argued that he wasn't so concerned over PO, since "he's been expecting the civilization to end since the 70's because of pollution, war, population etc.". How is it, he asked, any different from now...

Well, what we have here now isn't a threat, an expectation. Its happening. And from multiple sources. Peak oil, peak food, peak debt, global warming, crop failures... all culminating, converging, towards the same conclusion. And the response so far from humanity a helpless shortsighted scrambling for national interests and BAU topped off with plenty of denial and heads in the sand...

The difference between us is that he's been a doomer all his life whereas I prefer to see some numbers, some calculations before I draw probability tables and choose my actions accordingly. Hence I hang around TOD for the latest figures like the junky i am, heh

But now the tables have turned as I can begin to predict my doom scenarios on my pocket calculator and see them happening the next day, while he's still throughly tired and disillusioned of waiting for his doom scenarios to slowly emerge. The boiling of the frog as Quinn would put it...

This is the greatest quote from Frank Herbert:

    " Beyond a critical point within a finite space, freedom diminishes as numbers increase. This is as true of humans in the finite space of a planetary ecosystem as it is of gas molecules in a sealed flask. The human question is not how many can possibly survive within the system, but what kind of existance is possible for those who do survive. "

the response so far from humanity a helpless shortsighted scrambling for national interests and BAU topped off with plenty of denial and heads in the sand...

Don't panic, its Albertan tar sand, all will be fine! :-p

Don't panic, its Albertan tar sand, all will be fine!

Herbert was rather explicit about his inspiration for spice (i.e. oil), in his introduction to "Eye" for example. Also, unlike his son Brian, he seems to have understood ecology and islam.


Not as geek as I'am, having read all the prequels to the series as well, four times...

H2G2? "Iraqis" is pure gold, by the way.

HitchHikers Guide to the Galaxy. The second H always gets folks.

I thought that must be it, but how does it relate to PO? Dune is crystal clear, but although I've read HH several times (though long ago), I don't recall any PO relevance.

Twilight Zone In the Desert. The Saudis have been pulling this nonsense for years. I bet the price of oil will fall Monday, though.


In the last year, the price discount of Saudi medium and heavy crudes from Saudi light has doubled. This indicates that most most of the recent increase in total Saudi crude oil production rate is due to increases in their medium and heavy crude oil production rates.

In other words, the Saudi light crude production rate has probably stayed constant but is now a smaller percentage of the Saudi total crude production rate now, as compared to a year ago.

click to enlarge

This chart below shows only IEA member country (OECD) imports of Saudi crude. Note how Saudi light/extra light imports have stayed relatively constant, while Saudi medium and heavy imports have declined.

click to enlarge

For more info

Anyone who has read Simmons and the TOD for a while could legitimately wonder whether the Saudis can deliver on their promised increase. Not delivering on such a promise is tantamount to an admission of having peaked.

At this point one needs to descend into the dark side and note that SA abuts Iraq.

How easy would it be for some hundreds of thousands of barrels that originally are pumped from Iraq to end up counted as 'a production increase' from KSA? I know there was a conspiracy as such a year or so ago, given that much of the exported oil from both countries flows through the same pipelines, though I don't have the source.

"In Locked Down Iraq, Oil Still Flows Unmetered While Questions Run in Circles"

"UNITED NATIONS, Feb. 24 – While Iraq is on lockdown, that country’s oil continues to flow unmetered. Basic information about the issue continues to be shrouded in mystery by the International Advisory and Monitoring Board for the Development Fund for Iraq. In just-released minutes of IAMB’s Jan. 23 meeting in Paris, it is vaguely stated that “the IAMB was informed that no progress had been made with regards to the metering contract.”

Let's hope and pray that Saudi Arabia can back up what they are saying, bringing significant new production on line.

If they cannot, God help us. There is absolutely nothing left standing between us and the oil hawks like Iran and Venezuela.

Yup, Jesus will get us that black gold-or is that Allah?

We would be better served by a spike in oil prices above $130/barrel, so that we can get serious about mitigation.

It is going to be tough regardless !


Yes..... The Saudis raising production is like pouring a 12 oz bottle of water into the ocean!
They are playing a political game with the US and others. When World production drops to 40 million barrels per day, then we will see who our true friends are in the world.... Nobody!
All countries will simply hold the oil that they have remaining, and watch those who don't have any left die by the wayside.... There may be robberies of oil, or military takeovers, but ultimately there will be no regular exports. We must push America to live on the oil we produce here in America with no imports! As long as we import, we are creating debts that we can't repay, and will be slaves to others. Drilling for more oil in ANWR and offshore will simply burn up our own resources faster, which means we will run out sooner. None of the political solutions make sense!
This is about survival. When people realize that their survival depends on something, then they *MIGHT* make a change in their lifestyle!


When world production drops to 40 million barrels per day, then we will see who our true friends are in the world.... nobody!

A few comments:

1) The US still has tremendously destructive military power, and the strategic oil reserve to deliver it. It follows that US leaders will very likely threaten (though not necessarily publicly) to destroy power plants, bridges and so forth unless oil is diverted in the desired direction. The results are unpredictable, except that they will almost certainly make matters worse rather than better.

2) I strongly agree with you that the US should drastically limit its imports and use what we can pump ourselves -- bearing in mind that buying from Mexico and Canada is almost like buying from ourselves.

3) The following, in no particular order, are a few examples of low-tech measures we should put into place very quickly, either by use of tax incentives, outright subsidies or, if necessary, policing:

* Gradually curtail use of private vehicles except for approved necessities and emergencies;

* Eliminate sales of incandescent bulbs;

* Sponsor cheap or free fares on multiple-passenger "jitney" transportation systems;

* Begin a continuous process of building and modernizing passenger rail and bus facilities;

* Encourage delivery of groceries (where possible in electric vehicles), using computerized routing to serve the maximum number of households per run;

* Switch from trucking to railroad transportation for non-perishable commodities;

* Subsidize availability of warmer clothes in winter, including insulated underclothes;

* and similar relatively easy conservation steps.

3) We will need streamlined funding and approval for such measures. Local obstacles of many kinds will simply have to be overridden. We are facing an emergency of unrivaled proportions, far more dangerous than any single flood, hurricane or terrorist attack.

Hi Dratman,
Nice try but falls short of whats needed. There is a looming shortage of oil and other liquid hydrocarbons, not energy. Probably a good idea to save on energy use where possible but any government is only going to have so much political capital, should be used to attack core of issue; make dramatic savings in oil used for transport that can be implemented within 5-10 years. Thats not enough time to re-build a good mass transit system from scratch but you could bring back electric trolley buses, trams down roads, more trains, but its only nibbling at edges. The really big thing that can make a dramatic difference is legislate a major and immediate increase in new vehicle fuel efficiency. A start would be to immediately introduce 30mpg minimum on all new non-commercial registered vehicles, accelerate PHEV, HEV and BEV production, and raise minimum fuel efficiency every year as situation demands. Lots of SUV and light truck plants are idle so could be re-tooled for small car, PHEV and HEV production( not hybrids that only get 20mpg, I am talking about 50mpg at least). High prices will kill off other non-essential vehicle travel, and encourage higher use of mass transit. Who is going to oppose this legislation? Not existing SUV and light truck owners, this will keep re-sale price up for a few years, not oil companies they are already on defensive, maybe car companies unless they get a re-tooling subsidy, but they are going to go bankrupt trying to sell existing vehicle mix if world has to manage with only 40M barrels of crude a day.

"...There may be robberies of oil, or military takeovers,..."

MAY be? seems to me our incursions into afghanistan & iraq ammount to no more than "robberies of oil, or military takeovers"

Really now? How much oil are we getting from Afghanistan? Right, we invaded Afghanistan just to get their oil. Boy, were we surprised when we found out they had no oil.

And for that matter, how much oil are we getting from Iraq? Congress is bitching because Iraq does not even give us a discount on their oil, we pay full price for it, what tiny fraction of it goes to the US. And we have a squidd saying we are robbing them of their oil.

Ron Patterson

Really now? How much oil are we getting from Afghanistan? Right, we invaded Afghanistan just to get their oil. Boy, were we surprised when we found out they had no oil.

I remember back when the Afghan invasion happened there were some claims floating around that it was all about oil in the sense that it would allow construction of a pipeline from Central Asia to the Indian ocean bypassing Russia. I'd actually forgotten about that theory until I came across this article last week which indicates plans for exactly such a pipeline are in fact well-advanced and are being supported by the US as a means of bypassing Russia and cutting out Iran:

I'm not staking out a position here, but it does give ammunition to those who made the original claims at the time of the invasion, and they would no doubt emphasise the fact that negotiations with the Taliban to build the pipeline broke down in August 2001.

Clinton wanted to invade Afghanistan over the oil pipeline issue, Ron. Any reasonable student of foreign policy and recent history would know this. So yes, oil did drive actions with regards to Afghanistan. How was it that the US could invade Afghanistan in mere days after 9/11? Because they were using the battle plans drawn up a few years earlier for Clinton with updates for the current scenario.

This is not conspiracy, despite your attempt to paint it as such yet again. This is plain and simple fact - US oil companies were pushing hard for that pipeline and when the Taliban refused to play along, they tried to get Clinton to act. Clinton was, however, impeded by his own scandals, including a stain on a certain dress. The Republican majority made it clear they would not play along.

As for Iraqi oil, Congress is bitching but the oil companies want back in precisely because of the price and existing Iraqi reserves. That story was all over the Houston Chronicle in the last few weeks even.

If you still believe that Congress is actually in control of anything then you fail to understand how deeply entrenched lobbyists actually are. If you want an education on that, then check out the recent bank bailout bill which is now being exposed as having been written by Bank of America and Countrywide behind closed doors then handed off to Senator Dodd. Do you think other legislation might get written the same way in return for campaign donations and special access? Or you might check the Iraqi maps from Cheney's Energy Task Force from MARCH 2001, 6 months before 9/11 ever happened. Those maps have been publicly released after being forced by a FOI request. Also note how many millions of emails the Bush White House now claims are "lost" after they lost that court battle and had to expose their hand. Awfully convenient that so many electronic documents are now "lost" and can never see the light of day, isn't it, Ron?

Why don't you go back and read the Congressional Record for February 12, 1998? Look for the testimony of one each Mr. John J. Maresca, a Unocal Vice President, down around page 30 because it was Unocal that wanted to build that pipeline and it was Unocal that got tired of negotiating with the Taliban. Right there, on that day, in public, we have a private citizen asking the US Congress effectively for a regime change in Afghanistan to make completion of that pipeline possible so that there is a "single Afghan government". But there already was essentially a single government and it was the Taliban! And they were moving towards completing that control anyway. Effectively, Mr. Maresca was asking for US military action against the existing government of Afghanistan.

Now, who was Unocal in all this? They were a partner in CENTGAS, a consortium to build that pipeline. Who else were members of CENTGAS? Try on Halluburton, headed by Dick Cheney coupled with Delta Oil of Saudi Arabia. Those three made up CENTGAS and wanted to build this pipeline. On Feb. 12th, 1998, the Taliban controlled roughly 60% of Afghanistan but by August, the Taliban had seized control of 90%. At this point Unocal and Halliburton went to Clinton to try to get the Taliban regime recognized because international financiers refused to do business with Afghanistan unless the government was "legitimate". Clinton refused at that point for a variety of reasons. Shortly thereafter Unocal withdrew from the CENTGAS consortium citing political issues in Afghanistan as making the pipeline not feasible.

But all this is public knowledge and you should know it if you are going to make disparaging remarks about that time period's politics.

Clinton wanted to invade Afghanistan over the oil pipeline issue, Ron. Any reasonable student of foreign policy and recent history would know this.

You should have no trouble finding the evidence necessary to support your claim, then, rather than expecting people to take your assertions at face value.

How was it that the US could invade Afghanistan in mere days after 9/11?

Because they didn't?

Military aircraft were sent to bases in the region in the latter half of September, and air strikes started in early October. Those air strikes, as well as special forces, were used to assist the Northern Alliance in its ongoing civil war with the Taliban.

The US never "invaded" Afghanistan in the traditional sense, as it didn't have a significant presence of ground forces until after its Afghani allies had already retaken most of the country.

But there already was essentially a single government and it was the Taliban!
the Taliban controlled roughly 60% of Afghanistan

I don't see how you equate "controlled 60% of a country deep in civil war" with "a single government".

no surprises... believe me... we knew EXACTLY what we WANTED...

Afghanistan has only limited oil or gas reserves. But it straddles the most direct route for exporting oil and natural gas out of Turkmenistan, where the gas reserves alone are estimated at over 100 trillion cubic feet, or the fourth largest proven natural gas reserves in the world.

Undoubtedly US strategic planning has to consider the importance of oil and gas in the region of the Caspian and Central Asia. As Frank Viviano pointed out on 9/26/01 in the San Francisco Chronicle

"The combined total of proven and estimated reserves in the region stands at more than 800 billion barrels of crude petroleum and its equivalent in natural gas. By contrast, the combined total of oil reserves in the Americas and Europe is less than 160 billion barrels, most of which, energy experts say, will have been exhausted in the next 25 years."

US interest in the oil and gas reserves of Central Asia is both economic and strategic. Part of the "Great Game" played for a century in the area between Britain and Russia was not just to gain control of these huge resources for oneself, but also to deny them to others. America's world dominance is based in large part on its hegemonic influence over the world oil economy. As noted below, an NSC official told Congress in 1997 that US policy in Central Asia was "to in essence break Russia's monopoly control over the transportation of oil [and gas] from that region, and frankly, to promote Western energy security through diversification of supply" (quoted in Rashid, Taliban, 174).

Amen, Brother. We should be placing a floor on $130 oil; instead we are begging for more oil and opening up the few areas that are left for drilling. Oh, brother, how our grandchildren will hate us.

This is a test. It is times like these that separate the wheat from the chaff, the courageous from the cowardly. McCain is clearly amongst the cowardly. Obama. Possibly not. When push comes to shove, however, he will cave and spin this as an act of courage.

We are defenseless. We are screwed. And in ten years, we will be more so. God help us as the only way to get through the shadow of death is with our Denalis (denials). Praise Allah that I bought my Prius in 2005.

Forget not about the Share This button. :)

SBS news
showed the Jeddah conference with following snippet:

Assistant Petroleum Affairs Minister Abdulaziz bin Salman addressing the conference and saying: " is in our best interest that we extend the life of petroleum and we maximize the petroleum revenue..."

Adressing a press conference a day before:

He attributed much of the cause of this current crisis to “subjective circumstances” and warned that people should not be “overly optimistic” that anything but “temporary solutions” could be reached.

That says it all.

KSA has no idle, spare capacity of light sweet oil. That's the story. It's news--at least for a lot of people.


Can someone speak to the boost in planned Saudi Arabian oil production relative to the expected decline from other countries and the net worldwide change? Say, at the end of 2009?

And, the continued and expected growth in oil demand?

Will suppply and demand change at all?

As I see it, based on almost everything I have read here, the Saudi production boost will have zero negligible affect on prices. Is that right?

THis may already have been posted -- a link to the final statement with respect to the Jeddah conference. It is mostly a plan to look at things further and get better data.

Participants agreed that the situation requires concerted efforts from all parties -- producing and consuming countries, the oil industry and all concerned parties -- to bring stability to the international oil market for the benefit of all.

Taking into account their diverse national circumstances and priorities, as well as their shared interest in a stable global oil market and sustainable economic growth, the participants recognised the importance of the following.

* That the existence of spare capacity throughout the oil supply chain is important for the stability of the global oil market. Hence an appropriate increase in investment, both upstream and downstream, is necessary to ensure that the markets are supplied in a timely and adequate manner. Predictable energy and investment policies, as well as better access to technology, are necessary to this end.

Other things mentioned include:

-Capture more data on index fund activity

-Quality, completeness and timeliness of oil data submitted through the monthly Joint Oil Data Initiative (JODI) should be enhanced

-IEA /OPEC collaboration on study of market trends

- Find ways to help least developed countries deal with consequences of high oil prices

-Share best practices etc. to enhance efficiency

A working group will follow up on this.

I can’t help but wonder if there was a “closed door” meeting with key guests with a more realistic assessment of the situation with respect to future production. I certainly would hope so as I feel that the global economy is heading off towards the deep end of the pool without a floatation device.

Meanwhile there sits Russia. Several months of declines might not be such a big deal but if they are still down by year's end, it could spell big trouble. And for such a big producer (or extractor), Russia has a pretty poor R/P ratio.

The last number that I saw showed Russian (gross) crude oil exports down 7% year over year (April to April).

And at their current rate of decline, I estimate that net oil exports from Mexico are dropping at a rate of about 38,000 bpd per month, from a 9/07 rate of 1.4 mbpd, which, at this rate, would give Mexico about 37 months of net oil exports, from 9/07.

Ever since I started following this stuff, Russian production has been the 800 pound gorilla to me. Russian production has the possibility to really hurt as even a modest percentage decline is still an enormous volume.

And I can only imagine what will be going on south of the border socially and politically as Pemex's golden goose has an arterial bleeder.

BTW, your projections for Mexico seem to get grimmer by the week. But I guess that's what happens when such a major part of Pemex's production comes from one giant field. Hey, that sounds like another country I've read about here!

How about capturing more precise data on KSA oil fields in an effort to allow the world to plan for their future?

Just allow Matt Simmons to assemble an independent group of scientists/geologists to come in for 1 month and look over the books and explore the fields a bit. THAT would go a long way to killing the speculators. No one would have to speculate any more. We would better know how to really invest our dinero.

Would have been nice to see a statement which went something along the Matt Simmons line of every oil producing country submitting to an independent audit of reserves figures to establish the total world URR figure.

In other words, "Look we are marooned on this rock and we could be here a long time. We need to know who's got what and the best way to ensure everyone gets fed. Ok, all those who have oil, go over there. All those with food - over there. Anyone who's got soem uranium over there. Nuclear weapons are up the front here where we can keep an eye on you. Techies and manufacturers over that side. Forestry down the back."

What are the chances of that happening.....????

I hope the King has indeed bought us some time. It is time to get our house in order. For me, it's time to replace that LP furnace with an electric heat pump. It's also time to get that 250cc motorcycle that gets 80+ mpg. Small steps for some, but for the Islander family, these represent giant leaps.

Best regards,

We've had nothing but time! We've had decades and woke up for an instant during the Carter administration. Buying time will do nothing. Nothing, I tell you. The addict never wakes up until he hits bottom. That is what we need. The bottom. Otherwise, we will just continue to delude ourselves that the creamy nougat will continue to provide. The latest nougat is to to found in ANWR and offshore. Just imprison the greens and all will be well.

I couldn't agree more. But this addict awoke recently (relatively speaking) and has begun to turn his life around. Hopefully long before I hit bottom. One web site that made me think was David Holmgren's Future Scenarios ( ). After studying it, I came to the realization that my actions needed to be focused on the individual and community level. I am working, in my own small way, on a family and neighborhood lifeboat. To that end, I am grateful for any time that The Powers That Be have given me to continue my work.

One day soon life will change forever. Practice will be over and it will be game time. We're not there yet. If the King gives me another 6 months to prepare, then he has my heartfelt thanks.


Over the last year, the Saudis have made so many contradictory announcements about their proposed or potential oil production that the only thing that is certain is that they are making announcements.

These varying announcements suggest: (1) internal confusion and disagreements about their capacity to produce; (2) internal disagreements about how much they want to produce; (3) propaganda efforts to reduce domestic instability; and (4) propaganda efforts to boost their position with OPEC and the U.S.

This level of confusion casts doubts on the credibility of what the Saudis say regarding their oil production.

I'm going to reference my Saudi Arabia Rides to the Rescue (ASPO-USA, last week).

Saudi Arabia is offering greater volumes of Arab Light (33.4° API, Sulfur 1.77%) and Arab Extra-light (37.2° API, Sulfur 1.15%) in the June/July production hike. Arab Light crude is called "sour" because of its high sulfur content. Refiners who can process this oil will take it only if Saudi Arabia lowers the asking price. US refiners see extra Saudi oil offer [as] too pricey tells the story (Reuters, June 16, 2008).

"They [the Saudis] can offer all the oil they want. The fact is they want too much for it. There's cheaper oil out there right now," said a trader with an independent U.S. oil refiner.

Saudi official selling prices for the United States currently list Arab Light ARL-OSP-N at a nearly $3 per barrel premium to comparable U.S. domestic crude grades like Mars MRS- -- even before the cost of shipping oil from Saudi Arabia is taken into account.

Traders said they would be willing to increase purchases of Saudi crude, if prices were lowered.

Asian refiners like China's Sinopec, who are operating at a loss, are "choosy" about the the oil they buy in order to keep their costs down (Reuters, June 16, 2008). Many "simple" refiners in Asia would prefer a crude mix that includes more medium or heavy oil, not the pricey Arab light Saudi Arabia is offering. They also want these lower quality grades at a reasonable price.

Although margins for processing the kingdom's heavier grades have plummeted, Aramco has also cut the discounts it offers on these grades to their lowest levels this decade, while keeping prices of its lighter grades at relatively high levels.

In addition to keeping oil off the market in 2007, the Saudis have raised prices on all of their crude grades beyond what the refining market can currently bear. The Kingdom obviously cares very deeply about the detrimental effects on global economies of the 2008 oil price shock.

(read the article to get the links)

So, I see no details in any of the reports from Jiddah that the Saudis have discounted the crude they are selling. Aside from the 200,000 b/d -- from Khursaniyah, I believe -- increment in July, the only real move the Saudis could have made to lower oil prices would have been to lower oil prices. Thus the refiners would accept the new sour crudes, which are costlier to process, thus increasing throughput. But I see no evidence that the Saudis discounted their crude oil.

From the AP.

Al-Naimi also said that the kingdom was willing to invest to boost its spare oil production capacity above the current 12.5 million barrels per day planned for the end of 2009, reversing previous statements that the country would not go beyond that figure.

"In addition, we have identified a series of future crude oil mega-increments totaling another 2.5 million barrels per day of capacity that could be built if and when crude oil demand levels warrant their development," he said.

Given the fact that some of the fields cited (above in this thread) will not support the "mega-increments" Al-Naimi speaks of, and the fact that the Saudis have absolutely no intention of expanding capacity after 2011 (after Manifa), I believe he is lying through his teeth. To make sure you get my point, some synonyms are prevaricate, deceive, stray from the truth, palter, etc.

And when someone like Al-Naimi says that the "market is in balance", that should mean in an ideal world that it is never necessary to draw on stocks. But that quibble aside, the "market is in balance" at a price. Today, that price is $134.62/barrel. Which means that the quantity demanded at this price is equal to the supply + whatever draws on inventories are required to fill the gap that Al-Naimi says does not exist.

Now, at $134.62/barrel, the quantity demanded, at least in the OECD countries, has gone down some -- not a lot -- because of the high price. If the price were $100/barrel, the quantity demanded would be higher. If it were $80, it would be higher still. Most of the world's poor oil consumers have already been priced out of the market. There is a lot of unsatisfied demand. The market is always "in balance."

But of course the oil minister is hoping we won't notice any of this. And people generally being what they are, most of them will not notice.

-- Dave

The most frustrating thing is that the media doesn't explain how an increase of 500,000 barrels a day will make prices come down. Even a cursory analysis would reveal that Saudi Arabia's own internal consumption has increased by this amount in the last three years.

I'm glad you made that point, Dave, because to say that supply and demand are balanced is a deception since supply and demand are always in balance except when supply doesn't get sold. But when there is a shortage, it is always balanced since you can't sell more than you have. In this case, 'demand' only means what is sold. It doesn't mean desire to purchase but can't afford it.

This seems a typical appeasment announcment for the media and masses. 12.5 million barrels a day in such a short time is a physical impossibility but it looks good on paper.
They were never going to tell us what was realy debated at that meeting.

12.5 million barrels a day in such a short time is a physical impossibility but it looks good on paper.

True enough, I reckon. But one thing is certain: if KSA manages to raise production to a 'mere' 10 million bpd by year's end and if depletion in the rest of the world is sufficiently compensated for this year then the Deffeyesians (peak year = 2005 at 85 million bpd) will have been definitely proven wrong since production in 2008 will be at least 87 million bpd.

Deffeyes' estimates are for C+C.

And the EIA has only provided three months of C+C data for 2008, after we have seen two years of slight declines in crude production, which were basically quite similar to the first two years of the Lower 48 crude decline.

As I have previously noted, Matt Simmons believes that a good deal of the recent boost in NGL production is coming from increased gas production in oil fields where their gas caps are being blown down--in the last, terminal stages of depletion, and several people have provided some North Sea examples.

Can anyone here give me a brief explanation of how physical oil is sold? Do all physical sales take place on the spot market? Do any sales take place via futures? How much oil bypasses the market and is sold by direct deals? I keep hearing vague reports of Saudi deals with China.

I'd be most grateful if anyone who knows can give me a heads up. Thanks.

You can almost hear the chrous now: Energy Crisis Solved!!!11!111!. Instead of making the necessary and inevitable transitions, which seemed to finally be starting, now droves of Americans will hop right back into their Chevy Tahoes and Ford Expeditions. Now said necessary transitions will only be more difficult.

Great. The cliff grows ever steeper.

Oil is all about the political.

OPEC will increase oil supply out of respect for Bush
Bush said today that he would bring down gasoline prices by creating enough political good will with oil-producing nations that they would increase their supply of crude. “I would work with our friends in OPEC to convince them to open up the spigot, to increase the supply. Use the capital that my administration will earn, with the Kuwaitis or the Saudis, and convince them to open up the spigot.” Implicit in his comments was a criticism of the Clinton administration as failing to take advantage of the good will that the US built with Kuwait and Saudi Arabia during the Persian Gulf war in 1991. Also implicit was that as the son of the president who built the coalition that drove the Iraqis out of Kuwait, Mr. Bush would be able to establish ties on a personal level that would persuade oil-producing nations that they owed the US something in return.

thank you to everyone at theoildrum, those who post articles and those who make pertinent comments. it's been a great educational source for me over the past few years as i've been learning about peak oil, and now it's been helping me pass on information to my friends who seem to be coming to share my same conclusions one by one. Those conclusions are, of course, that peak oil is the most pressing and pervasive phenomenon presently affecting reality on planet earth, that many questions and concerns in the political, social, cultural, and environmental arenas, past, present, and future, begin and end there.

just wanted to make a blatantly bold statement and go on the record as saying there's no way saudi production will ever rise to 12.5 mbpd. anyone agree or disagree? anyone think that's too naive or concrete a statement?

i think it's been sufficiently demonstrated on this website that 12.5 mbpd is almost certainly impossible. i think them throwing around that number is, like many have been suggesting, a lie, an exaggeration to attempt to calm people down, fake people out.

Is this newsworthy at all? March 2008 production was already 9.2 mmbpd. The May increase took it to 9.5mmpbd (+300,000), so there is 200,000 remaining for July. E.g. no new increase.

Well, not according to OPEC's own Monthly Oil Market Report page 37.

Saudi oil production in thousand barrels per day:
Mar .... 9,031
Apr ..... 8,984
May .... 9,134

Actually the EIA, IEA, MEES, Platts and the OPEC Monthly Oil Market Report all give different figures. So we will just have to wait until August or September to find out what they actually produce.

Ron Patterson

It would appear that Saudi production has actually been drifting down since early 2008. So, as you said, we will have to wait and see what the second half brings. It will be very interesting to see how the oil markets process all of this sound and fury (signifying nothing?).

BTW, if we assume 9.1 mbpd for the first half of the year, they would have to average about 10.1 mbpd in the second half, if they wanted to match the 2005 annual rate of 9.6 mbpd (C+C).

These last 3 paragraphs of a New York Times article on the conference by Robert F. Worth and Jad Mouawad:

"There is a very clear difference of opinion on key issues underpinning the high price of oil,” said Raad Alkadiri, an energy analyst at PFC Energy, a consulting firm, who was present in Jidda. “It’s not clear that anything you heard today is going to reverse sentiment. One thing is clear: You are not going to wake up tomorrow and find that oil prices have dropped 20 or 30 dollars.”

To some, the upshot of the meeting was clear.

“This means we will have $200 a barrel oil,” said Mohammed H. A. Abudawood, a prominent businessman and member of the Jeddah Economic Forum, after the speeches were finished and the delegates began drifting out of the room."

WT, do you have a graph of Saudi net exports over the past 20 years or so?

click on the small graph on the left beside net exports/import, for a larger picture, and check out the consumption graph

In the Sovjetunion two men travelled in a train.

A. Asked B, where are you travelling?

B. To Odessa.

A. You are telling me that you are going to Odessa, making me belief, that you are going somewhere else. But now it happens, that i know that you indeed are going to Odessa, so why are you lying??

In the version I heard, two traveling salesmen who are competitors are standing on the platform waiting for a train. A asks B where he is going.

B: "I am traveling to Minsk."

A: " You tell me that you are traveling to Minsk to make me think that you are traveling to Pinsk. You liar! You really ARE going to Minsk!"

Last year China added around 1.4mn b/d of new refining capacity. Texas City is being restored to around 450,000 b/d this quarter, says BP, Total is building Jubail in Saudi Arabia, Shell/Aramco with Motiva on the Gulf, Repsol upgrading refineries in Spain...there is a lot of upgraded refining capacity coming onstream between now and 2010-12.

large, upgraded refineries are the name of the game really, focussed more eastwards...


How much of China's additional refining capacity will be for internal "demand", and how much will be for export? And where's the extra oil they'll be refining going to come from?

ABC NIGHTLY NEWS, just this last 30 minutes, in reporting on the Saudi oil summit,a commentator whose name I did not catch (it caught me completely offguard) responded to a question by the host...Question: "What about this issue of Peak Oil, that the world simply does not have enough oil fur the long term?"

Guest commentator(quoted from memory): "Well, that time will certainly come. I don't think we are there yet, but this should cause us to think of this as a dry run (exercise) because when that time does come that we reach peak 10 or 15 years from now we could see oil prices of $500, $600 and more...'

What was fascinating was (a)that the host of ABC News asked the question right out front as a serious question and (b) the guest commentator expressed no doubt that what we are seeing now is not peak but that peak is coming very soon (15 years is no time in the energy business.

ABC news closed with a stoy about waste oil theft, by the way, and pointed out that used oil prices have gone up from 60 cents to $2.60 in that last couple of years, so if your thinking the waste oil solution is a cheap fix, guess again!



commentator was peter buetel. yes surprising for MSM.

Fascinating technical conundrum:
(a) The U.S. can build dozens of plants that can convert corn to ethanol fuel.
(b The U.S. can build plants to convert tar sand bitumen to fuel.
(c) The U.S. can build plants to convert soybean, palm oil and animal fats to bio-Diesel.
(d) The U.S. CANNOT find ways to refine heavy or sour oil to gasoline.

Astounding is it not?

OIL SUMMIT: Nigeria Oil Output At Lowest In 25 Yrs -Official

The country's volume of marketable oil held back from such attacks is now between 900,000 and 1 million barrels a day, the official added.

Saudi increase will have little impact...

What should have been agreed in Jeddah and why it wasn't:

1) OPEC to allow an independent international commission to verify their "proven" and "probable" reserves.
This would likely result in an official confirmation of what many of us believe - that their reserves are much smaller than claimed and that spare capacity cannot be substantially improved, not even in a long term. This would result in a rush into alternatives such as tar sands, GTL, CTL, renewables, etc., not a viable outcome for most OPEC producers.
2) Western consumers to limit speculation in commodity futures markets.
This would cause hyperinflation as all the monies that now sit in commodity futures would have no where to go as most other asset classes are unattractive.
3) BRIC and other consumers to remove all subsidies.
This would cause (accelerate?) economic woes and result in widespread unrests.

So all they can do at this stage is produce some soothing promises ...

"2) Western consumers to limit speculation in commodity futures markets.
This would cause hyperinflation as all the monies that now sit in commodity futures would have no where to go as most other asset classes are unattractive."

Not true. Money can be placed in an account in a Swiss bank that charges interest on deposit accounts. (They have done so in the past.)

ok... i got it...

the saudis are planning to produce more oil... that they are already producing... and were planning to produce... that they don't have... that can't be discerned from any of the published reports... that won't have an effect on anything... except the fields that don't have the oil... will be further deteriorated faster... and won't effect prices for anyone anyway... because the planned production increase... is what they're currently planning... or actully producing... will actually increase demand on the supply... that can't be produced anyway... sometime now... or in the future... at some level...

i'm so glad they cleared all that up...

or is jedday SA just a cool place to take a businees trip in june?

So it doesn't look like anything has been learned from what happened at the meeting. Still FUBAR, SNAFU, or whatever.

But the world will go on. Babies will be born. Old people will die. Oil resource will be depleted... eventually to the point where the extant population will have starved or found a substitute, probably some of both. The substitute will be something that we already know about but won't support because it is incapable of supporting the World As We Know It. What will it be? It won't be neat. It will miss on some of the absolute, drop dead, must have, requirements. But when people have forgotten what those are, they won't really matter.

I think the first requirement to go will be that it is a Global Solution. Dropping this saves to cost of shipping whatever it is around the world, and it absolves those who have some of it from the obligation to share their supply of it with those who are far away. End of Globalization as we know it.

The world becomes a collection of localized economic systems that have limited interaction with each other. This reasoning doesn't give much information about the sizes of these non-integrated (disintegrated?) systems, but they are surely smaller than the current global system, and likely not in one-to-one correspondence to current recognized sovereign states.

Will such a reorganized world be capable of supporting a population similar to current size? Larger? There is no reason to hope that it will be able to support a larger pop. than present. Smaller: World population was approx. 1billion in 1800 when fossil fuel was economically unimportant. So, I suppose an Earth without fossil fuel can support 1billion again, maybe more. In 1800 there was a year by year growth of population which indicates that extant population was better off than minimal subsistence. So, I expect future population to stabilize somewhere in the range 1 to 6 billion, probably closer to 1 than to 6.

The technology for energy production in that future world will be something that was already known and in use before 1800. And, there may be more than one technology with different economic systems emphasizing different technologies because of differing local resources.

Just my two cents...