Drumbeat: February 25, 2011

Angola, Nigeria Can't Immediately Replace Libya Oil - Sources

LONDON -(Dow Jones)- Angola and Nigeria can't immediately make up for missing shipments of Libyan oil, officials in the African countries said Friday.

The news come after Saudi officials said Libya production shut down by unrest could be replaced by West African light crude.

Suncor shuts Libya operations, evacuates staff

(Reuters) - Suncor Energy Inc said on Friday it has evacuated all its expatriate staff in Libya and that field operations there were shut down earlier this week.

What Will Oil At $100 Or More Mean For The Economic Recovery?

Crisis-watchers have shifted their attention from food to oil prices, as the struggle in Libya, where Colonel Muammar Gadhafi is attempting to keep a grip on a nation that is quickly slipping from his hands, has injected a fresh dose of volatility into the markets. Investors and analysts are struggling to come to terms with what the meaning of a barrel of oil at $100 or more will mean for the U.S. and global economic recovery.

Motorists facing £6 a gallon at the pump due to Libya crisis

Motorists are now paying £6 a gallon in garages across the country as oil prices continue to soar amid the crisis in Libya.

Libya Crisis Fuels Washington Debate Over Energy Production as Prices Rise

The crisis in Libya has revived the partisan debate in Washington over energy production, with Democrats and Republicans drifting to familiar arguments as they try to figure out a solution to rising oil prices.

A Libyan diplomat reportedly said Friday that the country, which accounts for about 2 percent of the world's crude oil exports, will stop exporting oil while the unrest persists. The United States isn't as dependent on Libyan oil as other parts of the world, but the country still provides thousands of barrels per day to the United States.

Reduce dependence on oil, Middle East

Every kind of crude oil whose price is used as a barometer for international trading has topped the benchmark of 100 dollars a barrel. Should oil prices continue rising, they will slow the world economy, now moving toward recovery, and weigh down the Japanese economy as well. We must remain on guard.

The government and industrial sectors may need to promote anew energy measures to help Japan become less dependent on oil and the Middle East.

15 killed on Iraq 'Day of Rage'

Security forces used water cannons and tear gas to disperse thousands of angry protesters in Baghdad on Friday as a "Day of Rage" across Iraq left 15 demonstrators dead in clashes with police.

Around 5,000 people thronged Baghdad's Tahrir Square, with angry crowds throwing stones, shoes and plastic bottles at riot police and soldiers blocking off a bridge connecting the site to Baghdad's heavily fortified Green Zone, home to the US embassy and parliament.

US natgas rig count up 1st time in 4 wks-Baker Hughes

NEW YORK (Reuters) - The number of rigs drilling for natural gas in the United States rose for the first time in four weeks, up by one to 906, oil services firm Baker Hughes said on Friday.

The gas-directed rig count had dropped in nine of the previous 11 weeks, but remains above the 12-month low of 902 hit on Jan. 14.

Canada not concerned over oil effects on inflation

(Reuters) - There is little concern about long-term inflationary pressures in Canada arising from turmoil in Libya and Middle East countries, Finance Minister Jim Flaherty said on Friday.

"We watching what's going on in the oil markets. I don't think there's reason now to have any strong concerns about any long-term effects," Flaherty told reporters following a speech.

Russian oligarchs accuse BP of 'sabotage' over Rosneft dispute

BP failed to show up at the scheduled board meeting of its joint venture TNK-BP, leaving its Russian partners accusing the company of trying to "sabotage" arbitration proceedings meant to resolve their dispute.

Libyan rebels say control oil fields, honour deals

BENGHAZI, Libya (Reuters) - Rebels in eastern Libya said on Friday they now controlled most of the oil fields east of the town of Ras Lanuf, and said they would honour oil deals as long as they were in the interest of the people.

The eastern Libyan town of Brega and its oil terminal are under rebel control, and soldiers who have defected are helping the rebels to secure the port, Reuters witnesses said on Friday.

"This area is controlled by the people," said Mabrook Maghraby, a lawyer from Benghazi who is now involved with the local committees defending Brega.

If oil contracts were unfair or based on corruption, however, the interim leadership of Libya's second city Benghazi said they reserved the right to renegotiate them.

U.N.: Libyan crackdown 'escalating alarmingly'

Benghazi, Libya (CNN) -- Libya's bloody crackdown on protesters is "escalating alarmingly" and "thousands may have been killed or injured," the world's top human rights official said Friday, as strongman Moammar Gadhafi vied to retain power from his stronghold in the capital of Tripoli.

Spain to lower speed limit as oil prices rise

MADRID — Spain says it will lower highway speed limits and cut train ticket prices in an emergency energy-saving initiative because of higher oil prices brought on by unrest in Libya.

Newspaper: Oil 'megaloads' will be downsized

PORTLAND, Ore. (AP) -- A company trying to move huge pieces of oil refining equipment to Canada says it will downsize the "megaloads" so they can be trucked on interstate highways.

Corbett Repeals Policy on Gas Drilling in Parks

Gov. Tom Corbett has repealed a 4-month-old policy designed to minimize the environmental impact of Marcellus Shale natural gas well drilling in Pennsylvania's parks.

The policy repeal could hurt recreation and the environment in Ohiopyle State Park and a number of other parks in the western part of the state where oil and gas companies are seeking drilling permits, according to the former director of the state Department of Conservation and Natural Resources, which manages the state's parks and forests.

Gas Permits for Marcellus Shale May Face Backlog

Companies hoping to extract natural gas from West Virginia's Marcellus shale may have to wait in line unless there's money for more oil and gas inspectors, said the state's top environmental protection official.

Mexico to slash oil and gas drilling by 42 pct

MEXICO CITY (Reuters) - Mexico's state oil monopoly Pemex will dramatically slash the number of wells it drills for oil and gas this year in an apparent rethink of two of its largest onshore projects, according to its 2011 operational plan.

New Study: Alaska Has More Oil Than Russia, Nigeria, Libya

(CNSNews.com) – A new study says drilling on Alaska’s Outer Continental Shelf (OCS) could make Alaska the eighth largest oil resource province in the world -- ahead of Nigeria, Libya, Russia and Norway.

House panel pledges hard look at offshore drilling delays

WASHINGTON, DC -- US House Natural Resources Committee leaders promised to raise questions about what they consider a de facto offshore drilling moratorium with officials at the US Department of the Interior at hearings in the next 2 weeks. The committee also will hear directly from affected Gulf Coast states, communities, and local businesses on Mar. 16 and conduct a field hearing and site visit in Louisiana during the April district work period, Chairman Doc Hastings (R-Wash.) and Energy and Mineral Resources Subcommittee Chairman Doug Lamborn (R-Colo.) said.

Chevron Sees US Deepwater Drilling Resuming by Midyear

Chevron, the second-largest U.S. oil company, expects to be able to resume its ambitious drilling program in the deep waters of Gulf of Mexico before the first half of 2011 is over, company executives said Wednesday.

"We are getting to the end of the road," Gary Luquette, Chevron's head for exploration and production in North America, said. "One time we thought it will be the end of the year, now our estimate is that it could be before the middle of the year."

Shell CEO acquitted in fuel shortage case

The case began in 2007 after Trade Secretary Guillermo Moreno accused Mr. Aranguren of allegedly causing a fuel shortage. However, the judge considered that in the June-September 2007 time period, 'Shell didn't infringe the 1974 Supply Law.´

Ivory Coast Gbagbo militia confirms rebel advance

ABIDJAN (Reuters) – A militia chief loyal to Ivory Coast's incumbent Laurent Gbagbo confirmed on Friday that a western town under control by government forces had fallen to rebels and said they would fight to get it back.

Is Ivory Coast Doomed to Slide Into Civil War?

After nearly four months of post-electoral turbulence which has seen banks shut, political activists targeted and food prices rise dramatically, citizens of Ivory Coast's commercial capital Abidjan have become jaded. "There are a lot of people who have gone mad with poverty and misery here," says unemployed mechanic Yassa Touré. Which is why last Monday he barely looked up from his coffee at a roadside stall in Abobo, a working-class suburb of Abidjan, when a man ran past screaming that the army was approaching and would "mow down civilians." "An hour later presidential guards drove into the neighborhood," says Touré. "They had machine guns mounted on trucks. The next thing I knew was the noise of heavy weapons being fired." The shooting lasted six hours. When it was finally over, says another Abobo resident, a 52-year-old shopkeeper who gave his name as Ali: "I opened my door and there was a man lying there, blood everywhere. Next to him another corpse had half his face missing."

Arms deals still made amid Middle East crackdowns

Amid all the change sweeping the region, the multibillion-dollar business of arms sales to the Middle East may remain the one constant. The rich Persian Gulf states - particularly the United Arab Emirates and Saudi Arabia - are scooping up as much weaponry as they can. Some of it could, in theory, be turned on their own populations. But diplomats and defense industry representatives say the goal is to defend against Iran and to secure energy infrastructure that has become even more valuable with oil topping $100 a barrel.

Manifa well sets regional distance record

DHAHRAN, Saudi Arabia – Saudi Aramco’s drilling team on the Manifa offshore field have set a new record for a long-reach well in Saudi Arabia.

Saudi Aramco said to sell crude oil cargo from Okinawa

Saudi Arabian Oil Co, the world’s biggest oil exporter, sold the first crude cargo from its new storage facility on Japan’s southern Okinawa island, three people with direct knowledge of the transaction said.

Factbox: Possible future Saudi oil ministers

(Reuters) - The following are some of the names suggested as possible successors to Saudi Oil Minister Ali al-Naimi.

Rumors have repeatedly circulated that he might retire, but so far they have proved unfounded and Naimi last year dismissed them as "rubbish."

FACTBOX-Saudi oil ministers past and present

(Reuters) - Ali al-Naimi, in office since 1995, is only the fourth Saudi Arabia oil minister to date.

Here are some facts about his three predecessors.

David Strahan: Old Iran hand casts doubt on Saudi, Libya

As the last oilman out of Iran in 1979, Jeremy Gilbert knows just how it feels to be caught up in a Middle Eastern revolution. Hospitalized and desperately weak with hepatitis, he was left behind in the general evacuation and only escaped by walking through Iraq – after being forced to kiss the shoes of a border official.

Compared to the 170 British oil workers still trapped in the Libyan desert, the former chief petroleum engineer for BP was relatively fortunate. But the oil shock he lived through was far more serious than the current crisis. “It was a much bigger shock”, says Gilbert, “at least, so far”.

Libya: Stranded Oil Workers Describe Turmoil

"Our company will try again to get a flight out today, but if that fails the backup plan will be to try and bus everyone to Tripoli and then fly them to Tunisia, or to try and bus them to the Egyptian border.

"Personally, from what I have heard this is a disastrous plan as people that have tried to drive to Tripoli so far have had their cars stolen and the occupants left stranded in the desert. I can't imagine what the outcome would be with 46 expats onboard.

"For those who are thinking of taking matters into their own hands, plans have been to try and steal a car and get to the Egyptian border or maybe Benghazi."

Relying on Libya

Which countries depend most on Libyan oil?

A cry for freedom is paid at the pump

Who knew democracy would cost so much at the pump?

As political unrest intensified in Libya and continued to swell throughout the Arab world this week, oil prices pushed past $100 a barrel, at least briefly, their highest in two years. It probably won't be the last time, especially if violence in oil-producing countries escalates.

Americans support the cry of freedom, but the past month serves as a reminder that promoting democracy has long taken a back seat to cheap oil.

Expert Warns Against Tapping Oil Reserves

WASHINGTON—A leading energy expert is warning against calls by U.S. lawmakers to open emergency fuel supplies to reduce the pressure on fast-rising oil and gas prices.

Daniel Yergin, chair of IHS Cambridge Energy Research Associates, said the U.S. Strategic Petroleum Reserves should be used solely to combat supply shortages, and not to lower fuel prices.

British analysts: Rising oil prices will not lead to global recession

Oil prices on world markets continue to rise amid fears that the hydrocarbon flow will be halted from Libya as a result of the political unrest in the country.

Spiking Oil Prices: Time To Worry Yet?

For Cambridge Energy Research Chairman Daniel Yergin, the panic point will hit when oil routinely costs more than $100 a barrel. That benchmark, Yergin tells CNBC, "starts being a worrying setback for the economy. It hits consumer confidence and spending — and a lot of businesses, beginning with airlines."

For Jack Ablin, CIO of Harris Private Bank, the trigger point may be closer to $140 a barrel. He sent a message to CNBC Tuesday saying that when a gallon of gas hits $4, that "will begin to weigh on the consumer and our incipient recovery."

Who gets rich off of $100 oil?

NEW YORK (CNNMoney) -- For consumers, the return of $100-a-barrel oil is nothing but bad news. But investors see an opportunity: They're piling into unconventional energy stocks, betting that high oil prices could translate into big profits for some smaller U.S.-based oil companies.

In fact, companies that specialize in extracting crude from oil shale and oil sands are posting the biggest gains among energy companies this year.

Steve LeVine: Two reasons why oil prices are going through the roof

Trouble has been going on in the Middle East for weeks, so why have oil prices suddenly gone up precipitously today? Mainly because two major presumptions underlying our understanding of the world changed in the last 24 or so hours and in doing so shook up the global economic calculus.

Steve LeVine: All is not lost in Libya

We need some balance in the Libyan oil story. Is this north African nation an unmitigated disaster for those elsewhere in the world running an economy or driving a gas-guzzling vehicle? Notwithstanding the turmoil, the answer so far is no.

Libya oil production to shut down completely-BofA

(Reuters) - Oil production in Libya is expected to shut down completely and could be lost for a prolonged period of time, Bank of America Merrill Lynch said on Thursday.

Why the Disruption of Libyan Oil Has Led to a Price Spike

Libya produces less than 2 percent of the world’s oil, and exports little to the United States. But the high quality of its reserves magnifies its importance in world markets.

Libya’s “sweet” crude oil cannot be easily replaced in the production of gasoline, diesel and jet fuel, particularly by the many European and Asian refineries that are not equipped to refine “sour” crude, which is higher in sulfur content. Saudi Arabia has more than four million barrels of spare capacity and has promised to tap it if necessary, but that capacity is mostly for sour grades of oil.

Kjell Aleklett: Oil – Democracy’s black straightjacket

The collective name for the nations that produce oil in the Middle East and North Africa is MENA. On the map above you can see that MENA includes the following nations: Algeria, Libya, Egypt, Saudi Arabia, Iraq, Iran, Kuwait, Bahrain, Qatar, The United Arab Emirates (UAE), Oman and Yemen. What happens in these nations in coming years will be crucial for the world’s future. 10 of the 12 MENA nations are among the world’s 20 largest oil exporters. The exceptions are Bahrain and Egypt, but Egypt has a central position in the oil trade since large volumes of oil pass through the Suez Canal and it also controls an oil pipeline that runs parallel to the canal. Every day, large volumes of oil are freighted or pumped to the Mediterranean Sea and the EU. The 10 largest oil exporters are, in rank order, Saudi Arabia, Iran, UAE, Kuwait, Iraq, Algeria, Libya, Qatar, Oman and Yemen. None of these nations are democracies as we understand the term.

What the Libya Crisis Means for Crude Oil Investors

In a word: Canada.

Our longtime friends in Canada are happily – and quite profitably – producing millions of barrels of oil from the vast deposits of oil sands in Alberta.

Political unrest casts a shadow over Desertec energy project

The Desertec project aims to supply Europe with renewable energy from North Africa. Construction of the first solar plant is due to begin soon, but unrest in the region has put a question mark over the project's future.

California Senate OKs renewable energy bill

Reporting from Sacramento — The state Senate acted Thursday to require California utilities to boost their use of wind, solar and other renewable energy sources to a third of total supply by the year 2020.

Bonneville Power to Wind Generators -- Shut Down, and You Get Free Power

The Bonneville Power Administration says it is preparing to sharply reduce the region's wind generators' output during extreme high water flows in the Columbia River system as a last resort to assure that hydropower dam operations do not threaten protected fish populations.

Pakistan: Solar energy to beat price heat of fossil fuel

Muhammad Jamshed, Head Engineering & Instrumentation, TSML and Kai Klingenhagen, Area Sales Manager, SolarWorld signed the memorandum. Muhammad Jamshed, Head Engineering & Instrumentation, TSML said: “With higher prices and growing scarcity of fossil fuel, solar power is finally emerging as a viable and efficient source of energy.

Former NATO Commander Urges Shift To Ethanol

Gen. Wesley Clark, a decorated U.S. serviceman who served as the U.S.’ top NATO officer in Europe and who also ran for the Democratic presidential nomination in 2004, says ethanol is a viable replacement for imported oil from unstable Middle Eastern nations which are being overcome with chaos.

In an op-ed he penned for Politico’s website on Thursday, Clark — who retired from a life in service and is now an ethanol lobbyist — lamented the effect that ongoing turmoil in Libya has had on oil prices, which have skyrocketed over $100 per barrel since protests against Libyan ruler Muammar Gaddafi began over a week ago.

Drought-hit Chile requiring less diesel for power due to LNG terminal

Santiago (Platts) - Chile's state oil company ENAP has increased imports of diesel to meet extra demand from the power industry due to a drought that has crimped hydroelectric output, but such demand is lower than during past crises, due to an LNG terminal that began operating in 2009, ENAP's CEO Rodrigo Azocar said Thursday.

Zimbabwe reviews Namibia power exports

ZIMBABWE exports electricity to Namibia – despite major power shortages at home, Energy Minister Elton Mangoma revealed on Thursday.

Zimbabwe generates between 1300-1400 mega watts against the national requirement of 2000MW, but the country still exports 150MW to Namibia “below cost”, the minister said.

“The current situation means that Zimbabwe, despite its own shortage of electricity, is subsidising Namibia. This situation has to be corrected soon,” Mangoma said, as he revealed the true extent of the country’s energy crisis and a long term strategy to meet the country’s power needs.

John Michael Greer - Energy: embracing the real alternative

It will be interesting to see what happens if the current round of crises turns into a full-blown energy crisis, as it well might, with oil prices spiking up past $200 or $300 a barrel, say, and the cost of gasoline and diesel fuel following the same upward trajectory until demand destruction puts a ceiling on them. No doubt there will be any number of attempts to blame it all on the oil companies, or the Arabs, or the Obama administration, or perhaps David Ickes’ imaginary space lizards; no doubt there will be at least as many proposals to rush another round of stimulus money the US government doesn’t have from the Fed’s already overworked printing presses and pour it into fusion power, cellulosic ethanol, and an assortment of other high-tech ratholes; no doubt there will be plenty of people insisting that we’d have all the energy we need if we just put the same amount of freshly printed money down some other set of ratholes. What interests me, though, is whether there will be any amount of attention, or even lip service, paid to the real alternative to petroleum.

Being Carless in America is Like Second-Class Citizenship

The first time I came to America I was 23 years old, and it always confused me why people were so shocked that I had never driven a car. Until I started to travel. Because as soon as you leave the major metropolitan areas, it can be amazing how un-pedestrian friendly most infrastructure is. The fact is that being carless in most of America is, without doubt, a major impediment to social inclusion and economic well-being. Without a car, you're basically a second class citizen.

Michael C. Lynch: Drilling for an Oil Crisis

While peak-oil advocates have in the past ridiculed optimistic industry expectations, the evidence continues to confound them. Over recent decades, the consensus estimates of the amount of recoverable oil on the planet have roughly doubled. And recovery rates — the percentage of those reserves that we are technologically able to collect — have grown from 10 percent a century ago, to 25 percent a half-century ago, to an estimated 35 percent now. In some areas, like the North Sea, the figure is above 60 percent.

There are several other reasons to remain calm about Saudi reserves. Officials there have discovered approximately 70 major oil fields that they have left untapped over concerns that increased Saudi production would cause global oil prices to collapse.

And while Aramco is hardly likely to find anything on the scale of the Ghawar oil field, the world’s largest, they haven’t been looking very hard. The Saudis drilled about 500 wells last year; some 11,000 are drilled every year in the United States alone.

Thomas L. Friedman: If Not Now, When?

What’s unfolding in the Arab world today is the mother of all wake-up calls. And what the voice on the other end of the line is telling us is clear as a bell:

“America, you have built your house at the foot of a volcano. That volcano is now spewing lava from different cracks and is rumbling like it’s going to blow. Move your house!” In this case, “move your house” means “end your addiction to oil.”

Oil hovers above $97 as traders eye Libya supplies

Oil prices hovered above $97 a barrel Friday but were far from highs over $103 the day before amid signs the crisis in Libya may have cut supplies less than previously estimated and as Saudi Arabia seemed ready to boost output.

By early afternoon in Europe, benchmark crude for April delivery was up 42 cents at $97.70 a barrel in electronic trading on the New York Mercantile Exchange. Trading was volatile between $96.39 and $99.20. The contract on Thursday dropped 82 cents to settle at $97.28 after massive swings.

Gas prices spike 6 cents overnight

So far this week, gas prices have increased nearly 12 cents a gallon. And analysts expect prices to continue higher in the next few days following a sharp rise in the price of crude oil.

Oil May Rise as Mideast Turmoil Disrupts Supplies, Survey Shows

Oil prices may rise from the highest levels in 29 months next week as violent clashes in Libya and tensions in other parts of the Middle East disrupt crude shipments from the region, a Bloomberg News survey showed.

Twenty-three of 40 analysts, or 58 percent, forecast crude oil will climb through March 4. Nine respondents, or 23 percent, predicted prices will decline and eight estimated little change. Last week, 44 percent said futures would increase.

Oil price: Should we fear the latest rises?

With energy prices already well on the rise before the latest crisis hit the Middle East and North Africa, is the global economy headed for another tumble?

Fears oil prices could put global economy at risk

LIBYA'S descent into civil war has led to drastic cuts in oil shipments and prompted warnings that an escalation of the crisis could see Brent crude prices double to $US220 a barrel.

The spike that sparked a correction

Global economic growth is not such a fragile beast that a spike in oil prices of $US10 or even $US20 will cause much harm. The key word there though is "spike".

Economy faces new threats

NEW YORK (CNNMoney) -- Just when the U.S. economy seemed to be getting its footing, a number of new obstacles risk tripping it up.

A spike in oil prices due to spreading unrest in the Middle East is the highest profile problem, but not the only one.

Oil's 'inflexion point' and Wahabi central banks

The greatest threat to the global economy is not the oil shock itself but the risk that central banks will commit a blunder, compounding the damage by tightening monetary policy at exactly the wrong moment.

For the European Central Bank and the Bank of England this would mean raising rates into the teeth of the storm, as the ECB did with predictably disastrous consequences in July 2008.

Obama, Geithner seek to quell fears about oil spike

WASHINGTON (Reuters) – U.S. President Barack Obama and Treasury Secretary Timothy Geithner sought to quell fears on Thursday that unrest in Libya would put oil prices on a long term upward trajectory.

"We actually think that we'll be able to ride out the Libya situation and it will stabilize," Obama, referring to fuel prices, told a group of corporate chief executives.

India oil min to seek ministerial meet on fuel prices

(Reuters) - India's oil minister S. Jaipal Reddy wants a ministerial meeting on fuel prices and will ask Finance Minister Pranab Mukherjee to set one up, but it will not happen before the budget on Feb. 28, he told reporters on Friday.

India freed petrol pricing last June, but diesel prices and cooking gas prices are set by the federal government.

Gov’t considering using oil reserves amid Libya chaos

Chances are high that Korea will tap into its oil reserves to prevent a possible supply crunch and price spikes should international oil prices keep soaring because of the ongoing pro-democracy movements in the Middle East and Africa.

The Ministry of Knowledge Economy held a second emergency meeting yesterday to discuss the possibility of releasing oil reserves. It created a special team to monitor the crisis in Egypt early this month.

Qaddafi Bolsters Defenses in Tripoli While UN Mulls Libya Sanctions

Muammar Qaddafi bolstered defenses in Libya’s capital after rebels seized much of the rest of the country, as the United Nations prepared to debate sanctions and the U.K. said the route to Tripoli airport is no longer safe.

Venezuela: US, allies fomenting Libya's violence

CARACAS, Venezuela – Venezuela's top diplomat on Thursday echoed Fidel Castro's accusation that Washington and its allies are fomenting unrest in Libya to justify an invasion to seize North African nation's oil reserves.

Foreign Minister Nicolas Maduro claimed the United States and other powerful countries are trying to create a movement inside Libya aimed at toppling Moammar Gadhafi.

Saudi Arabia Pledges OPEC Supplies to Replace Lost Libya Oil

Saudi Arabia and other OPEC nations including those in West Africa are willing and able to replace any lost Libyan oil as soon as companies ask for it, including crude of the same quality, a Saudi Arabian oil official said.

There is no reason for oil prices to rise because Saudi Arabia and OPEC won’t allow shortages to exist, the official said by telephone today, declining to be identified by name. Some West African oil that goes to Asian markets can be redirected to Europe, and extra Saudi oil can go to Asia to replace Nigerian or Angolan supplies, the Saudi official said.

Saudi Arabia raises output above 9 mln bpd

(Reuters) - Saudi Arabia has increased its oil production to more than 9 million barrels per day (bpd) to compensate for disruption to Libyan output, an industry source familiar with the kingdom's production told Reuters on Friday.

"We have started producing over 9 million barrels per day (bpd). We have a lot of production capacity," the source said, but said he could not say when the change had taken place.

Oil spike: a word from Saudi Arabia

The fact that active negotiations are taking place between Saudi Arabia and European refiners to establish how the kingdom might replace Libyan supplies has calmed the market after Thursday’s panic-buying sent a barrel of Brent crude above $119.

But the most crucial question of all remains unanswered: has Saudi Arabia actually begun to produce more oil?

Libyan oil ports, terminals mostly halted-sources

(Reuters) - Crude oil exports from Libya, Africa's third-largest producer, have almost stopped because of reduced production, a lack of staff at ports and security concerns, industry sources said on Friday.

Security concerns had deterred some shippers from sailing to Libya which is in the grip of a violent uprising against leader Muammar Gaddafi's 41-year rule.

Some vessels have refused to dock at Libyan ports or have turned back en route, the sources said, and bad weather in the Mediterranean has also disrupted operations.

Gaddafi son: govt will not destroy Libya oil supplies

(Reuters) - The government of Muammar Gaddafi will never resort to destroying Libya's oil wealth in its fight to put down an insurrection, the Libyan leader's son Saif al-Islam told Turkish news channel CNN-Turk on Friday.

Eni: Libyan upheaval cuts 1.2M barrels from market

Libya's violent upheaval has taken 1.2 million barrels of oil off the global market as energy plants and ports are shut down, according to Italy's Eni, the largest producer in Libya.

The figure represents a majority of Libya's total daily production, which before the crisis was about 1.6 million barrels of crude. The country also sits on the biggest proven oil reserves in Africa.

Repsol's Libya oil production at about 50 pct

Spanish energy company Repsol says its production of oil in Libya is slightly above 50 percent of capacity amid violent protests against the embattled regime of Moammar Gadhafi.

China oil company says Libyan facilities attacked

China National Petroleum Corp. says its facilities in Libya were attacked, and that its employees have been evacuated back to China.

A statement issued Thursday on CNPC's website mentions that its project and job site were under attack, prompting an order for all staff to withdraw. It does not mention the location of the facility or any other details.

Iran sells more oil as Libyan exports dwindle

TEHRAN/LONDON (Reuters) - Iran is taking advantage of Libya's turmoil and dwindling exports to sell more crude that it has found difficult to offload due to economic sanctions.

Unrest in Libya has slashed a big chunk of its crude oil output of 1.6 million barrels per day (bpd), with estimates of capacity shut down ranging from 500,000 to 1.2 million bpd.

Mideast unrest shows need for alternative fuels: Navy Secretary

WASHINGTON (Reuters) – Oil price rises spurred by spreading unrest in the Middle East underscore why the U.S. military should reduce its dependence on fossil fuels, said U.S. Navy Secretary Ray Mabus.

Every $10 increase in the price of a barrel of oil adds more than $300 million to the U.S. Navy's annual fuel costs, said Mabus, the former governor of Mississippi and the U.S. ambassador to Saudi Arabia under former President Bill Clinton.

Q&A: How Will the Libyan Crisis (and Its Oil) Affect the US?

Libya is different. Unlike the toppling of dictators in Tunisia and Egypt and the unrest roiling Bahrain and Iran, the violence gripping Libya, the 18th largest oil producer in the world, may have a more immediate impact on the American pocketbook.

Our view: Mideast oil shock threatens U.S., again

It's nice to aspire to a carbon-free future built on solar, wind, hydropower and similar renewable technologies, but that future is materializing so slowly that oil will be a major factor for decades. Even if President Obama's goal of 1 million electric cars on the road by 2015 is achieved, they will still be outnumbered 250-to-1 by gasoline-powered vehicles.

So the U.S. doesn't have the luxury of picking a few energy strategies it likes and fencing off the rest. The nation needs a do-everything policy to bridge to a time when the choices are better.

Opposing view: More drilling won't help

"Drill, baby, drill" won't get us out of this mess. We have only 2% of world oil reserves but use one-quarter of world oil production. Oil companies want more ocean drilling, yet it will take years to produce anything from the thousands of undeveloped Gulf of Mexico leases they already own. And nuclear plants are no solution because they are exorbitantly expensive and time consuming to build.

We must shrink oil use by increasing vehicle efficiency, using cleaner fuels and investing in public transit.

Equity markets stirred-up as 'peak oil' fears grow amid Libya crisis

Setting aside the political and humanitarian issues, the escalating crisis poses an intriguing dichotomy for investors.

Think before scratching itch to invest in oil

Oil prices have been surging. You want to ride the wave, so you're thinking about investing in an exchange traded fund that tracks oil prices.

If you're thinking crude will be a-bubblin' because of events in the Middle East, here's some advice: Go to Las Vegas instead. You'll have lots more fun and may even marry a really fun rodeo clown.

Why I'm Long ProShares Ultra Crude Oil ETF Despite Volatility

Like many Peak Oil proponents, Kunstler comes off as obsessed with the idea. It got to a point, reading his weekly ramblings, where I seriously decided that he lost it. He either went nuts or, became so closely associated with the phenomenon that he desperately needs to be right. It's good for business and the ego. While I am not stockpiling ammo and moving the family out to a farm on cheap land in the middle of Wyoming, I remain convinced that oil prices will move with volatility throughout my lifetime and trend ultimately higher over the mid- to long-term, irrespective of who's "right" in the Peak Oil squabbles. I pay little attention to the spikes, such as the one experienced in the summer of 2008 and the one occurring now. It's all so predictable -- prices rise, people find other modes of transportation and cut out car trips, demand falls, prices retreat. Depending upon the extent and duration of the spike, it may or may not impact the domestic and global economies. This too shall pass. I think if you cut through the hype, you realize, without the attendant and unnecessary hysteria, that oil serves as a sound long-term investment.

Pemex crude production hits 8-month high

Mexico's production of crude oil hit 2.58 million barrels per day in January, an eight-month high for the state-owned Petroleos Mexicanos.

A statement from Pemex on Thursday credits the higher output to stabilization in production from its Cantarell field in the Gulf of Mexico, which once had been its principle source.

Tullow Geologist Gambles on $70 Billion Oil Find by Chasing Atlantic Drift

More than 90 million years ago, when the land mass of Pangaea began separating into the continents we now call South America and Africa, the earth may have produced a lucrative farewell gift: huge oil and gas deposits along both coastlines where they had previously been joined.

Now, Angus McCoss, exploration director and chief geologist at Tullow Oil Plc, which in 2007 discovered one of the biggest oil finds of recent years off the coast of West Africa, is betting more than $100 million that a similar bonanza awaits off South America’s eastern shore, Bloomberg Businessweek reports in its Feb. 28 issue.

Study highlights benefits of Arctic Ocean drilling

ANCHORAGE, Alaska (AP) -- Shell Oil is touting a report it commissioned that says outer continental shelf petroleum development off Alaska's northern shores could create 54,700 new jobs that could be sustained for 50 years.

Breaking an Ice-Bound U.S. Policy: A Proposal for Operating in the Arctic

The United States is losing the race to protect its own interests in the Arctic region. It is important to create a sensible policy to field an adequate fleet of U.S.-owned ice-breakers. An adequate, competent, and sustainable fleet is the key to maintaining American presence in the region, protecting U.S. sovereignty, working with allies, and rebuilding the nation’s edge in global commerce.

Sinopec to Buy Fuel, LNG Stake From ConocoPhillips, Origin

China Petrochemical Corp., the nation’s second-largest oil company, agreed to acquire 15 percent of an Australian gas venture planned by ConocoPhillips and Origin Energy Ltd. as part of a fuel-purchase accord.

U.S. has interest in buying Brazilian oil: Brazilian FM

Brazilian Foreign Minister Antonio Patriota said Thursday that the United States is interested in purchasing Brazilian oil.

Patriota said that the matter was mentioned when he met U.S. officials in Washington D.C.

"The U.S. eyes on Brazil's energy potential. It was speculated that Brazil could become an important oil exporter to the U.S., because of its pre-salt reserves," he said.

1 worker critically hurt in Pa. gas well explosion

AVELLA, Pa. – Three contract workers were injured, one critically, in a fiery explosion that erupted during well testing at a natural gas-drilling site in western Pennsylvania, authorities said.

Gas drillers make waves in Pa. with NFL tickets

HARRISBURG, Pa. – When John Hanger, then the state's top environmental regulator, was offered a coveted trip to the Super Bowl to see the Pittsburgh Steelers in 2009, he turned it down.

The offer came from Consol Energy, one of the energy companies thirsting after the riches of the nation's largest-known natural gas reservoir, the Marcellus Shale.

Oil poisoning humankind

One thing that quickly becomes clear from reading Crude World: The Violent Twilight of Oil, is that its subtitle is misleading. Violent twilight? A reader might expect to be heading into the territory of writer James Kunstler, who argues that a coming global shortage of oil is going to turn our petroleum-powered lives upside down, and leave stranded suburban families relying on their vegetable gardens for survival.

But in Crude World, American journalist Peter Maass is actually sending a different message. Like Kunstler, Maass seems to be a believer in the theory of Peak Oil, meaning he thinks the days of relatively cheap petroleum are coming to an end. But far from seeing this twilight of oil as a disaster, Maass sees it as a saving grace. It will force us to end our addiction to a substance that has poisoned our natural environment and our politics, and made life measurably worse for millions.

High Oil Prices, Global Instability: The Nasty Underbelly Of Fed Policy

The Dow is going down because investors are worried. That’s why gold is going up. What if these revolutions get out of hand? What if they spread to Saudi Arabia? What if the price of oil keeps going up?

“Gasoline at $4 a gallon?” asked a headline yesterday. What would gasoline at $4 a gallon do to the U.S. economy?

A Day of Rage

In just a second, I’ll show you how to manipulate oil prices down. It could come in handy if you’re ever asked to rig the market in favour of your elite establishment friends. But the main point I’d like to make in today’s Money Morning – which I’m writing because your normal editor Kris Sayce is away for the day – is this: the chaos in global financial markets is a sign of the endgame in the global currency war. It’s going to get a lot worse before it gets any better.

Cruise lines reluctant to bring back fuel surcharges

With oil prices soaring this week due to unrest in the Middle East, North American cruise passengers can't help but wonder if fuel surcharges are soon to come.

Clean-energy economy a winner for Oklahoma

For more than a century, Oklahomans have relied on the oil and gas industry to provide jobs and wealth to give us the “good life” in our state. But things have changed. Today and in the future, clean energy will provide the jobs and the economic boost we need — if we support our fledgling green industries right now. A clean-energy economy can help the earth as well as our pocketbooks.

Jerry Brown's tough choice: green energy in hard economic times

Los Angeles – Instability in the Middle East has put America’s dependence on foreign oil back on front pages. It’s also added another ball to California Gov. Jerry Brown’s juggling act over this state’s renewable energy sector in tough economic times.

Solar Energy Faces Tests On Greenness

SAN FRANCISCO — Just weeks after regulators approved the last of nine multibillion-dollar solar thermal power plants to be built in the Southern California desert, a storm of lawsuits and the resurgence of an older solar technology are clouding the future of the nascent industry.

Using Solar Power to Extract Oil

A California company has begun using solar power to squeeze oil out of an old oil field, flooding the underground rock with steam that comes from the sun’s heat instead of from burning natural gas.

PCB Removal, With Zero Upfront

As I reported in Thursday’s paper, New York City is allocating $708 million for an energy retrofit program in public schools over the next 10 years that is mostly spurred by the need to replace light fixtures containing the toxic chemicals known as PCBs. For some months, the cost issue was a major factor delaying this week’s decision to replace the lighting at nearly 800 schools.

But some energy service companies say they are willing to undertake the job with no upfront costs. Instead, they suggest that they could be paid with the savings that the city racks up by switching to more energy-efficient lighting.

Judge recommends rate hike to pay for dam removal

GRANTS PASS, Ore. - An administrative law judge has recommended granting PacifiCorp a temporary 2 percent rate increase for its 45,000 electric customers in California to help pay the costs of removing dams on the Klamath River.

Reality Is Broken, By Jane McGonigal

It has been strange to read a book which claims that reality is listless, uninspiring and broken compared to computer games as the Arab revolutions swarm across our screens. We watch real citizens defy real riot police in order to achieve real control of public space and institutions. At this moment, it's not that easy to hear Jane McGonigal tell us that immersion among the trolls and space warriors of virtual worlds is a way to recover our sense of epic idealism and heroic altruism.

But even in the blazing context of the new Arab dawn, McGonigal might have a point. One of the cheekier posters held up by the Tunisian youth in their mass protests was "Game Over": and we know generally how much cyber-culture enabled the fall of Ben Ali.

The $200 Microhouse

For ingenuity, thrift and charm, Mr. Diedricksen’s tiny structures are hard to beat. Made of scavenged materials, they cost on average less than $200 to build. They often have transparent roofing, which allows a fine view of the treetops, particularly in the smallest ones, where the most comfortable position is supine. They have loads of imaginative and decorative details: a porthole-like window salvaged from a front-loading washing machine, a flip-down metal counter taken from the same deceased washer. Mr. Diedricksen hates to throw anything away.

Joel Kotkin predicts growing population, growing suburbanization

Where will the next 100 million Americans live? Kotkin thinks he knows: While 20 million may indeed find their way into the urban cores, most will live in the multi-nodal, car-defined suburbs. Will rising energy costs and a desire for density “force” empty-nesters back downtown? Not likely, says Kotkin—and the sprawled-out megacities of Houston, LA, Atlanta, and Miami will become the dominant paradigm of metro life. The strip shopping plaza may make Jane Jacobs aficionados wince, but in the West, the Southwest, Texas, and all across the Southeast, that’s where the folks are going to continue to want to be. Meanwhile, the “superstar” cities—Manhattan, Boston, Chicago, San Francisco, Portland, Seattle—will become even more luxurious playgrounds for the owning class, folks who are so much richer than everybody else that these places will have next to no middle class residents at all, only tycoons and their servants.

Surviving, thriving in a world of the future

“How could a town bounce back after peak oil?” asks Read. “Is your town going to be able to survive with not much transportation available? Or if all the jobs dry up? What would people be able to do? It’s that sort of thought process.”

It may sound radical, but it draws on some decidedly old-fashioned notions about the collective power of a community.

How to Make Oatmeal...Wrong

There’s a feeling of inevitability in writing about McDonald’s latest offering, their “bowl full of wholesome” — also known as oatmeal. The leading fast-food multinational, with sales over $16.5 billion a year (just under the GDP of Afghanistan), represents a great deal of what is wrong with American food today. From a marketing perspective, they can do almost nothing wrong; from a nutritional perspective, they can do almost nothing right, as the oatmeal fiasco demonstrates.

One “positive” often raised about McDonald’s is that it sells calories cheap. But since many of these calories are in forms detrimental rather than beneficial to our health and to the environment, they’re actually quite expensive — the costs aren’t seen at the cash register but in the form of high health care bills and environmental degradation.

Farm living could arm kids against asthma

Kids who grow up on traditional farms are 30% to 50% less likely than other children to develop asthma, a new study shows. But it's not the fresh country air.

It's the germs.

No Farms No Food: Battle Over Rezoning Application in Kings County Goes Provincial

On February 1, 2011, the Kings County Council voted to approve a rezoning application for 382 acres of land in the hamlet of Greenwich. The land, which is zoned as agricultural, may now be available for development, pending approval from the province. The decision to approve the application for rezoning, which passed at council by a narrow vote of 6-5, has pitted neighbour against neighbour, and arguments both for and against the rezoning application have become heated and emotional.

The collective known as No Farms No Food is the driving force arguing against the approval. Members of No Farms No Food describe themselves as "farmers, tourism and business operators, wildlife enthusiasts, teachers, health care professionals, lawyers, and individuals from every walk of life." What they share is that they call the Annapolis Valley (in which Kings County is located) “home” and are committed to its long term sustainability.

E.P.A. Scales Back Emission Rules

Responding to a changed political climate and a court-ordered deadline, the Obama administration issued significantly revised new air pollution rules on Wednesday that will make it easier for operators of thousands of industrial boilers and incinerators to meet federal air quality standards.

The new regulations represent a major step back from more demanding and costly rules proposed last spring that provoked an outcry from members of Congress from both parties and from thousands of affected businesses. One industry-financed study said the proposed standard would cost businesses $20 billion to comply and cause the loss of more than 300,000 jobs.

Greens say new transport strategy ignores emissions and climate change

The Australian Greens say they welcome a National Freight Strategy but have slammed the Federal Government's approach to emissions and climate change in the planning.

"Basically, there hasn't been any notice taken of the issues of greater emissions from road freight and the issue of peak oil" says Senator Christine Milne.

Bhutan’s experiment with happiness

“Guided by our unique philosophy of Gross National Happiness, Bhutan has so far been free of the guilt of contributing to climate change and has in fact been more successful than most other countries in conserving our natural environment.”

In a bid to match its grand rhetoric with actions, the authorities have busily promoted policies that reflect a pro-environment stance. The economic development policy and the foreign direct investment policy, both formed by the current government, strongly favour environment-friendly businesses, offering tax cuts and benefits to those who demonstrate green practices.

Can geoengineering put the freeze on global warming?

Scientists call it "geoengineering," but in plain speak, it means things like this: blasting tons of sulfate particles into the sky to reflect sunlight away from Earth; filling the ocean with iron filings to grow plankton that will suck up carbon; even dimming sunlight with space shades.

Each brings its own set of risks, but in a world fretting about the consequences of global warming, are these ideas whose time has come?

NOAA scientists cleared in climate email review

WASHINGTON (Reuters) - U.S. officials on Thursday cleared scientists of charges that they manipulated data about climate change in e-mails that were stolen from a British university in 2009, triggering a climate scandal.

The Department of Commerce's Inspector General conducted the independent review of e-mails taken from the Climatic Research Unit at the University of East Anglia in England, at the request of Republican Senator James Inhofe, a climate change skeptic.

Ancient megadroughts preview warmer climate: study

WASHINGTON (Reuters) - Ancient megadroughts that lasted thousands of years in what is now the American Southwest could offer a preview of a climate changed by modern greenhouse gas emissions, researchers reported on Wednesday.

The scientists found these persistent dry periods were different from even the most severe decades-long modern droughts, including the 1930s "Dust Bowl." And they determined that these millennial droughts occurred at times when Earth's mean annual temperature was similar to or slightly higher than what it is now.

This morning on CNBC topic was "Climbing Commodity Impact" the exchange of Fancisco Blanch and Becky Quick was imo priceless he took her to school on oil markets here's the vid http://www.cnbc.com/id/15840232?video=1817753634&play=1

Boone Pickens was also on CNBC this morning discussing his favorite topic, natural gas. However Erin Burnett was also on with him, dragging out her "shale oil" argument. She said we could quadruple our oil reserves if only the federal government would allow us to go on federal land to get it. Pickens shot her down by saying that that study had no credibility. She then brought up the Marcellus and Barnett Shale. Pickens however missed his chance to point out to her the fact that she was comparing apples and oranges.

Near the end of the piece she got back to her "federal land" argument. Pickens said all the shale plays were 98 percent on privately owned land and the only federal land in question was in the Gulf of Mexico.

Watch and enjoy: Pickens: Oil Will Go Higher

Airtime: Fri. Feb. 25 2011 | 8:10 AM ET

T. Boone Pickens, BP Capital Management chairman & founder, advocates an energy plan for America as oil prices are likely to rise on continued Middle East unrest.

Ron P.

The sad part is that Erin has seemed more sane than most of the others on CNBC. I guess the Kool Aid gets to everyone after awhile, especially when you are surrounded by extreme free market, capitalism can do no wrong zealots. Somebody seems to have gotten to her lately as she just cannot seem to comprehend the difference between the Shale Oil at Green River and the oil from Marcellus.

At the end of the day, however, this is a business channel. Those investing their money have to deal in the reality based world eventually or they will go horribly broke. Not so, however, with bubble head commentators.

I believe the terminology is: Oil Shale (really marlstone) as found in the Green River formation which IS owned by the government versus Shale OIL, which are really dolomites and are NOT owned by the government. But why should we be surprised that Americans who can't even name a country on the Indian ocean can't keep shales straight?

And oil shale does not contain oil, it contains kerogen, which is a waxy oil precursor.

Just keep reciting, "There's no oil in oil shale, and it's not really shale." And there's no tar in tar sands either. It's so simple.

Erin learned nothing from Pickens. This afternoon she is pushing the same nonsense on U.S. oil with Cramer. The U.S. can be the king of oil.

The US was kingpin of oil until 40 years ago.

Yea great piece. He mopped the floor with her. I rarely see Becky so feisty. And I think it's shameful that she sat there and claimed that the price run up of 08 was due to speculation.

I also find it astonishing how dumb the CNBC anchors act with oil prices. They constantly ask the question: Are high/rising oil prices a threat to the economy/recovery? Like they have completely forgotten about 2008. And most of the experts respond with the following formula: The economic recovery can withstand oil prices at $XX per barrel but if they rise to $XX + ~15% per barrel then I think we could see a curtailment in consumer discretionary spending.

They have repeated this formula over and over as oil has risen through the $60s, $70s, $80s, $90s and yesterday with WTI hovering around $100/barrel. So basically they just plug in the current front month futures price and say as long as it doesn't go any higher we'll be alright. The oil price then goes higher and they simply repeat themselves. What a joke.

Last night I heard a so called expert interviewed who was asked how much oil prices would rise if Saudi production was shut down due to unrest. His answer was: "The loss of about 1 million barrels of export from Libya has pushed the price up by about $10 so the loss of about 6 times that amount from Saudi Arabia would push the price up about 6 times $10."

So he would expect the price to rise to about $160 dollars per barrel if Saudi exports ceased. I have no idea how much money he gets for spouting crap like that.

Wow. 6x10.

His logic is just unassailable, huh? I love it when things have simple formulas.

At the end of the video, they threw up the Brent price as a background, beginning with the most recent time period, just as they had done for WTI. When they got to the price over the past year, the graph was quickly removed. Don't worry, sheeple, be happy, Mister Market will make it all better...

E. Swanson

CNBC is simply brutal on commodity analysis; especially on oil and gold.
I've watched a lot of CNBC over the past several years and it's becoming shear torture to watch it anymore.
Worldwide Exchange is still the best of their programming. The rest of it is "Amateur Hour" at best.

This morning on CNBC topic was "Climbing Commodity Impact" the exchange of Fancisco Blanch

That guy Francisco rode Quick out on the last train to Palookaville. He rejected speculation (now and in 08) due to the enormous amounts of money in the billions needed to have any effect on price and even laughed at one point regarding speculation, saying over time the price is determined by fundamentals of supply and demand.

He also tried to explain to her, yet briefly that the supply of oil is now ineleastic. Meaning there isn't a lot of spare capacity to bring on line.

I love the part where he cleaned her clock on WTI, saying it was irrelavent to the East coast, deep south (texas) and far west (California).

Then when Quick talked about the Saudi's claim of adding 1.5 mbd to make up for Libya's lower supply, he said "Well, then the question becomes how much spare capacity will they then have, and what affect will that have on price as we move forward?" Of course she avoided answering that question. And he also talked about Saudi heavy crude saying not many refineries can handle it.

That guy was great!

I liked this line from Quick...

So Brent was $100 two weeks ago, now it is $118, what's that a 15% increase?

Must be in the "new math".

From link above.

There are several other reasons to remain calm about Saudi reserves. Officials there have discovered approximately 70 major oil fields that they have left untapped over concerns that increased Saudi production would cause global oil prices to collapse.

Someone should ask Michael C. Lynch for a list of these 70 untapped major oil fields. Where are they located and how much oil is there in each of them? I would really like to know.

I also like this qoute:

The Saudis drilled about 500 wells last year; some 11,000 are drilled every year in the United States alone.

Yet the US oil production in the area (main 48) is heading downwards. They drill those holes to keep the liquid flowing. It is the symptoms of a dying man, not of a rich man.

If I had more time today, I would try to count the misdirections, distortions, and falsehoods in Lynch's article. This borders on criminal.

The Saudis drilled about 500 wells last year; some 11,000 are drilled every year in the United States alone.

Did he mention that the average Saudi Arabian oil well produces 5,000 barrels per day, while the average American oil well produces 15 barrels per day?

If you don't have the oil, you don't have the oil. Drilling more wells doesn't help. Well, it does, but not enough.

It's comforting to see "Spike" Lynch up to his old schtick. He revs into action whenever a price spike occurs.

I have a chapter devoted to refuting several of Lynch's technical arguments in The Oil ConunDrum. Enough to make his head 'splode.

Anyone who ever thinks of taking Michael C. Lynch seriously needs to go back and read this article:

Really, Really Cheap Oil
Christopher Helman 10.02.06

Don't sell that SUV just yet. Oil, at a recent $66.50 a barrel, will fall to $45 by mid-2007 and could dip briefly into the 20s in 2008. Sometime next year you are going to see a $1.95 price on a gas pump.

So says Michael C. Lynch, 51, president of Strategic Energy & Economic Research in Amherst, Mass. He swears he hasn't been inhaling fumes. His reasoning: New supply, coming online from all corners of the world, is more than ample to satisfy growth in demand and sufficient even to withstand an embargo against Iran, which produces 3.75 million barrels of oil a day. Lynch argues that the threat of disruptions--nuclear brinkmanship, war, terrorism, hurricanes, pipeline corrosion--has larded oil prices with a $20-a-barrel risk premium. As these perils recede, oil prices will fall.


He is a permanent cornucopian. He predicted a dip into the 20s in 2008 . . . instead the world got $147/barrel.

Who would pay for that analysis? No one who wants honest hard analysis . . . just people that want to hear someone with an MIT degree spout the happy-talk.

As I've posted elsewhere, some people will pay a lot to have matters pertaining to the ownership and control of the capital accumulated during the process of degrading the final stores of high quality hydrocarbons defined in terms that weaken the arguments for windfall taxes, changes in depreciation allowances and so forth.

some people will pay a lot to have matters pertaining to the ownership and control of the capital accumulated during the process of degrading the final stores of high quality hydrocarbons defined

This is the first time I've heard this idea, at least put this explicitly.

Care to elaborate or direct me to either blog posts or (if possible) books about this?

You can read any standard economics or business text which deals with taxation issues in relation to maintaining production to see what's going on here.

A part of the price the consumer pays for any product is dedicated to perpetuating the supply of that product. Some of this part goes to government for social reproduction (education, etc) so that industry continues to have access to engineers, etc. The major portion of this part goes back to the firm so that, in theory, the firm can carry on production through continued investment. Investment comes out of profits and profits are enhanced by tax rules which allow for depreciation of equipment, for example.

Now, as constrained supply pushes prices higher, the firm accumulates more and more profit. At the same time, the likelihood that investment is going to be able to maintain production is declining.

What then is the rationale for leaving the money flowing from consumer to oil company in the hands of the oil company? It's not their oil, it's not their money, they're not owed a living. They have been allowed to live well because they provided a valuable service, but now they're living very very well while their service is declining.

At this point in history we are in need of substitutes for oil. Do we want oil companies managing the investment in these substitutes, which include alternative sources of energy and alternative ways of doing things?

Not in my book. It's time to start to methodically strip the oil companies of their capacity to accumulate capital and to redirect the flow of that capital.

The oil companies are hopelessly inadequate bureaucracies in an era crying out for entrepeneurship. Moreover, they work relentlessly to make government bureaucracy useless as well. Which is another reason to hobble them sooner rather than later, as resource degradation (from hydrocarbons to the biosphere) increases the need for effective government.

Exxon Mobil or Saudi Aramco don't want people raising this issue. So they reward pimps who will argue that reserves are expanding and oil companies will be needed to exploit them until technological nirvana.

Be honest: Lynch was off by $5 as oil dropped to $34/bbl at the end of 2008, as a result of the global recession brought about in part by...... oil hitting $147/bbl. He will continue to prosper, as the US fails to develop its Plan B for peak oil, and allows the cretins running/ruining Wisconsin and Florida to reject high speed rail even when it is free.
Never fear, however, the Koch Brothers will continue to profit, the higher prices climb and the scarcer oil becomes.

"Koch adds life" (with the possibility of time off for good behavior)..

""allows the cretins running/ruining Wisconsin and Florida to reject high speed rail even when it is free.""

That's a good one......Sorry, but nothing is free in this Universe. All I see is wasted time. money and Energy, when it comes to high speed rail. Same bad story over and over, just different writers. There is so, so much wrong with high speed rail between Tampa and Orlando.....or any other route.

Another Bridge to nowhere.

The Martian

IIRC what was on offer in Wisconsin was 79mph rail, matching the top of the line in about 1930, and well below the 110mph briefly attained between Chicago and New York in the late 1930s before wartime austerity put paid to it. Whoopee. What was on offer in Ohio was apparently 39mph rail, which is simply less than unspeakable. And there was nothing much said about the "freight interference" that perpetually plagues Amtrak.

So, when they come back with real high speed rail, and get turned down again, then let's talk. Until then, why bother?

possom - If I recall the story I heard on NPR correctly if FL take the $3 billion from the feds the state is required to throw another $10 billion of their tax payers money into the pot. Derauls possum..details.

"Who would pay for that analysis? No one who wants honest hard analysis . . . just people that want to hear someone with an MIT degree spout the happy-talk."

Actually there are plenty of people who will pay for his happy talk. In my years of hiring consultants on energy for our business forecasts I learned that energy consultants pick niches to be successful. Many business people trying to sell their business plans up the line to corporate management need optimistic (read low cost) forecasts of energy costs. They return to Lynch and others of his ilk time and time again because if they used realism in their forecasts they would never get their plans approved.

Lynch has a very lucrative niche and he will not abandon it because it consistently brings him business. Has he been wrong on his forecasts - yes consistently wrong. But he is not paid for being accurate - he is being paid for being optimistic.

Don't assume that all energy consultants are giving an honest opinion. Many are, but Lynch has a strategic business plan - always forecast low energy costs. It pays.

Lynch has a very lucrative niche and he will not abandon it because it consistently brings him business. Has he been wrong on his forecasts - yes consistently wrong. But he is not paid for being accurate - he is being paid for being optimistic.

Don't assume that all energy consultants are giving an honest opinion. Many are, but Lynch has a strategic business plan - always forecast low energy costs. It pays.

Yep . . . just like housing appraisers that were paid to give home value appraisals that would get a loan approved. And look where that lead us.

I understand this effect but at some point it has to collapse (as it did for housing). Anyone who makes plans based upon analysis from Michael C. Lynch these days should practically be guilty of gross negligence. You don't listen to the guy who predicted $20/barrel oil in 2008 when it actually hit $147. You would have been much better off with just a straight line prediction of saying that it would be the exact same price 2 years hence plus inflation.

What does it take to get someone discredited out of being a pundit these days? Apparently it is impossible. When selling the Iraq war, that clown Bill Kristol famously said that there was no evidence of any tension between shias and sunnis in Iraq and thus that was nothing to worry about. A complete boner like that (which cost us hundreds of billions and thousands of lives) should disqualify him from ever making any foreign policy advice. Yet many foolish people still listen to him and he remains a highly paid talking-head.

"Anyone who makes plans based upon analysis from Michael C. Lynch these days should practically be guilty of gross negligence."

I of course agree with what you are saying Speculawyer, but in my experience many business decisions are made on an annual basis and to get a budget approved you may need very optimistic energy costs. And if you miss your plan because the energy costs were actually much higher you can always appeal to authority ("But Michael Lynch said so and he is quoted in the New York Times".)

In the long run he will be proved completely wrong (IMHO), but for now he will make big consulting bucks. And since 98% percent of the population still worships at the church of perpetual progress they much prefer listening to his forecasts.

What bothers me the most is that the NYT always turns to him for the WORD on oil. But I have long since stopped getting my energy education from them.

Quote of the day!

What does it take to get someone discredited out of being a pundit these days? Apparently it is impossible.

With Michael Lynch and Dan Yergin getting prominent media placement today, I thought it a timely opportunity to revisit my final word on them from August 2009: Reading Peak Oil Deniers Is a Waste of Time

And speaking of purchased over-optimistic analysis . . . hey look, a report that Shell purchased says they will create a ton of jobs, pay lots of taxes, and find more oil than Russia (currently the world's #1 oil producer) has if they get to drill for oil in Alaska! It must be true . . . right?

I like that a faith-based news service (my description of CNSNews) picked it up and ran with it.

I wish I could believe such stuff . . . it would make life much easier.

Well the CNSNews headline and article completely misstates what the Northern Economics/ISER report is about. The report says IF Shell finds a hypothetical 5 billion bbls and 7 tcf in the Beaufort, and 4.8 billion bbls and 7.8 tcf in the Chukchi THEN the economic impact would be 35,000 jobs, $72 billion payroll etc etc. However, the original report doesn't say a damn thing about how likely (or not) it is to find that much.

Shell is, of course, has spent a big pile of money for leases in the Beaufort and Chukchi and is now fighting for the permits to drill there. Thanks to BP in the deepwater GOM, getting those permits has become very questionable. They have had rigs and support vessels on contract for going on 3 seasons now to drill in the Beaufort, but so far have been denied permits.

The notional volumes used in the report appear to have come from previous estimates made by the agency formerly known as MMS (BOEMRE). Like all such estimates it is a wild assed guess made on limited data. IS there that much oil/gas out there? We will not know unless/until it is drilled. COULD there be that much out there? Sure. Shell now owns the Hammerhead and Sivulliq (formerly known as Kuvlum) structures. Both were drilled in an earlier round of Beaufort drilling and are believed to be at least in the range of 1-200 million bbls. There is still a lot of very sparsely explored area out there and Shell obviously thinks there is significant potential. The original report was commissioned by Shell and is clearly an effort to build support for drilling, based on potential economic impact. The CNSNews people spun it as meaning there definately is that much out there, and clearly they don't know what they are talking about.

Edit: fixed minor typo

Well I'm for more drilling.

But I really hate it when they spew misinformation to get support. The reality of the situation provides more than reason to drill.

On CNS . . .

Study after study by the Media Research Center, the parent organization of CNSNews.com, clearly demonstrate a liberal bias in many news outlets – bias by commission and bias by omission – that results in a frequent double-standard in editorial decisions on what constitutes "news."

Reality has a well-known liberal bias. They have to fight that.

But I really hate it when they spew misinformation to get support. The reality of the situation provides more than reason to drill.

I don't think Shell was spewing misinformation, rather it was CNSNews. That being said, Shell probably doesn't mind what CNSNews said. I'm sure that from Shell's perspective, anything that helps them get the permits is OK with them.

And I totally agree, the reality of the situation does provide plenty of reasons to drill.

I suspect that the optimistic projections in the report by Northern Economics were provided to them by Shell. Scanning the report it appears that it is only an update of a report published by them in 2009 and only covers the benefits accruing to the rest of the US (that is, outside of Alaska). So the recent fuss about the report is probably manufactured since most of the "data" is 2 year old news.

Stepping back two steps; if we are going to drill offshore doesn't it make more sense to drill off the coasts of California and Florida than in the Beaufort sea?

Stepping back two steps; if we are going to drill offshore doesn't it make more sense to drill off the coasts of California and Florida than in the Beaufort sea?

Florida lives off tourism and the Gulf spill nixed that. Same for California plus it is a deep blue state.

Alaska . . . that is way up thar. And their residents all get multi-thousand dollar checks from oil so they are always for it.

Florida lives off tourism and the Gulf spill nixed that.

And did any oil actually reach Florida? Maybe around Pensacola, but the rest of the state? It was mostly media driven hysteria. In any case, our ability to deal with an accident is far greater in Florida -or off California or the eastern seaboard than it is off the north slope, where seasonal ice makes ocean engineering almost impossible. The problem is the horrible PR image that oil got and retains in those states. In the meanwhile the environments ability to deal with a spill increases exponentially with water temperature. So a spill off Alaska is many times worse than one in the Gulf.

I don't know the numbers, but I bet if you find them Tourism is probably a greater percentage of the economy for Alaska then for Florida.

I don't know the numbers, but I bet if you find them Tourism is probably a greater percentage of the economy for Alaska then for Florida.

While tourism is an important and growing part of the Alaskan economy, oil is still by far the big dog in Alaska. We have wonderful things to attract tourists, but it is a very short season (Late May through August). For some odd reason, tourists don't seem to want to come up here in the winter? ;<)

The winter tourist industry is tiny. A few to see the Iditarod, a few skiers, and Japanese to see the Aurora.

Florida lives off tourism and the Gulf spill nixed that.

As the price of transportation fuels goes up, Florida will have to find something else to live off of.


The Northern Economics report clearly states that "The resource size estimates are from the 2006 BOEMRE Resource Assessment". Northern Economics just used that to make an estimate of economic benifits if those resources are in fact proven by the drill bit. Shell paid for the report because they want to make a case for drilling.

Shell certainly has their own internal resource assessment, which they used to make their bids for the acreage. However, because OCS lease sales are by compteitve sealed bids, Shell's internal resource assessment would be a very closely held secret. However, considering that Shell spent $2.1 Billion in the Chukchi sale, we can assume they see a lot of potential.

In the end, pre drill estimates are just that...estimates. We won't know what's really there until they drill. That holds true for California and Florida as well.

In the end, pre drill estimates are just that...estimates. We won't know what's really there until they drill. That holds true for California and Florida as well.

California definitely has oil off Santa Barbara. If it wasn't for that 1969 spill, I'm sure they'd be drilling away (actually, it would probably be all gone by now). But considering the state of the budget, the time that has passed since 1969, and the current price of oil, I'm almost surprised that we haven't started drill again. I predict that there will be drilling off the California coast within the next 20 years.

The beaches down there are already kinda mucked up from natural oil seeps. They might as well just go ahead and drill . . . it would help with the budget deficit.

But considering the state of the budget, the time that has passed since 1969, and the current price of oil, I'm almost surprised that we haven't started drill again.

I had the impression they were about to loosen up a bit, also Obama had been pursuaded to allow some new drilling off Florida and the East coast. Then BP spoiled the party, ans totally poisoned the political lanscape offshore drillingwise.

Of course California gets zero royalites from oil. And our absurd state constitution makes it almost impossible to raise any. So you can't blame Californians for not wanting the corps to extract their oil for free.

We would get no royalties at all? That makes no sense. There will never be any drilling here unless we get some money out of it.

But yeah . . . there was some talk about re-opening drilling off Santa Barbara . . . then the Deepwater Horizon blew up and that just ended it completely.

spec - close to the shore (probably out to about 3 miles) CA owns the mineral rights and gets 100% of the royalty. Beyond that is the OCS. I'm not sure what the split is but the states now get a portion of the fed roylty. And there is the economic boost from any business expansion in the state. And they get to tax it.

IMHO if the CA public doesn't want drilling in state waters that's their privalege. But the OCS minerals belong to the rest of the country.

Of course there is value in just having oil, but it would go to the open market, not just the CA or US.

I think it makes perfect sense to delay all drilling in the US for environmental concerns, cornucopian reasons, political infighting, or however else it can be done. The goal should be to NOT drill until the most painful shortages and are in the rear-view. Then the oil will be worth something.

Paleo - Offshore U.S. oil production cannot be exported by law. True: that oil can be shipped to any refinery in the country but it costs a lot more to ship it to Texas than a CA refinery. This gives the CA folks an economic advantage that would result in more gasoline in the CA market. More of any commodity in a market tends to lower its price.

I agree with your sentiment about preserving any asset until you really need it. But the timing is critical. Just an estimate but if Monday morning CA and feds turned the entire oil patch lose to drill as much as they wanted it could easily take 15 years, or more, before we could see max development. So maybe you might not think we need to move forward today. But do you think we’ll need the gain in 10 years? 15 years? 25 years? As in most situations timing is critical. Maybe in 2015 you’ll think it’s time to pull the trigger. But remember it could easily 2025 or beyond before we would see any significant impact.

Thanks, Rock. I did not know that. Not that it much matters given the ration of imports.

My take is that 20 years is a good date to target. Say, start in 2020 or 2025 for a bump up by 2030. No reason to use ANY until after the hardest phases of the crash, and by then what's left will be valuable for uses other than motor fuels.

I actually think the military will be the ones to sequester some future reserves, and control the access to public lands and OCS drilling.

I think CA will drill soon, esp. when we have this next mega-spike. I cannot believe they would turn away the money given their problems.

This is the problem as I see it currently. Maybe it reads like a rant. Sorry but it is likely the hold up.

I wish there was a campaign out there to go into gory detail how the safety of Off-shore is going to be maintained. Why in the world did BP go out and do the very worst job it possibly could and throw a wrench into the whole thing? Did they plan on it so they then could brow beat the government because the gov't has to hold back permitting? What did they think was going to happen? We are paying a lot of money in investments and premiums (profit margin) to BP. Well pony up, or just flat-out get out of the business! Go away already. Let Chevron or Exxon do the job. it would make me feel better if BP never drilled again or they relieved the company managers of their jobs. But leaving the reckless at the helm is kind of asking for it. No?

BP like the banks that peddled the housing market scam should have failed -- they were only saved by limited liability --and that is why they get to risk the world around them when they drill without using their heads.

Their recklessness can only be blamed on themselves -- their management -- on Wall Street pressure to make money that is so obviously risking a major accident. (Play a bad poker hand enough and you will lose). I am not just talking about the errors leading to the spill. I am also talking about the lack of systems to contain a spill when it happens. That was sad -- considering all the money they have on hand.

Now someone assure me that the industry understands that they actually need to get the oil into a pipeline and not release tons of it into the ocean. Cause that is not entirely clear yet. Once they understand how to do that maybe they can drill in more sensitive areas. Until then, sorry but screaming that they are being obstructed by the President or Senator X is kind of a silly argument.

They obstructed themselves -- pure and simple.

End of rant.

I really liked that rant Oct - pretty much agree with everything you said.

The thing is you are trying to apply your completely logical line of thinking in a current environment harboring an absolutely morally bankrupt economy completely blinded by predatory greed. Entities such as BP et al. are perpetually egged on by a populace and media that throw temper tantrums when gas prices fluctuate a few cents - nevermind the significant change that would be required were the actual "cost" of these escapades actually priced into the "market".

In no other world than the completely delusional one we now inhabit would it be considered ridiculous that access to drilling in the GOM be shut down after one of the worst spills in history... but that is what we are now witnessing - a line of thinking that says the poor oil companies are the victims of the mean old government and unneccesary regulation - less than a year after it became all too clear that the gov't wasn't nearly mean enough and that the regulations (or enforcement) were WAY too little too late...

It truly is the Twilight Zone - USA version 2011.

I agree. Michael Lynch seems to be taking a lot for granted with the Saudis. Where and how large are those fields? Why have they not brought at least one or two online to keep their production up and help the economy. They don't have to crash oil prices. Lynch is full of it. They peaked in 2005 and have done nothing to increase their production despite prices doubling since then. Besides, what happened to the agreement that we would protect them and they would keep us in cheap oil.

Another question to ask is: Why are the Saudis spending a fortune to prospect for oil in 1200m water depth in the Red Sea, under 1000's of feet of salt, and doing that with great urgency? The award of the exploration contracts was based on the ability to deliver the data quickly, in support of near-term drilling plans. Why on Earth would they be rushing to do this and throwing tons of money at it if they were sitting on a bunch of easy, cheap oil that could be produced with much less risk?

Someone should ask Michael C. Lynch for a list of these 70 untapped major oil fields.

Searching the internet gives for example:

Oil has been produced worldwide for well over a century, and more than 40,000 oil fields have been discovered.
Of the known discovered reserves of these fields, estimated at 2.4 trillion bbl - 94% are concentrated in fewer than 1,500 major fields defined as those with more than 100 million bbl of ultimate reserves.

For the US, the tally exceeds 30,000 oil fields, of which roughly 300 are majors with 80% of total US reserves. The North Sea has 265 oil fields of which 90 are majors that account for 80% of total reserves. Saudi Arabia has 96 oil fields.

Worldwide, the top 100 oil fields account for 50% of current production and 65% of reserves.

More than 90% of the world's oil fields are classified as small and hold just 3% of reserves. A small oil field is defined as one with less than 25 million bbl of reserves.


This is very important information for understanding Peak oil. The production pyramid can also be found at: http://hubbert.mines.edu/news/Simmons_02-1.pdf

Let's say that KSA's producing giants contain 80% of their oil.
Westexas points out similar information for the North Sea: fields that started to come on stream past peak produce less than 20% (1 mbd versus 6 mbd peakproduction).

Rune Likvern has a special thread on the IEA’s International Energy Statistics which came out a couple of days ago with the production data for November 2010. But I would just like to make a couple of comments here giving a general overview of the data and in particular mention Russia, which I have been tracking closely and reporting on Drumbeat frequently.

World Crude + Condensate production was up 215,000 barrels per day to 74,256,000 barrels per day. That is still 430,000 barrels per day below the record set in July 2008.

The big gain came from Canada, up 226,000 bp/d. Other gainers were Brazil, up 91,000 bp/d, China, up 82,000 bp/d, Kazakhstan, up 60,000 bp/d, and Saudi Arabia, up 100,000 bp/d. The big surprise to me was Russia, down 332,000 bp/d to 9,484,000 bp/d. This contradicts what had been posted on CDU TEK, Russia’s own web site of energy production. At this web site they only give daily production numbers and not a monthly summery, at least I cannot find one. But I had been tracking their daily production numbers on this site and had them setting a new production record in November, up about 15,000 bp/d from October.

I simply don’t understand this discrepancy. The data on the Russian web site is all liquids but I have a formula which I convert it to C+C and is usually pretty close to what the EIA reports. The EIA has Russian all liquids down by the exact same amount as they have Russian C+C down.

All Liquids production set a new record for one month at 87,309,000 bp/d, up 474 from October.

Ron P.

Russia's oil figures are always strangely high.

I can't find where IEA breaks out oil from NGL. Do the Russians count NGLs as oil?

If you want something to really worry about it would be peaking of Russia's natural gas production.

In 2009 Russia was the world’s second-largest natural gas producer (19.3 Tcf), second only to the United States (21Tcf), however, Russia was the world’s largest exporter (7.3 Tcf).

Russia’s production decreased in 2009, falling by more than 4 Tcf or 17 percent year over year. The decrease in production led to a lower natural gas exports during the year, as well. At 19.3 Tcf, Russia’s production reached the lowest level since 1992.


Production fell sharply in Russia (-74.2bcm) and Turkmenistan (-29.7), in each case the largest decline on record. The US recorded the largest increase in the world for the third consecutive year.


Seems to me this is a severe problem so why hasn't TOD reported on it?

I can't find where IEA breaks out oil from NGL.

I don't follow the IEA data. Did you mean the EIA? If you did then just click on the arrow beside "Total Oil Supply" and bring up the drop-down. Then click on "Crude Oil including Lease Condensate". Then click "Update".

Do the Russians count NGLs as oil?

When I started tracking Russian production back in 2008 they did. Here is what I copied back then:
Crude Oil&Liquids (000 t) 13/03/08 And I never noticed any changes. But just now as I check the header is now: Crude Oil&Condensate 24.02.2011, (000 t) Funny, I never noticed when they changed that. Glad you asked or it might have been awhile before I noticed that they had changed the header.

Ron P.

Russian data is pretty strange just because of the transition of Soviet Union to Russia.

This has been discussed on TOD before. The Russians claim that they reduced production voluntarily because their storage was full and they had no market for their excess gas. Charts from Simmons posted at the time attempted to show that Russia was in involuntary decline and they had been playing storage games to cover up - until they ran out of storage and shut off most of Western Europe blaming it on a dispute with Ukraine.

The late Dr. Bakhtiari also claimed that Russian gas was about to peak.

Reported Russian production has rebounded since then but is still not back to its previous high.

Russia's oil figures are always strangely high.

That's because some people decided, I don't know based on what, that Russia's URR is about 210 Gbarrel. This is in spite of the fact that Russia's peak production in the 1980s, excluding the other USSR republics, exceeded that of the US which is assumed to have a URR of around 220 Gbarrel. In fact, Russian production during the 2000-2010 period also exceeded the US peak. Maybe the URR is closer to 300 and there is nothing strange about the "high" sustained production.


At this web site they only give daily production numbers and not a monthly summery, at least I cannot find one.


there's a page on the site (in Russian only) which allows you to order detailed monthly reports but only at considerable cost to your credit card...

Mazama Science has been harvesting the CDUTEK daily data since December 12, 2010 and we will put it up in a databrowser some time this spring. So far, no exciting stories are visible in the data and any trends are confounded with weekly fluctuations and seasonal cycle. Still, it is interesting to see the breakdown of oil or gas production by company and I am hopeful that any trends will become apparent as we gather enough data.


The big surprise to me was Russia, down 332,000 bp/d to 9,484,000 bp/d. T

A surprise to the IEA as well it seems who don't agree with the EIA. Here's the IEA's figures for Russian Total Oil Supply

    Oct   Nov   Dec   Jan
IEA 10.58 10.55 10.49 10.54
EIA 10.26 9.92  N/A   N/A

So why the EIA thinks there was a big fall in November is strange.

EDIT: Did the EIA forget that November has one less day than October perhaps and divide the month total by 31 instead of 30?

Did the EIA forget that November has one less day than October perhaps and divide the month total by 31 instead of 30?

Not likely else all other producers would have been down by a similar amount. Most were up instead.

The EIA has, in the past, sometimes made some really bad boners. They would correct them later or else next time around. I suspect this may be the case here. At any rate we will know by this time next month.

Ron P.

Because someone's got to get their hands dirty answering these peak oil deniers:


I'll even give you today's theme song too.


With The Oil Drum running fewer posts, and Libya being of great interest, there are a lot of posts that are running elsewhere that don't make it over here. Posts I have run on Our Finite World this week include:

WSJ, Financial Times Raise Issue of Oil Prices Causing Recession

Why all of the concern about Libya?

There is No Steady State Economy, (Except at a very basic level)

Dave Summers (Heading Out) has a new post up on Bit Tooth Energy called

Libya, oil production, OPEC response, Saudi Arabian capabilities and the SPR

Earlier this week he wrote:

Revolution, the Threat to American Imports.

Robert Rapier continues to write at R Squared energy blog. His posts this week include

A Closer Look at The Commission Report on the Deepwater Horizon Disaster

Due Dilligence: How to Evaluate a Renewable Energy Technology

Some of the above posts may eventually appear on The Oil Drum.

Also, Luis de Sousa and I were on This Week in Energy this Week.

As these "MENA" countries each go through political turnover, they temporarily postpone oil exports. Most of this oil will still be exported in the future, because whoever takes the leadership of these countries will still want the money. IMO, this reduces the slope of the depletion curve. Or is this just more undulation in the plateau?

My thought to, saving MENA oil for the future, just like back in 1973 and 1979. The next libyan dictator will be a happy one.

But what we are talking about here is a few million barrels a day. When global daily production have fallen say 10 million and keeps falling, I am not sure it will make such a big difference in our daily lives.
Just my two pennies.

It depends on how long it takes these countries to get back. If any of them end up like Somalia, it could be a long, long time. It depends, too, on what kind of condition the rest of the world is in when they do get themselves back up.

Dictators don't allow any meaningful opposition to form, and there may not be any legislature with any power. So without the current leaders, there can be a big vacuum, that is not easily filled.

So without the current leaders, there can be a big vacuum, that is not easily filled.

And when filled, the structural problems remain: high foodprices and unemployment.

Was wondering when this would happen:

9:35pm The reports that protesters, armed with weapons from abandoned security installations in Beghazi, vow to march on to Gaddafi's palace in Tripoli. Writer Adrian Blomfield says that many in Benghazi are afraid of "the retribution Mr Gaddafi will unleash on them for their rebellion if they fail to complete their mission and force him from power".


It might actually be a positive for the country as a whole if those tribes in the East liberate those in the West - could be a turning point for unity?

Robert's post, Due Dilligence: How to Evaluate a Renewable Energy Technology is incorrectly titled. It should have read How to Evaluate a Renewable Energy Technology for Liquid Fuels. There are other ways to make use of renewable energy sources besides those which provide liquids of the sort which are useful for transport and there are also ways to provide transport which do not require liquid fuels. Then too, his analysis is based on economic calculations and the usual cost figures for fossil fuels ignore the fact that those primary sources are already stored, thus no cost for that storage is included in the numbers. For most other stand alone renewables, such as PV or wind electricity and solar thermal, the storage costs are usually part of the calculation of the system cost. Another example is biomass, where the production tends to be seasonal and very local, while the use is often spread over a year...

E. Swanson

Thanks for saying this, BD.

I would really appreciate titles that Mention "RENEWABLES" to be very clear about such distinctions, as there have been so many broad and inaccurate swipes taken at the whole gamut of RE, when an author is only referencing one portion of it in argument.


(of course, I'm probably a little oversensitive.. I scowl at my Browser's tendency to underline the very word "RENEWABLES" as a misspelling whenever I type it in. I suppose it is improper to pluralize an adjective, but sheesh, aren't there other common exceptions in these word check engines?)

"Then too, his analysis is based on economic calculations and the usual cost figures for fossil fuels"

That is completely wrong. I don't know how you could have read the article and come to that conclusion. While I used several liquid fuel examples, the vast majority of the techniques I detail are perfectly suited for any sort of energy - renewable, fossil, liquid fuel, electricity. It is all about the art of separating hype from reality by burrowing in and figuring out what has actually been achieved versus what is more or less speculation. I am not doing economic or cost calculations; I am telling you how to get to the bottom of what is being claimed. It doesn't help to do economic calculations if you can't even verify the claims.

Behind the WSJ paywall, but viewable via Google:

Saudi Alone Can't Reverse Oil Rise

Saudi Arabia's ride to the rescue of global oil markets may be hobbled at birth. The kingdom may have plenty of spare production capacity, but its oil isn't as high-quality as Libya's. So while Saudi willingness to ramp up output has taken the froth off headline oil prices, a full reversal of the sharp rise this week is contingent on a more settled outlook for Libya.

In the link supplied by Vaporlock up thread, Francisco Blanch mentioned the fact that Saudi does not have any spare capacity of light sweet crude like the API 40 very low sulfur Libya produced. Becky Quick said yes but they said they could come up with a mix and get it on the market. Implying that they could mix the very heavy high sulfur stuff and get it up to the quality that Libya produced.

That made my day. ;-)

Ron P.

Unfortunately, I can't find the link but a Saudi official earlier in the week was saying exactly that, he was saying that we can mix the supply to provide the light oil the world needs.


Curiously, despite the announcement by KSA of increasing oil output by 700,000 bpd, Mideast oil shippers did not – repeat NOT – yet arrange to have more supertankers available in the next 10 days. On the other hand, it is possible that KSA did increase output – it just did not make its way yet from the oil fields, through pipelines, up to port storage facilities and down unto tankers. It is even possible that shipments will be made in small tankers, typical of those that must transit the confined space of the Suez Canal.

Note that the amount of money KSA will earn per year by increasing output this much roughly equals the additional amount of money KSA is giving away to its citizens this year.

So in sum, while KSA may really be on its way (eventually) to producing more (sour) oil output, it doesn’t look like KSA will be able to support the increased US need for quality oil imports, to make up for oil import losses elsewhere (even increased supplies of Canadian lower quality oil flowing from the oil sands by pipeline into the US Midwest is not going to help eastern US refineries geared up for higher quality oil).

Michael Lynch's message has remained consistent over the past decade in every respect except one: he is no longer predicting $15/bbl oil within a couple of months.

Recognition of peak oil raises fundamental questions about the dispersion of benefits from the remaining oil including very significantly the ownership of the accumulating investment capital accruing from the sale of the depleting reserves. Hence, Lynch and his ilk always argue that reserves are expanding and destined to expand until it no longer matters. It is their job to, pre-emptively, frame debates over issues such as wind-fall taxes, depreciation allowances and so forth.

There's gold in the services end of the oil extraction industry.

Most of the people who got rich in the 1849 California gold rush, were selling pick axes.

Pick axes, whiskey, and women.

Mr Lynch keeps moving the goal posts fairly regularly.

First he talks about reserves, then about surplus capacity, then about EOR, then about unconventionals, now more recently about drilled holes.

What next? Biodiesel and abiotic oil?

I really would love to believe him, but it's so difficult, when he doesn't use any credible numbers or data sources at all.

I wish he was right, but like H. Kahn used to say:

"We must appreciate these possibilities. We cannot wish them away. Nor should we overestimate and assume the worst is inevitable."

But I digress. Anybody who reads Lynch does that on his/her own peril.

Lynch is to peak oil, what Inhofe is to climate change. At the extreme fringe of denial.

I had the great pleasure earlier today of sending an email to Inhoff to tell him he is an idiot. I attached a recent news report:

"Federal climate scientists whose e-mails were leaked in the debate over climate change did nothing wrong, concludes an investigation by the U.S. Commerce Department's inspector general."

Inhofe requested the investigation.

Really, Really Cheap Oil!
Forbes, Oct 2, 2006
Gasoline for $2? Michael Lynch says those good old days are just around the corner.

Don't sell that SUV just yet. Oil, at a recent $66.50 a barrel, will fall to $45 by mid-2007 and could dip briefly into the 20s in 2008. Sometime next year you are going to see a $1.95 price on a gas pump.

So says Michael C. Lynch, 51, president of Strategic Energy & Economic Research in Amherst, Mass. He swears he hasn't been inhaling fumes. His reasoning: New supply, coming online from all corners of the world, is more than ample to satisfy growth in demand and sufficient even to withstand an embargo against Iran, which produces 3.75 million barrels of oil a day. Lynch argues that the threat of disruptions--nuclear brinkmanship, war, terrorism, hurricanes, pipeline corrosion--has larded oil prices with a $20-a-barrel risk premium. As these perils recede, oil prices will fall.

No SEER, just a False Profit.

Thanks for posting this. It does leave one wondering if Lynch has burned his bridges with the pipeline industry association, who seem, at least now, to want to calm concerns about pipeline corrosion, rather than highlight the problem.

Damn . . . I didn't see that someone already mentioned this article. Well, at least I added context.

From that article Really, Really Cheap Oil

Lynch calculates that global production capacity will expand by a net 2 million bpd this year and 3 million bpd in 2007...

That capacity should cover a supply disruption from virtually anywhere in the world, helping to push down the price of oil, Lynch believes, to $45 a barrel by the second quarter of 2007.

Crude + Condensate production was down 290,000 barrels per day in 2006 and down another 444,000 bp/d in 2007. All liquids fared a bit better. Production here was up 65,000 bp/d in 2006 and down 118,000 bp/d in 2007.

Ron P.

Re: Iran sells more oil as Libyan exports dwindle

I doubt that there is going to be any embargo against Iran. Politics is politics; but business is business. When supplies get tight, Iran can sell more.

Ship brokers and agents say Iran has at least 20 million barrels of crude, mostly Iranian Heavy, at sea in 10 VLCCs and up to another 20 million barrels in shorter-term storage.

This is the Matt cartoon in the UK's Daily Telegraph... just about sums it up!


A better cartoon would be about how the media forgets about the high world (not WTI) oil price before the Arab awaking that began in Egypt. It's always some excuse other than resource constraints.

In the snippet of the Reuters article about the control of Libyan oilfields, this line jumped out at me..

" If oil contracts were unfair or based on corruption, however, the interim leadership of Libya's second city Benghazi said they reserved the right to renegotiate them. "

Just harkening back to why some don't feel comfortable with actual democracies in place, be it the MidEast (1953 Iran, for example), or the MidWest and collective bargaining. I'm sure Aristide could tell some stories about G8 resistance against (Other) people having the opportunity for balanced negotiations between equally represented parties.

"A managed democracy is a wonderful thing, for the managers.." R.A. Heinlein, The Moon is a Harsh Mistress

No worry, light sweet crude is very fungible. ;-)

Thanks. That's excellent. And apt here in Thailand.

"A managed democracy is a wonderful thing, for the managers.." R.A. Heinlein, The Moon is a Harsh Mistress

How big does a new GOM oil play have to be in order to justify a $500 Million drilling rig?

I mean, the company I work for, keep making more expensive tools (drawworks, top drives, active heave compensators, etc.). Therefore, the price of each new rig, designed to go where no rig has gone before, has to be more expensive.

At the same time, the oil plays are getting smaller.

Your comment might not strike many members on this thread but I'm thinking the same thing right now. I work in Deepwater GOM and I'm seeing companies like Ensco/Pride, Transocean, Seadrill, major service companies and others getting ready like something big is coming in the gulf. They keep stating that they don't see many deep water permits coming but their actions don't follow their words.

For example the rig that I work on just gave a full round of raises one week ago to all the hands, because they had recently lost many employees to the competition, now this same company that had massive layoffs just a few months ago and just last hitch(two weeks ago) they were still laying down the law and telling the employees that "it is my way or the highway". WTF? I know it's the oilfield but, Have these people lost their minds? In a matter of two weeks we went from full freak out mode "cut cut cut because the end is near" to full freak out mode the other way "please don't leave and here's your new pay scale". The kicker is that nothing changed, our rig still doesn't have a new customer or a new contract and company wide nothing much has changed. BUT upper to mid level managegment from all these companies must be seeing something coming sooner than later, but what?

We need a GOM/BOEMRE deepwater thread.

wildman - I may have a partial explanation for the kiss they gave you: in my onshore ops I won't sign a drill rig or workover contract w/o seeing the resume of every hand. A combination of good hands being laid off a while back and the boom in the Eagle Ford Shale drilling: it's getting very difficult to get good crews. Just last week I had one drilling contractor bid with the provision he wouldn't start drilling for a month while he trained new hands. I told him to not bother bidding on my wells until all his hands had at least 6 months experience. And then it would only be a maybe.

Screw up on an onshore job and it might cost me a few hundred thousand. Screw up on a DW job? You know better than me: who wants the be the next BP? And besides the potential for cost over runs I've never had a hand killed on any project I managed. I'd like to retire with that record intact.

TOD folks, Rockman and all TOD members I enjoy reading the commentary on this site. I haven't found a place to contribute since the DW Horizon issue has been off the news cycle, but I work in the deep water GOM and I live in South Louisiana so it's all we think about. We want our cake and we want to eat it too in my neck of the woods and if more people in my industry thought like Rockman, we could do that for the most part.

In saying that, our federal water drilling regulatory body with a new name is just as incompetent as they were under the old name. The only difference is that they are scared to give out drilling permits. They have morphed from being a useless arm of industry into a useless bureaucratic agency much like the Army Corps of Engineers. For people not from south Louisiana please know that the USACE comparison is an insult.

Now I think that there are some reasons that a Deep Water drilling permit may be on the way for the GOM. One reason is what high gasoline prices could do to Obama and Gulf coast democrats politically, they have to appear to be trying to help the situation. The other reason is the containment contraption built by the consortium of five oil companies has been released for approval, which was a major prerequisite for getting a DW GOM permit. The other thing is that federal Judge Feldman of New Orleans ruled that a permit had to be released in thirty days or the administration would be held in contempt. I don't think the Obama administration wants to risk a loss in court if the case goes further up the judicial fod chain.

I am not an oilman or anything of the sort. My feeling was that the industry needs to self-regulate their oil drilling and clean up efforts (in case of a spill) to the point that the Feds do not need to intervene so much. Problem is that one BP problem makes it a political nightmare for the President. If he quickly re-issued permits and BP Part II happened then he is finished. If he acts careful and gets industry to make a spill preventer device (whatever it is) then he is more immune to a future spill. Because if the spill preventer fails to stop a gusher then industry can be blamed for not making a good enough fail-safe device.

I think more drilling will happen but the politics are not easy. Plenty will be mad one way or the other. He will try to ride the center and likely make 100% of the people mad. LOL


Boy I called that one. The first GOM deepwater permit was approved. I wouldn't have ever thought it would have gone to Noble Energy though!

Well damn. It's been a while since I've something that informative and that funny.

By-the-way, just because my head works this way, do you guys use any computerized controllers on your rigs? You know, like the kind built by Siemens? And would they perhaps be hooked up to a network, with PCs, etc? Just thinking about all the fun a malcontent could have with a derivative of Stuxnet (the worm that took out a bunch of Iranian uranium isotope separation centrifuges).

At one point the live feed from Macondo "Down Hole Camera" showed clear indications of multiple use of pirated software (links to pirate bay files plus the pirated apps themselves on the desktop which appeared for a time) by a major contractor working for BP. Do I think their control systems are any more "safe"? Hell no. But that's not unique to the oil industry.


What I understand of Stuxnet, it was specifically set up for centrifuges using Varcon VFDs. I believe it would take quite an expert to change it to fit the oil field equipment. The down side is, there are rigs running Siemens switch gear and Varcon VFDs. The positive is they are normally stand alone except for ehawk which is a dedicated line back to base for trouble shooting. Of course there is always the USB route.

Lets hope our techies don't get too pissed off and have too much time on their hands.

Rockman, have you ever received the kind of pressure that BP allegedly put on their contractors to cut corners and finish the job quickly because of budget issues? There seems to be strong evidence that this contributed to the kick/blowout/explosion/leak.

Are guys like you able to tell biggies like BP to go to hell - and then move on to another opportunity if they try to push you to cut corners on safety issues...and not get blackballed?


You have to somehow generate the amount required for investment in the massive devises from the piddling amount of extraction from the very small oil plays. It is this conflict that puts an end to production. I don't think this end looks like the right side of a Hubbert Curve, either. If prices don't rise high enough to cover the cost of these high priced devices is small field, all we will have left is what remains left in low priced fields, and I am guessing this is not a lot. Perhaps it looks like "total crude oil from currently producing fields", plus a little Natural gas liquids and a little unconventional oil.

eastex - the good news is that a drilling contractor doesn't have to drill one new discovery and he can still make a nice profit. He gets paid the same whether the well is successful or not...he doesn't get any of the grease. You probably already know that. His profit is determined by the day rate he can charge and how many days out of the year he has the rig contracted out. During a boom time folks see a contractor charging $700,000/day just for the use of his rig. And think he's making a huge profit. Maybe...maybe not. He's making a great cash flow but that isn't profit. Think about the interest he's paying on the $500 million loan. And then there's the principal payment and daily over head. And then what about the times when rig demand goes down and he's only getting $250,000/day? And what about the down times when he would only be getting $250,000/day but he's getting nothing because the rig is sitting at anchorage not working for 8 straight months?

Making money building and leasing rigs is a very different business than drilling for oil/NG.

I do understand much more detail. I was just trying to make a simplistic 10,000 foot hypothetical question. In truth, it doesn't really matter that there is a middleman (drilling contractor), the BANK still has to look at the big picture and decide to invest or not. I think it will become harder and harder for a drilling contractor to make his case to the bank that he/she can pay it back, even if he/she got one little contract in the GOM with a nice starting day-rate.

P.S. Did I mention that our spare parts business is booming? The days of friendly discounts are over. This has a knock-on effect to those day rates.

eastex - I know what you mean about the bankers. I think folks will be surprised to not see many of the oil patch components expanding very quickly despite high oil prices. Companies, investors and banks have been burned too many time by booms that didn't last long enough to recover costs let alone make a profit.


That wouldn't be "No Other Vender" by any chance?

How can the Huffington Post allow people to print outright falsehoods?
Don't Worry about the Oil Prices: it is pure trading speculation, oil companies racketeering and ignorance

Most oil contracts are at fixed price formulas based on long term parameters. The part that is trading market is less than 10% of all oil supply. So why would we have an increase of the price at the pump? Because oil companies specialize in consumer racketeering, as do the banks. The impact on the gas prices should not exceed 1%. Instead, we now are suffering a 10% increase.

What this guy is saying here is that 90% of all oil is based on long term contracts at a price that was fixed way back when the contract was negotiated. This differs radically from what the EIA publishes in its This Week in Petroleum. According to this document the average contract price changes every week as WTI, Brent and all the other benchmarks move up and down.

So this guy is asking: "So if 90% of the oil on the market is fixed by long term price formulas, why does the price at the pump go up every time the benchmarks go up?" Well perhaps you are wrong dummy!

Ron P.

Ron - Good points but there's one more. I don't work in this area but most long term contracts have prices based on a benchmark adjustment. For instance I may contract to buy oil from the XYZ Co for 12 months at a price of WTI - $8. Or maybe Brent + $4. Maybe not all contracts are written like this but I believe the majority are. So I may have bought my fist monthly load back in oct 2009 for $75/bbl. But now my contract, which hasn't changed from the day I signed it 10 months ago, requires me to pay $102/bbl.

There are a number of reason these benchmarks exists. This is one of the most critical. It allows forward contract purchases w/o having the gift to see what market prices will be many months out.

FOR ALL: From up top: "Opposing view: More drilling won't help"

Absolutely false. Most have heard me whine about such statements before so I won't bore you again. Drilling in the U.S., when done responsibly, is a great benefit to the economy on many levels that I've explained before.

But: NO... MORE DRILLING WILL NOT CHANGE PO SIGNIFICANTLY IMHO. Sorry to yell but often responders don't hear me when I speak in a calm voice. Many on both sides of the debate throw out so many red herrings and strawmen it gets frustrating and makes it all the more difficult to carry on a sane discussion.

I posted this comment to that HuffPo article:

In reality, the amount of real analysis that has gone into oil depletion analysis is close to zero. Economists do not believe in applying constraints to their analysis, preferring to believe in technical breakthroughs to provide a smooth transition to new forms of energy. Geologists don't write about it either for some odd reason. The real analysis is in a book called "The Oil ConunDrum" that I wrote, free online. The level of discourse is well above that of classical economics because it relies entirely on models of oil discovery and extraction from a finite resource pool. You won't find anything like it anywhere else.

I will let you know if it actually gets published pending approval. Most of the time my HuffPo comments on oil don't get approved. Apparently it is OK for people to spout short opinions w/o any weight, but the minute they see an embedded link to some real analysis, they delete it. I think they are trying to prevent spam marketing or people trying to sell their wares.

the minute they see an embedded link to some real analysis, they delete it

Actually, "they" don't ever see it.

A computerized spam filter automatically deletes it.

The reason is time budget.

If they had to click on every questionable hyperlink, and review it, and review the hyperlinks inside it, etc., "they" could never finish moderating the thousands of comments they get.

So the computer deletes it without anyone ever looking at it. Sorry.

That's why I have learned to stop putting in links. This one actually got published.

I still think they actually review a certain set of the comments manually because there is often a long delay. A spam filter would do that on the spot and there would be little delay.

I believe each HuffPo author can decide to have moderation enabled or not. The energy analysts like Learsy always have moderation enabled and so you see relatively fewer comments. For example, this piece only has 2 comments so far, mine and another person's. Yet another topic could have close to 10,000.

I think it is better to get one published in a crowd of 2 than a crowd of 10,000 because it might actually stand out. You just have to be crafty on how you get past the moderation phase.

If the average contract price changes constantly, how does that contradict the idea that most prices are based on long term contracts? I don't know the answer one way or another but I am not sure that your post necessarily contradicts the idea that long term contracts rule. For example, it is quite common in the propane business that one can enter into a long term contract at a fixed price or take one's chances with a spot price. Is the oil business that much different?

Those who bought fuel efficient cars years ago or do very little driving are not all that concerned about higher gas prices. Personally, I welcome them and hope they are permanent.

ts - Were you asking me? I'll answer any way based on my limited knowledge. Yes...I think most oil is sold on term contracts. But it seems the implication from Huffington was that those oil costs thus don't change. As I described above they can change radically as per the specs of each contract.

An very day example many might understand: do you have an electric utility provider that offers a fix rate over a period of time? We do in Houston and some years ago folks flocked to them when we had an elect. price spike. They were happy until a while later they were paying more than the market price. Companies can offer deals like this because they cover themselves by buying futures. So they know exactly what they'll be paying for the elect. in the future and thus how much profit they'll make off their customers. Prices go down and the utility company still makes the same profit...but their customers pay above normal rates. A lot off p/o customers who didn't understand they were betting in the futures market. And like all futures trading there is loser for every winner.

BTW: I'm with you 100% on the higher fuel costs. I get 23 mpg and do drive 50 miles r/t daily to work (and around 20,000 miles/year). OTOH I make a living selling oil/NG. Strange bedfellows, eh?

Tstreet, see Rockman's post above. Of course there are long term contracts but not at a fixed price. But there is a way of getting a long term contract at a fixed price. It is called hedging. That's what hedgers do. That is what is happening in your propane case.

Although: NYMEX Propane Futures In September of 2009, the New York Mercantile Exchange delisted the propane futures contract. Since propane gas is a by product of natural gas and crude oil, following crude oil futures and natural gas futures can give you the general trend of propane prices.

In other words one can still hedge propane prices you just have to do it with oil and natural gas futures, weighted heavy on the natural gas side I would suppose. But if you, as a propane buyer, decide on a long term fixed price contract but do not hedge, you simply contract with a hedger.

By hedging, that is buying or selling at a long term fixed price contract with the aid of the futures market, you guarantee yourself a fixed price and will not suffer if the price rises dramatically. But you still must pay the contract price even though the price might drop dramatically.

It is called hedging, guaranteeing a fixed price via the futures market. Guarding against any dramatic losses but also giving up any chance of windfall profits.

Ron P.

Thanks to both Rock and Darwinian for the clarification.

Most oil contracts are at fixed price formulas based on long term parameters. The part that is trading market is less than 10% of all oil supply. So why would we have an increase of the price at the pump?

I think the author of that phrase is suffering confusion about how contract law works. The price in a contract does not have to be a fixed amount, it merely must be a sum certain.

A sum certain is a specified and set amount of money owed by one person to another. It is a legal term of art, having specialized meaning in the law. Some kinds of legal claims can not be brought at all unless the sum certain can be plead. A document claimed to be a negotiable instrument can not be negotiated unless it is for a sum certain.

A price like "WTI - $8" is not a fixed amount but it is a sum certain - on any given date you will know the sales price, although it varies - so the contract will be valid. The key feature, though, is that the contract price is determined by the free market price. That's one of the key functions of crude oil benchmarks - they determine the sales price on a lot of sales contracts for crude of different qualities trading in places far removed from the trading hubs.

The author doesn't understand that so he operates on the assumption that anything he doesn't understand must be illegal. It's not illegal, just rather arcane.

The author doesn't understand that so he operates on the assumption that anything he doesn't understand must be illegal. It's not illegal, just rather arcane.

You honestly think that someone who spent seven years as a vice president of the New York Stock Exchange is that dumb?

So you're saying the guy is intentionally deceptive, instead of dumb? Goes against Occam's Razor for people -- presume ignorance before malice -- but I guess it's possible.

Someone from the top ranks of the engine of capitalism says that capitalists specialize in racketeering but he's honest Joe now and we should trust him. Do I believe him or think he's full of it? I think, on balance, he's full of it.

the guy is intentionally deceptive, instead of dumb?

You don't have to be dumb or deceptive in order to be "ignorant" (not know the deep down facts and truths).

Most people are just plain ignorant, and proud of it.

Learning is hard hard work.

Who needs that when you can be "clever", sit back, and listen to the "experts" on CNBC corporate news?

(In grade school the same people "beat the system" by copying the homework off the nerd in the back of the class rather than doing it themselves --and rather than learning in the process to think and learn on their own.
Today, in their all-growed-up life, they sit back and watch Faux News plus CNBC for a gettin' all their edu-acation.)

Facts are a funny thing,
especially when you laugh them all away

tow - I've spent 36 years in the oil patch and I just understand only the very basics of oil trading. Rocky apparently knows a good bit more. I've known some folks who were absolutely brillent in their field but knew very little about much else. The worse were the brillent folks who thought they understood every thing just because they understood everything about a small segment of biz. I have no way of knowing where a VP on the NYSE fits into this scheme. I just tend to not take a lot for granted.

Rock, you might be right but he's just said that you, as an oil company person, are a racketeer so you are probably just trying to confuse me :-)

Hopefully folks don't believe him or he'll be calling for you to be strung up next. Note he actually used the word racketeering which, by definition, implies actual criminal offences are being committed. Oh and he's also a lawyer but perhaps he's really incompetent at that as well and doesn't realise what he is saying. But I'm not giving him the benefit of the doubt.

tow - If he were to call me that to my face I would slap the p*ss out of him on the spot. LOL. But I could do that (not that I really would) because I, like the vast majority of us, don't work for Big Oil. He deals with the public oil companies. I suspect by now you understand that Big Oil does not represent most of us in either their public statements or, more importantly, the goals. I don't have shareholders to convince. I have an owner who clearly understands the BS Big Oil tosses out. But you won’t see me on CNN spewing forth on his behalf. Its family money and he has zero interest in being in the spot light. I can also promise you that the vast majority of those working for Big Oil share my opinions but can’t make such public statements.

So if Big Oil doesn’t have the incentive to lay out the truth to the public and Little Oil has no gain in putting it out there, where does the public get even a hint of the reality of the situation? Oh…yeah…the MSM and the govt. Guess that explains why we’ve done almost nothing for the last 40 years to address these very predictable problems.

There does seem to be a contradiction here, such a well educated and experienced person saying something so outrageously stupid.

Just curious undertow, but what is your opinion of his piece in the Huffington Post? Do you believe this oil price spike is the nasty work of speculators? Do you believe 90% of all oil sold is long term fixed price contracts, unaffected by the price changes on world markets? That is, do you believe the oil prices posted here really affect only about 10% of all the oil traded in the world?
Upstream Crude Oil Spot Prices

Do you honestly think that someone who spent seven years as a vice president of the New York Stock Exchange is that dumb?

Ron P.

No I don't think he's that dumb. Personally I think he's just trying to soothe the masses and blame it all on nasty capitalists for pushing the price of oil up and that there's no real problem. I can't believe he would ever have said "oil companies specialize in consumer racketeering, as do the banks." while at the NYSE, or when he was a banker himself for that matter ;)

I could not open the link...

I have a vague idea how the futures and future options markets operate, so I went to NYMEX website to see the trading volumes. It seems that they are actually quite small (from trading standpoint). On the example of WTI:

Go to http://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_quote... and see column Prior Day Open Interest.
Each contract is for 1,000 barrels, so the the total numbers of futures accounts for 298 million barrels for April settlement. The total amount of oil (WTI) that was being traded as of yesterday on NYMEX (see bottom of the table) was 1,500,000 contracts hence 1.5 Gb. Interestingly there are some speculators who can have their oil at $100 in 2019..

This looks kind of dumb, to let the price of oil be determined by trading such relatively low volumes. 298 million barrels is not quite 4 days worth of oil. This amount of open interest can't be all speculation, part of it must be bona-fide hedging?

PS. Someone actually trading oil, please come to the rescue to make real sense out of it.
PPS. Remember TinHatGuy - he wanted 1,000 barrels - one contract of Macondo.

Curious, The link works. Try it again.

These are spot prices. That is what was actually paid for newly contracted oil cargoes today.

http://www.upstreamonline.com/marketdata/markets_crude.htm (same link posted by Darwinian)

The most expensive oil in the world, according to upstreamonline, that was actually bought today was Louisiana Sweet. Obviously the rest of the USA should nuke Louisiana for being the worst racketeers in the world...

Given a choice of believing RockyMountainGuy or a 7-year NYSE president, I'll choose RMG :-)

Just for clarity, I don't believe what Georges Ugeux is saying and I don't believe even Georges Ugeux believes what he is saying. That was my point.

You honestly think that someone who spent seven years as a vice president of the New York Stock Exchange is that dumb?

Well, I don't know. I'm not that much into conspiracy theories myself, but maybe he's not suffering confusion, maybe he's promoting confusion.

Just a guess. In my experience, there are conspiracies, just not the ones you think there are.

If you read the rest of my posts in this thread, I think you'll see we are in agreement :)

"just not the ones you think".

Well said, Rocky!

A little at the time, I am gradually learning something about oil markets from you and a couple of others here, thank you!

I have never believed that speculators could move the oil market very much for very long, and I also believe that such limited movements would work out to a zero sum game anyway, over any extended period.

Futures and hedging are taught in freshman ag econ, and at Va Tech back in my day, we sat in the same classrooms with the biz /econ guys at the same hour, the only difference being that my transcript reads Ag Econ rather than just Econ.

I have always contended that the only way "speculators" could control the oil market would necessarily involve the speculators and the big players-producers and /or refiners/distributors being one and the same.Hedging and price adjusted to index contracts certainly appear to be more than adequate to cover the situation, except for a few who may be bold enough, and have deep enough pockets, to as they say in sex ed nowadays, "take a shower without a raincoat"-which is to say, to run a very high risk of catching a very serious disease-the equivalent financial disease being bankruptcy.

Of course there has been a conspiracy right along, with various powers in control-once upon a time, Standard Oil, at another time, the Seven Sisters oligopoly, later OPEC.Right now it looks as if OPEC has ample power to move the market if the goal is to RAISE prices, but my personal opinion is that the cartel cannot any longer produce enough to CONTROL the market.

I simply cannot see how anyone with a basic understanding of futures, hedging, and markets in general could think these things thru and still conclude that a few smart guys, even the ones who run gold in sacks , can outmaneveur companies such as Aramco and Exon Mobil, or even PEMEX.

A bit more about the author


Georges Ugeux
Chairman & CEO

A lawyer and economist by training, Georges Ugeux has focused his entire 30 year career on the global dimensions of business, government and finance. He has a deep understanding of the cultural dimension of negotiations, networks and partnerships.

...For seven years Georges immersed himself in the global equity markets by heading the International Group of the New York Stock Exchange, bringing over 300 non-US companies, valued at $ 2.7 trillion, to the US market. He is a frequent public speaker and educator on global issues (at the College of Europe in Bruges and Harvard Law School).

Georges Ugeux holds a Doctorate in Law and is Licentiate in Economics from the Catholic University of Louvain. He chairs and sits on Boards of numerous transatlantic organizations.

So he's a trained liar twice over (law and economics) ;-)

So he's a trained liar twice over (law and economics)

It's in their genes

Market Crash 2011: It will hit by Christmas

Politicians lie. Bankers lie. Yes, they’re liars. But they’re not bad, it’s in their genes, inherited. Their brains are wired that way, warn scientists. Like addicts, they can’t help themselves. They want to sell stuff, get rich.

We want to believe they’re telling us the truth. Silly, huh? Both trapped in this eternal “dance of death” controlled by programs hidden deep in our brains,...

In fact, behavioral science tells us that bankers and politicians are lying to us 93% of the time. It’s 13 times more likely Wall Street is telling you a lie than the truth. That’s why they win. Why we lose. Because our brains are preprogrammed to cooperate in their con game. Yes, we believe most of their lies.

Maybe this is an issue of shooting the messenger, but see, now I'm wondering exactly how often I'm supposed to believe what the behavioral scientists are telling me.

"The problem with these Gentlemen's Agreements, is these Gentlemen ain't Gentlemen!" - Twain

Or from that other fount of American wisdom, the folksong "The Dodger Song":


HuffPo doesn't fact-check and they do let a lot of garbage get out there. They've let immunization shot conspiracy theorists post a lot of garbage. I bash the right a lot but they have no monopoly on crazy & conspiracy theories (but the right does seem to have a dominant share).

spec - You may already know but now AOL News is now 100% HuffPo. Ms. A is in complete controll.

Actually it is Ms. H.

I will have to agree with you, though. Ariana is... well... an advocate?

Just like most of the media, only on the other side of the issues. Some times she gets it right. Some times, I suppose, even Bill O'Reilly gets it right(?)

So, we get news that comes to us spinning, and it is our job to figure out what is really going on. What I see from you indicates a pretty good read on that, and I appreciate your views. Though we seem to disagree on some issues (I sometime wonder why anyone who seems as bright as you doesn't see things the way that I do. I'm sure you feel the same, though), I also appreciate two other things. First, that you are civil and polite. Second that what we discuss here is not really political. To paraphrase, reality makes strange bedfellows.


Like a lot of my commie co-conspirators and fellow travellers, this guy doesn't get the idea of pricing at the margin.

Makes me want to quit the vanguard of the revolution. Sigh.

Oops, I just said we weren't political, and here comes TFO to make me out a liar.

Idunno. I give up!



Ron - even though I describe myself as a "Teddy Roosevelt progressive," I have a real love/hate relationship with HuffPost. They have a few regular bloggers like cornucopian Raymond Learsy,

Learsy's analysis of the international oil trade, OPEC, and its impact on the American and world economy has been featured in the National Review Online, the New York Times, the Pipeline and Gas Journal, the Huffington Post and on CNBC.

who are totally without credibility with respect to peak oil and energy issues. Now this guy Georges Ugeux, chairman of Galileo Global Advisors - a New York-based investment banking advisory firm with a direct focus on emerging markets. spouts Learsy-type bs.

Bottom line, I find some things at HuffPost interesting, but am very leery about bloggers there I don't know anything about. I believe that Arianna Huffington is much more about money than principles. Huffington Post is not a site to send the naive to get accurate information.


Re: NOAA scientists cleared in climate email review

When will Inhoffe be investigated for using the legal resources of the Senate for malicious, politically motivated harassment of researchers?

Or how about just wasting government money on a witch hunt?

Never give up, Never give in !

--motto of new movie: "Republican Galaxy Quest"

Facts are a funny thing,
especially when you laugh them away

There's a 21 minute long interview with Daniel Yergin on MarketWatch/WSJ today. He mentions the impact of the high oil prices in 2008 at $147 a barrel as a factor in the economic problems at that time. He also mentions the rapid increase in population in some developing nations as another aspect of the problems. He also mentions food price increases, but not what might be causing those increases, such as ethanol. He talks about the present availability of natural gas too..

E. Swanson

From MSNBC: Someone gets it:

"Turmoil in the Middle East, trouble for your budget"


Crude oil's impact on consumers.

A chart with notes:


Saudi oil facts - when will we know?

A general question - plenty of headlines about Saudi pumping more, some from November 2010 and another apparent uplift today. However, how long will it take to verify any of this? And who will notice?

According to several people here, such as Charles M, the November uplift was mostly a lie - yet the market does not seem to be reporting a problem. The EIA publishes data which many argue both ways. I guess my question is simply who ultimately will know what is true or not and how long will that take? A week? A year? Longer?

I get the impression that oil contracts are often short on delivery anyway, with only a select few getting their actual pre-agreed quota (is this like interrupt-able gas contracts??), so how would you know if there is a generic shortage? It is all very confusing to me - it would be good if someone in the trade could shed some light on it.



It seems likely that 2011 will be the sixth year in a row that Saudi net oil exports will be below their 2005 annual rate of 9.1 mbpd, despite the fact that it appears that annual US spot crude oil prices will have exceeded the $57 level that we saw in 2005 for six straight years, with five of the six years showing year over year increases in annual oil prices. (Soon, the Saudis will have been showing declining net oil exports, relative to 2005, longer than the Second World War, 1939 to 1945).

My standard Saudi comment (henceforth to be permalinked and bookmarked):

Regarding Saudi Arabia, it's really a story of two countries: (1) Saudi Arabia through 2005 and (2) the post-2005 Saudi Arabia.

Let's look at 2002 to 2010 Saudi net oil exports versus US annual spot crude oil prices (EIA):

From 2002 to 2005, the Saudis responded to rising oil prices with sharp increases in net oil exports:

2002: 7.1 mbpd & $26
2003: 8.3 mbpd & $31
2004: 8.6 mbpd & $42
2005: 9.1 mbpd & $57

But then we have post-2005 Saudi Arabia, when the Saudis responded to generally rising oil prices with declining net oil exports:

2006: 8.4 mbpd & $66
2007: 8.0 mbpd & $72
2008: 8.4 mbpd & $100
2009: 7.3 mbpd & $62
2010: 7.4* mbpd & $79


Post-2005 Saudi Arabia has of course shown the same pattern as Texas after 1972, i.e., declining production, relative to a prior peak, in response to rising oil prices. The 1972 Texas peak (black) lined up with 2005 Saudi production (C+C):


In my opinion, what passes for excess capacity worldwide, including Saudi Arabia, largely consists of what Matt Simmons called "Oil stained brine."

By increasing their output of "Oil stained brine" and by depleting inventories, I suspect that the Saudis could show some kind of short term boost in delivered oil, but I think that the time has passed when they could bring global prices down via a steady increase in net oil exports in excess of their 2005 annual rate. The Saudis have some new production coming on line, but that was true of other post-peak regions too.

For example, Sam Foucher looked at new oil fields in the North Sea whose first full year of production was 1999 or later, and these new oil fields had a peak of about one mbpd in 2005 (versus the overall peak of six mbpd in 1999). These new fields, equivalent, at peak, to one-sixth of 1999 production only served to slow the overall decline to about 5%/year.

BTW, there were certainly have two stock markets in Saudi Arabia: (1) Through 2005 and (2) Post-2005:


Interesting coincidence that the Saudi stock market crashed at precisely the same point at which the Saudis started "voluntarily" reducing their net oil exports.

Remember the OPEC price band?


April, 2004: Mr Al-Naimi said: "Saudi Arabia continues to be committed to OPEC's $22-28 price band. There are signs that worldwide inventories have begun to build but no one really knows for sure. I do not believe there is a fissure [within Opec]. There is dialogue. Opec in general is committed to the band," he said.

I think it is impossible to extrapolate the slope of the curve with each data point, because of the variables involved (reporting lags, reporting errors, reporting lying, price induced demand fluctuations, etc.).

On that note: when I was much younger, I worked at a restaurant/bar. The bar tender was required to use a measured amount of alcohol for each drink (cost control). At the end of the night, the bar manager would measure the bottles and put a mark on them. The bar tender would then cheat 8 customers by about 1/8th of a shot, then give his regulars a double. I can't help but think this kind of thing is happening here in a big way, but we may not be able to see it. To that end, I think Westexas' idea of just looking at the average yearly numbers make more sense. Maybe then we can talk more seriously about the slope of the curve.

The EIA says Saudi crude production increased by 100k per day from October to November. The IEA however says that November production was 100k lower than October. Take your pick...

The news come after Saudi officials said Libya production shut down by unrest could be replaced by West African light crude.

Didn't the Saudi's say that they would cover the shortfall? Do they really need help from West African crude?

I'm pretty confident that there is spare capacity in OPEC to cover up 1.6mppd taken off the market. But many of the statements I'm hearing are not really confidence inspiring.

Well . . . perhaps we are going to find out "who has been swimming naked" as they say.

Didn't the Saudi's say that they would cover the shortfall? Do they really need help from West African crude?

You have to realize that the Saudis can't actually cover the shortfall. Their "surplus" oil is mostly heavy, sour, and contaminated with heavy metals. The Libyan oil was sweet and light, some of the nicest oil on the international market.

If you feed the "surplus" Saudi oil into a refinery designed to process Libyan oil, you will probably do serious damage to it.

The Saudis appear to be trying to do some kind of a swap with the West African producers, who actually do produce oil of the same quality as the Libyan oil, in hopes they can ship Saudi oil to the West African's customers, and the West Africans will ship sweet, light oil to the refineries that used to take Libyan oil.

However, the West Africans are saying things like, "No, our production facilities are shut down for maintenance," and "The last tanker left port and we don't have any more oil left in storage."

So, at this point, the idea of replacing Libyan oil with Saudi oil is not looking really good. Those countries which rely on Libyan oil will probably have to import gasoline and diesel fuel from countries which don't. Their refineries are screwed.

However, the West Africans are saying things like

Shouldn't the negotiating be with the consumers of the West African light crude. SA could offer them a great bargain on heavy sour in turn for releasing their contracted for sweet light for sale to southern European refineries. Thats the only way to resolve this. Tricking the West African producers into shortchanging their current customers isn't going to fly.

NSC- Yes..confusing and always will be IMHO. But maybe understanding why might help. Above all else the KSA will not provide the info under any circumstance. It is a crime against the kingdom for any Saudi to disclose this info (as well as any specific oil reserve info) under the threat of severe penalties. The kingdom is free to issue any press release with any detaled numbers the like. But there is no way to varify. The crude buyers are also restricted from sharing info but they probably wouldn't do so even if they could: it's a very competitive biz.

There are lots of folks who try to make estimates based upon ship movements etc. I have no idea how accurate these efforts prove to be or even if there's any way to know. You (and the rest of us) are confused my our ignorance for a very good reason: OPEC wants us to be confused. In their opinion, especially the KSA, it's not to their advantage for us to know exactly what the their real production capacity is nor what their proven reserves might be. And, from a purely business stand point, they are correct IMHO.

According to several people here, such as Charles M, the November uplift was mostly a lie - yet the market does not seem to be reporting a problem.

Now I'm not a trader and am skeptical of "technical analysis", but here is a quick Paint job on a screenshot from FT's interactive Brent chart:

My very quick handwavy interpretation is that after the rebound off the '08 - '09 lows, it traded roughly sideways... until December '10, when it broke out of the channel, to the upside... That's The Hand saying, "I see your November uplift and raise you $10/barrel".

And in the last week?

I think the market is reporting a problem.

Thanks for you comment. I have seen the same graphs and would be tempted to draw the same conclusion. However I fear that the only thing that it shows is that the price is different.

I would expect that if the market had any physical shortage that the volume graph would fall off - and the opposite is true here. A volume fall off would surely occur if traders were unable to complete deals due to scarcity? If there is no scarcity (required) but just limited extra headroom (nice to have) then the market is properly supplied with oil as the Saudis say it is.

Higher prices might indicate that there is an approaching shortage if you believe the market has a long term view at all.

I am sure my approach is too simplistic, but as I said before, I find this a very difficult topic to relate to concrete on the ground changes. All the levers seem indirect to the point of unrelated, but maybe this is just because the physical delivery market is too slow to see other than yearly? (wasn't that Memmels main argument thinking about it?) And then you have to trust self-published, unaudited figures anyway...

You're welcome, but as I said, I'm far from an authority of this. However, I will continue to offer my observations, in the hope that if I screw up a real expert will get annoyed and educate me...

Firstly, I don't believe the market can anticipate a shortage very much in advance. At least, it has failed miserably at this numerous times in the past. However it is all the same possible to learn a lot from watching it!

NotSoCertain said

I would expect that if the market had any physical shortage that the volume graph would fall off - and the opposite is true here.

No, this is futures. There is no (simple) relationship between how many oil futures are traded and how much oil is traded. From the linked Wikipedia article:

Futures traders are traditionally placed in one of two groups: hedgers, who have an interest in the underlying asset (which could include an intangible such as an index or interest rate) and are seeking to hedge out the risk of price changes; and speculators, who seek to make a profit by predicting market moves and opening a derivative contract related to the asset "on paper", while they have no practical use for or intent to actually take or make delivery of the underlying asset. In other words, the investor is seeking exposure to the asset in a long futures or the opposite effect via a short futures contract.

Hedgers typically include producers and consumers of a commodity or the owner of an asset or assets subject to certain influences such as an interest rate.

For example, in traditional commodity markets, farmers often sell futures contracts for the crops and livestock they produce to guarantee a certain price, making it easier for them to plan. Similarly, livestock producers often purchase futures to cover their feed costs, so that they can plan on a fixed cost for feed.


The social utility of futures markets is considered to be mainly in the transfer of risk, and increased liquidity between traders with different risk and time preferences, from a hedger to a speculator, for example.

So increased volume could be interpreted as 1a) oil consumers feeling a greater need to hedge (insure themselves against future price rises); 1b) oil producers feeling a greater need to hedge (lock in high prices); 2) speculators seeking to profit from oil price moves (both ways).

I believe the greater part of the volume is by "speculators".

If you read trader sites such as always-hysterical Zero Hedge, they will often talk about using oil (and other commodities) as an inflation hedge, that is they are insuring the value of their money, by the presumed inverse relationship between the price of oil and the value of currency (dollars). They might be using futures to accomplish that, but although they are "hedging" they are, from the POW of the futures exchange and the quote above, speculating: they have no intention whatsoever of selling or taking delivery of any physical oil.

Which leads us to interpretation 3): Various monied interests seeking to escape expected/possible loss of money value.

Now if you look at the interactive chart at the FT page I linked to in the previous comment, in the 10-year view, volume starts to rise about 2005 (the very low months throughout the earlier years of the range appear to be missing data). Then there is a bump that starts in late '07 and ends in early '09, with relatively low interest around the time price bottoms (and market presumably is well-supplied with physical oil). (Note that December of every year has a marked, seasonal drop in volume (easy to see in the 5-yr view), and also (if you look at the 6-month view) a marked drop around the 15th of every month: This is a graph of the front month futures, which are rolled monthly). But in the later half of '09 volume rises again, and in 2010 is higher than ever.

All in all I wouldn't read too much into the volume, it seems mostly to move with price. (Although volume does seem to go a bit down both around short-term tops and bottoms, probably reflecting participants' perception of price vs. fundamentals).

And I wouldn't read too much into the price, either... but taken together with other data, it might help tell the story of what's happening. Like the case of OPEC's spare capacity... There is almost certainly some, but very debatable how much. Well... the price rises sharply; that's a hint, a signal both to us, the oil-watchers, and to the oil producers.

Seeing the oil producers' response to the price signal will be very very interesting.

(EDIT: intro)

You are correct in your analysis Kode but there is an indirect link between volume on the futures market and a shortage, should a shortage be anticipated by traders. Should that happen you would definitely see an increase in the volume of contracts traded.

NotSoCertain wrote:

A volume fall off would surely occur if traders were unable to complete deals due to scarcity?

This statement revels a basic misunderstanding of how the futures market works. Yesterday on the NYMEX a total of 1,509,588contracts for 1,000 barrels each was traded. That is contracts for 1,509,588,000 barrels of oil or approximately 21 times the total amount of oil produced in the entire world yesterday. And that is only on the NYMEX for WTI, several hundred times the amount of oil actually traded at the Cushing hub. And the ICE and Brent would have a similar pattern. Obviously trading paper barrels traded does not depend on the number of actual barrels produced.

The completion of trade deals on the futures market has absolutely no connection with the number of actual barrels produced.

Ron P.

Fiat contracts......magic oil.

Close but not exactly correct. The contracts are real. If you bough a long contract and the price of oil goes up one dollar you make thousand dollars. And if the price of oil goes down you lose a thousand dollars. And it is not magic oil, it is not oil at all, these are paper barrels, no oil involved.

About 2 percent of the open contracts on expiration day on the NYMEX were placed by hedgers. But a lot of these are settled in cash. The other 98 percent of trades are placed by speculators. They are just betting on which way the price of oil will move. Casino type action.

Ron P.

Ron - Thanks for the details. I think there are still are a lot of folks that don't understand the vast majority (as you quantify) of future trades are no different than betting on a football game at one of the Vegas casinos. Just because the vast majority of folks bet on Greenbay didn't help Greenbay win the game. Just because there are a lot of futures players betting oil prices would rise during the term of the contract doesn't mean those bets made oil prices go up. Just as many folks bet the the same amount of money that the price wouldn't go up. IOW just because I bet Greenbay would win, and they do, doesn't mean my SPECULATION caused Greenbay to win. But one could make that correlation if they had a problem distinguishing between cause and effect.

Thanks to all those that have tried to help. I think the combined message that I can draw is that it MAY be obvious afterwards but I think we are talking years, because no has the information we need - probably not even the Saudis.

It is nearly impossible to prove what happened in 2008 other than a financial crash with multiple causes, so the ability to see what happened this week I guess is wishful thinking.

Thanks for you comments.

US scrambles to dig out of a rare earths hole

...developing a new mine from scratch requires prospecting, exploration, permitting and construction.

And even if more mines open in the U.S., the country has few companies that can process rare earths, use them to manufacture batteries and magnets and work them into products. Without a domestic supply chain, most of the material extracted in the U.S. would have to be shipped overseas anyway.

There aren't many researchers or industry workers in the U.S. with experience working with rare earths. Not long ago, Molycorp recruiters were unable to find potential hires or even universities that offered rare earths courses. The company has 22 scientists exploring uses and sources of the elements; China has thousands.

"It takes a lot to go from some dirt in the ground to magnets," said Lifton, the analyst. "Finding a deposit is like saying, 'George Washington slept here.' It doesn't mean much.

"Not long ago, Molycorp recruiters were unable to find potential hires or even universities that offered rare earths courses."

The politics and markets of the '90's hit higher education for mining and mineral processing pretty hard. Programs closed all over the country.

The US has no strategic vision. Rare earths, nukes, energy in general -- we just trust that the multinational capital corps will supply all, and somehow we'll reap the rewards. What exactly does our gov't DO? My kids asked me about the impacts of a gov't shutdown, and I had a hard time coming up with ANY personal impacts. Parks, passports, SS office -- rarely do we use those.

Depression 2.0

Economy in the crapper ...check
Unemployment skyrocketing ...check

Que the duststorm

Drier conditions projected to accelerate dust storms in the southwest

Drier conditions projected to result from climate change in the Southwest will likely reduce perennial vegetation cover and result in increased dust storm activity in the future, according to a new study by scientists with the U.S. Geological Survey and the University of California, Los Angeles.

...Dust is also a contributing factor in speeding up the melting of snow, which affects the timing and magnitude of runoff into streams and rivers.

Article http://www.pnas.org/content/early/2011/02/16/1014947108.abstract

Okay, you gotta watch this video. Someone has finally told Erin Burnett what the Green River Shale really is. Now she has an expert in the field who says that all that oil is really there and that it can be produced for $35 a barrel. He also says we need a Manhattan type project by the US Government to get this ball rolling.

Now I have a question. If oil is selling at over $100 a barrel, and this stuff can be produced for $30 a barrel, why aren't several companies producing millions of barrels of this stuff and making a mint. And if it can be produced for $35 a barrel why do we need a Manhattan project to get the oil flowing. Something just ain't right here.

What About Oil Shale?

Airtime: Fri. Feb. 25 2011 | 1:36 PM ET

Insight on whether oil shale is a viable option to importing oil from the Middle East, with Claude Pupkin, Genie Energy CEO.

Ron P.

Now I have a question. If oil is selling at over $100 a barrel, and this stuff can be produced for $30 a barrel, why aren't several companies producing millions of barrels of this stuff and making a mint. And if it can be produced for $30 a barrel why do we need a Manhattan project to get the oil flowing. Something just ain't right here.

I had precisely the same reaction. For anyone with two working brain cells, I would think that this interview did more damage to her case than Pickens' comments. I continue to attribute it to CPSR (Cornucopian Primal Scream Response), which is basically a form of cognitive dissonance, I suppose.

"Cognitive dissonance is the mental conflict that people experience when they are presented with evidence that their beliefs or assumptions are wrong."
Montier (2002)

Makes you wonder what goes on inside Michael C. Lynch's head.

Ooh ooh I think I understand all this Pickens man/tech talk ...
(Erin pauses and bats eye lashes)

All ya gotta do is turn the knob thingy on the kitchen oven thingy to 650 degrees,

wait 15 minutes

and then up a coming from the shale rocks is some of that light super sweet hydrocarbon!
at $30/per self pumping barrel!

650 on my kitchen oven?
How hard could that be?

Let's all make a mint cooking up that stuff

He meant to say $35 per barrel of rocks, like the ones in his head. CNBC has become a network for crooks, liars, and scam artists. Erin is too young to realize that we've been there done that.

He meant to say $35 per barrel of rocks, like the ones in his head. CNBC has become a network for crooks, liars, and scam artists. Erin is too young to realize that we've been there done that.

Yeah . . . holy smokes. It is surreal. We went through this EXACT SCENARIO back in the 70's! I've never seen the "Those who don't learn from history are doomed to repeat it." illustrated so perfectly.

Even better, the Yahoo finance page has a CNBC article on growing stagflation. It's BACK! Rising food and energy costs, poor employment, sick local gov'ts and states cutting back. Low economic growth but rising core expenses. Pretty soon no discretionary income left to bootstrap us out...and where's the cheap energy just around the corner to dig us out this time? What if that part of the story doesn't repeat?


So let me get this straight . . . crude oil is selling for ~$100/barrel and you claim you can make it for $35/barrel. You are staring at a profit margin of some 150% . . . but you need government money. Riiiiiight.

Scam artists indeed.

The whole idea is to divert current investments in solar, wind and batteries to a black hole project like shale oil. LOL.

Not saying we will be magically saved by solar investments in research but really I bet they are hoping to steer money away from those other areas.

The oil companies are desperate to give oil shale another try. Otherwise, the jig is up for their future. Gotta keep us addicted to the black sauce. If we are in an emergency, maybe we should consider getting really serious about conservation, efficiency, alternative vehicles, public transportation, walking, bicyling, restructured cities, etc.

We have seen this movie before and it ended badly. Sure, maybe they will even figure out a way to make oil shale marginally viable, but at what expense to the very limited water resources of the waste, massive waste products, poisoned ground water, poisoned rivers, and an incredible amount of co2 for the energy derived. The energy required to produce oil from shale is astronomical so it is also not clear whether the EROEI is positive.

Sept 14, 2010

Genie Energy Corporation (Genie Energy), a division of IDT Corporation (NYSE: IDT, IDT.C), today announced that Rupert Murdoch and Gene Renna have joined its Strategic Advisory Board.

Says it all.

Thanks for this link, Ron.

So when Pupkin concludes with the request that the Gov't needs to 'Create Stability and Create Certainty', is that really only regarding the regulatory environment, or is it also suggesting that there be some (Taxpayer) support for this 'required research' that he has pointed towards?

I'm eager to hear what they call the oil they find when they start working in the Snake River Canyon.

(Wasn't he also in Spinal Tap?)

Oil shale ain't about drilling oil, it's truly titanic mining.
Oil companies don't like to mine they like to drill.

The way for them to get into oil shale is Shell's insitu method
but that requires oodles of energy to be poured into the ground for a couple years and then drilled for liquified shale oil.
They don't like this method either because they are'nt power utilities either.

The solution would be to turn the whole deal over to the coal mining companies.

It's not about money. it's about a different mentality.

In China, they mine oil shale out of coal pits and retort it and today they are the number one oil shale producer.

Wrong again majorian. AMSO (IDT) is using an in-situ method that utilizes either electrical or gas to heat a mineral oil in a sealed pipe. Surface retorting is 200 year old technology. How old are you major?

I'm 160 years YOUNG, junior.

There are energy objections to in-situ methods; for one thing you only recover 80% of the OOIP, and then there is the huge amount of externally purchased gas or electricity you need for heating, whereas with retorts volatiles off gases are burnt in the retorts
providing most of the required heating. The downside is in the huge mining (comparable to tar sands), large CO2 emissions and large requirement for water.

Of course, nobody is producing in-situ shale oil commercially.

Having some experience in non-conventional oil, I would have to say that T. Boone Pickens' estimate of $200 per barrel is probably closer to the mark than $30 per barrel. It costs about $45 per barrel for an established Canadian oil sands plant to produce oil, and that's after 40 years of fine-tuning the operation. Producing oil from US "oil shale" would be much more difficult, since it's not actually shale and doesn't actually contain oil, so I would think the costs would be substantially higher.

It probably would require a Manhattan Project size research effort to get an oil shale pilot plant up and running. Canadian governments and companies have spent billions of dollars on oil sands research, and extracting oil from Canadian oil sands is far easier than manufacturing oil from US oil shale.

There is also the issue of scaling up production. It has taken 44 years for Canada to go from the original 45,000 barrel per day commercial oil sands plant to the current production of about 1.5 million barrels per day. The US doesn't even have a working oil shale pilot plant yet, so I think it would take the US at least 50 years to reach the much higher volumes needed to meet US demand.

If Americans invested billions of dollars in oil shale now, I'm sure that it would pay off by the time their children retired, but that's probably not the time line Erin Burnett was hoping for. Look forward to substantial production toward the latter half of the 21st century.

It has taken 44 years for Canada to go from the original 45,000 barrel per day commercial oil sands plant to the current production of about 1.5 million barrels per day. The US doesn't even have a working oil shale pilot plant yet, so I think it would take the US at least 50 years to reach the much higher volumes needed to meet US demand.

Rocky, you cannot compare the past decades with the situation now. It was not necessary and not possible to scale up oil sand production when oil was cheap and the world not short of supply. There are other reasons thinkable why oil shale won't scale up.

There are other reasons thinkable why oil shale won't scale up.

Yes there are, a few very good reasons. If you are talking about a mining operation like the oil sands, then that is going to take a lot of water, an awful lot of water. The only water in the area is the Green River itself, a major tributary to the Colorado River. If you are talking about millions of barrels per day then it would take all the Green River and likely then some. That would be a killer to the folks that depend on the Colorado River for their water. And you know who those folks are.

But the guy in the video was not talking about a mining operation, he was talking about the Shell Oil method of Cooking the earth with electric or heat for a few years and freezing the parameter. And if you are talking about millions of barrels per day, about four years after they get the heating and freezing rods in place, then it would take many new power plants in the area. That is going to take many years just to get the power plants in place and get all the cooking and freezing rods in place. And those power plants are going to also take a lot of water.

The green river shale is not remotely related to the Canadian oil sands. It would take a lot longer and cost a lot more money to ramp up anything there. And it would take a lot of Government Money because, in my opinion anyway, no investor in his right mind would invest in such a scheme. Too many have invested in that kind of shale oil in the past and lost 100% of their investment.

Ron P.

The green river shale is not remotely related to the Canadian oil sands. It would take a lot longer and cost a lot more money to ramp up anything there. And it would take a lot of Government Money because, in my opinion anyway, no investor in his right mind would invest in such a scheme.

That's absolutely correct. The Green River oil shale does not contain oil and is not shale. That's a major technical problem in producing it. And there's not enough water available in the region, which is going to complicate things.

I'm sure it can be done, and it probably will be done sometime long after I am dead, but it's going to take a major effort. The US government will probably have to put in an effort somewhat on the scale of the Manhattan Project or the Manned Lunar Landing program to develop the technology, and THEN the private companies can begin to develop the resource.

For those Americans who have been watching the talking heads on CNBC blather on about all the oil shale in the US that is going to save their butts from oil shortages, I'd like to point out that landing a man on the moon was a piece of cake compared to producing that oil.

I'm just speaking as someone who was involved in Canadian oil sands research 35 years ago. The company I was working for spent $50 million, and got nowhere. However, after an injection of $1 billion in government money and numerous other research projects, other people nailed it. Canadian oil production is now ramping up in a major way and a decade from now Canadian production will probably be higher than US production (not that US production will be very high). It's nice to see some results for all that money.

Large amounts of Canadian oil sands production are now arriving on the US market so Americans are relatively okay. Just don't buy a car with more than four cylinders, and don't assume you'll be able to afford to drive everywhere. Make sure everyone in the family has a bicycle, and live close to a station on an electric rail line.

Ron, You have to be kidding me. GENIE OIL!! Rub the barrel and get three wishes? You can't make this stuff up.

Al Jezeera is reporting that the first of two ferries that the American government hired to get people out of Libya has arrived in Malta. The British and Chinese each have one on route as well.

Now that U.S. personnel and diplomatic corps are out of the country and harms way it is being hinted that Americans are free to act.

Sanctions are being discussed, assets will likely be frozen, and it looks like military action is being contemplated.

The U.N. is becoming more vocal - the U.N. General Secretary is calling upon the international community "to protect the safety of civilians." The Human Rights Council is commissioning a human rights inquiry on Gaddafi's "incitements of crimes against humanity" and is taking steps to expel Libya. Ban Ki-moon even went so far as to say, "the loss of time means a further loss of life."

NATO is in session.

The hope is being expressed events may move quickly now.

Will their be an outside push to persuade the Colonel of the errors of his way? It's starting to look that way.

Defense Secretary Robert M. Gates warned Friday that the U.S. should avoid future land wars like those it has fought in Iraq and Afghanistan

"In my opinion, any future Defense secretary who advises the president to again send a big American land army into Asia or into the Middle East or Africa should 'have his head examined,' as General MacArthur so delicately put it," Gates said in a speech to cadets at West Point.


It is sad that it took 8 years of slogging for them to figure it out. It is the most well known classic blunders.

Pardon my cynicism, but are the UN folks planning to blow Gaddafi aside with wind generated by doing nothing more than flapping their jaws? When was the last time the UN actually did anything whatsoever in the face of resistance, which it surely would get in spades from Gaddafi & company? Right, it sure did a superb job of preventing the genocide in Rwanda, didn't it? What a worthless pile of useless junk.

Please don't spread misinformation about Rwanda. It was the US that blocked UN intervention in Rwanda. Albright must have felt the need to wash away this guilt with her strenuous efforts in the former Yugoslavia. The UN may be "useless" but that does not make NATO holy.

The logic of humanitarian bombing is very peculiar. I guess people fighting and winning their own freedom is not good enough. They need some foreign military welfare daddy to look after them, setup some military bases, establish a protectorate regime that will sign away oil resources or whatnot for a song...

Wow, didn't realise the US had such a big role in this..

Shades of the same in the recent vetoing of the UN's attempt to stop Israeli settlements. How can the UN Security Council not be the "appropriate venue"???


Fascinating report just on Sky News from British oil-worker "Nick" in Libya. He said he is involved with pumping oil and gas to the coast. He says if they all leave then the power-stations in Libya will shut down because they are still keeping the gas and oil pipelines to the coast (which also supply the power stations) running. However he says the coastal storage tanks are almost full at which point he says things will get "interesting" and they either shutdown the pipelines and Libya goes dark or "Let's say the environmentalists won't like us very much if we do what's needed to keep the lights on"

Then he started to add something but the Sky News reporter literally cut him off just when I wanted to hear more.

Med Crude-Urals stronger in Med on Libya

LONDON, Feb 25 (Reuters) - Urals crude differentials
strengthened sharply in the Mediterranean on Friday due to market concerns over Libyan oil supplies, and a Russian loading plan showed Black Sea March oil shipments would stay flat.

Rare, unique seeds arrive at Svalbard Vault, as crises threaten world crop collections

The arrival of these collections, including many drought- and flood-resistant varieties, comes at a time when natural and man-made risks to agriculture have reinforced the critical need to secure all the world's food crop varieties.

The optimism generated by the arrival of this incredible bumper crop of contributions is tempered by the threats that seem to emerge almost daily to seed collections around the world," ...A vivid example of some of the threats facing genebanks is when unrest in Egypt led to the looting of the Egyptian Desert Gene Bank in North Sinai. At the Desert Gene Bank, home to a prized collection of fruit and medicinal plants, looters stole equipment, destroyed the facility's cooling system, and ruined data that represented more than a decade worth of research. Meanwhile, the Global Crop Diversity Trust continues to fight plans to bulldoze the field collections at Russia's Pavlovsk Experimental Station, Europe's most important collection of fruits and berries, to make way for a housing development.

Some interesting and somewhat contradictory comments from Alyeska Pipeline regarding the recent leak/shutdown/restart

In today's Petroleum News there are a couple of interesting and contradictory articles on Alyeska and the recent events on the pipeline.

From the first article Jan. shutdown puts TAPS close to brink: Alyeska executives describe efforts to prevent freezing in pipeline after pump station oil leak in era of low oil throughput :

“I was closer to the edge of the cliff that I didn’t want to go over, and I don’t think Alaskans want to go over,” Tom Barrett, president and CEO of Alyeska Pipeline Service Co., told the Alaska House Resources Committee on Feb. 17 when recounting how an army of Alyeska employees and contractors had swung into action, preventing water from freezing in the line following the Jan. 8 oil spill incident. Alyeska operates the pipeline on behalf of the pipeline owners.

....a shutdown of the pipeline in January following an oil leak at Pump Station 1 on the North Slope dramatically illustrated the growing risk of a major pipeline outage, as declining pipeline throughput allows the temperatures of the fluids flowing down the line to drop to lower and lower levels in the winter.

The essential problem that Alyeska faces is that, with pipeline throughput declining from a peak of about 2.1 million barrels per day in 1988 to 630,000 barrels per day recently, it now takes 15 days for the oil to travel from the North Slope to the tanker terminal in Valdez. The oil cools as it travels down the line, with the potential for water in the oil to freeze out as ice, blocking the movement of pigs — the devices used to scrape clean the inside walls of the line — and potentially damaging valves and other pipeline equipment.
And, although Alyeska continues to seek ways of dealing with low oil flow, the best solution to the low temperature problems is to pump more oil through the line, a prospect that seems improbable over the next five to 10 years, he said.

“It’s declining flow and it’s not looking good to me,” Barrett said.

In a second article in the same issue: Alyeska answers federal pipeline critic: Barrett says operator of trans-Alaska pipeline is on top of challenges associated with declining oil flow; talks begin with PHMSA

Alyeska Pipeline Service Co. is challenging many of the concerns federal regulators raised in a proposed safety order.

The U.S. Pipeline and Hazardous Materials Safety Administration didn’t specify any fines or other penalties. But in its Feb. 1 notice to Alyeska, the agency said corrective measures appear necessary to address “multiple conditions” on the trans-Alaska pipeline system posing a risk to public safety or the environment.
In a Feb. 15 response, Alyeska President Tom Barrett challenged much of PHMSA’s proposed safety order. Barrett himself formerly headed the agency.

“We support actions in the proposed order that will enhance safe operation of TAPS,” said Barrett’s letter dated Feb. 15. “However, Alyeska believes that some of PHMSA’s preliminary findings and proposed actions fail to reflect sound operational practice, propose out of sequence activities or address matters external to TAPS.”

“Alyeska has been, and will continue to be proactive to address risks resulting from declining flow,” Barrett wrote. Steps include more aggressive pigging of the line and “multiple changes in operations as a result of studies conducted of low flow conditions.”

Barrett also pushed back against criticism that Alyeska had difficulty implementing its cold restart procedures during the January shutdown, partly due to an “inability to quickly move equipment” into position along the pipeline.

“To the contrary, Alyeska successfully executed the Cold Restart contingency plan as written,” Barrett said. “Moving equipment up and down the 800 miles of pipeline was conducted in a measured manner. The pipeline was not in a circumstance that dictated the need to implement the plan, so moving equipment into place was precautionary.

As always, TAPS is under intense pressure to keep costs down. At the same time, declining throughput is, of course, an increasingly serious issue regarding the long term viability of TAPS. Finally, TAPS and it's owner companies are making a big push to convince the Alaska Legislature to cut tax rates affecting the oil industry. The intersection of technical issues, economics, and politics always gets interesting!

Gas wells leaking methane

Coal seam gas mining has become controversial since the release of the US film Gasland, with the NSW Farmers Association, Australian Greens, Lismore City Council and Rous Water all calling for a moratorium on drilling.

There are 45 approved production wells across the Northern Rivers and about 100 approvals for exploratory drilling.

Metgasco inspected its Bentley well after a community activist filmed gas bubbles emerging from around the “sealed” drill well.

How One Nuclear Skirmish Could Wreck the Planet

New climatological simulations show 100 Hiroshima-sized nuclear bombs — relatively small warheads, compared to the arsenals military superpowers stow today — detonated by neighboring countries would destroy more than a quarter of the Earth’s ozone layer in about two years.

Regions closer to the poles would see even more precipitous drops in the protective gas, which absorbs harmful ultraviolet radiation from the sun. New York and Sydney, for example, would see declines rivaling the perpetual hole in the ozone layer above Antarctica. And it may take more than six years for the ozone layer to reach half of its former levels.

...You have the inability to grow crops due to severe, colder temperatures and also the severe increases in UV light. You have the loss of plants and proteins in the oceans, and that leads to widespread food shortages and famine.

...we still have the ability to basically destroy planet with one-tenth of 1 percent of the world’s current arsenals.

I read a study published in either Scientific American or Discover a while ago that described about what this article says....the authors mentioned that the exchange level mentioned was based on a hypothetical India-Pakistan full-scale war.

I recall that they calculate d such an exchange would loft xx teragrams of soot and dirt particles high into the atmosphere, and that World food production could be depressed for ~ a decade...

This is a follow on to that research - different researchers. They found that, besides the soot, the NOX would destroy the ozone. Scratch the plant and animal life on half the planet - including the ocean. Global famine doesn't quite capture what would ensue.


They all should be dismantled and their special metals blended down to reactor-grade fuel and used in breeder reactors.

Those weapons are a money pit for governments, a source of high hay living for certain scientists and engineers who could be doing things to actually help humanity, and are equivalent to a loaded semi-automatic sidearm in the hands of a juvenile delinquent.

And people think that 'normal society' could be resumed after a major exchange between 2 superpowers. All those officials hiding in bunkers to resume governance asif nothing had happened. Stroll on!


The news come after Saudi officials said Libya production shut down by unrest could be replaced by West African light crude.

In other words, we are producing flat out. Maybe those guys over there can pump more!

I highly doubt it is THAT bad. You can't say you have 4mbpd in spare capacity but really only have zero.

Well they could have spare capacity of "oil stained brine" as Westexas often says plus a little bit of heavy, sour crude which most refineries can't handle.

I highly doubt it is THAT bad. You can't say you have 4mbpd in spare capacity but really only have zero.


All this was inspired by the principle--which is quite true within itself--that in the big lie there is always a certain force of credibility; because the broad masses of a nation are always more easily corrupted in the deeper strata of their emotional nature than consciously or voluntarily; and thus in the primitive simplicity of their minds they more readily fall victims to the big lie than the small lie, since they themselves often tell small lies in little matters but would be ashamed to resort to large-scale falsehoods. It would never come into their heads to fabricate colossal untruths, and they would not believe that others could have the impudence to distort the truth so infamously. Even though the facts which prove this to be so may be brought clearly to their minds, they will still doubt and waver and will continue to think that there may be some other explanation. For the grossly impudent lie always leaves traces behind it, even after it has been nailed down, a fact which is known to all expert liars in this world and to all who conspire together in the art of lying.

- Adolf Hitler

In other words, we are producing flat out. Maybe those guys over there can pump more!

Or, let's all agree to stay in that fluffy realm of day-dreaming the Saudi's can turn up the wick whenever they decide to snap their fingers, and to maintain that platitude, let's see if we can't squeeze enough out of the smaller OPEC players to cover the Libyan shortfall so the Saudi's don't have to, and live to enjoy the mirage of BAU for just a little bit longer!

On a more serious note, this is what people on here including myself have been waiting for - to see just how fast the Saudi's can bring this 1.5 mbd of spare capacity online, the quality of that extra oil and how long can they maintain that higher level of production. Talk is cheap - now deliver by proving your still the worlds swing producer! And in a few weeks we may be calling on you again to dip into that spare capacity some more.

For those who tuned in late, I think that a general synopsis of the above, (as well as related subjects) is "This is really, really NOT going to end well"...

"Farmers seek to protect locally grown foods"

"Small, local farm operations in recent years have faced increasingly stringent state regulations that, farmers say, threaten their farms and the rights of local residents to buy local food.

Now, they are pushing back.

A group of Hancock County farmers has proposed an ordinance in four towns that would exempt small farms from new state licensing and inspection requirements as long as the farm products are sold directly to a customer for home consumption. "

Don in Maine

See I find these stories very interesting. The idea that industry is held back by regulations is kind of not the whole story. Basically, the politicians are lobbied by Big Ag to stomp out the little farmer with excess regs. So industry tries to keep its hold on farming by squeezing out the little guy with extra regs.

The regs for big ag are needed because the massive scale processes are prone to large scale failure -- bacterial contamination, etc.

If a little producer has a problem, very few are affected.

I know this is a little tinfoil hattish but I think there is a glimmer of truth to it.

An example is the safety ninnies who make those worthless child seats and the child seat laws for cars. None of those products are proven to save lives. They lobbied the states to make these laws so they can sell more seats. See industry is actually profitting off of regulations. They act like they are the ones being hurt. It is the taxpayer citizen that eats it in the end. LOL. Funny the way things actually work. Big business uses the government, while many folks argue that government is hurting big business.

It is not that simple.

You scored some good points. This is why government is distrusted. Because it can be and is purchased by big business, and can be deflected by bad science.

To live through the coming debacle, my recommendation is that you be a skeptic!


Caveat emptor.


I am a backyard beekeeper wanting to sell surplus honey. The law was recently changed in Illinois to allow small producers (less than 500 gallons) to sell honey as "raw agricultural product", thereby not requiring inspections.

I was planning on going back to our local farmer's market this year, but they've introduced a requirement for liability insurance. At $350 - $500 a year, adding on table fees, packaging, labeling and equipment, it would pretty much negate any potential revenue.

So, up the ladder, down the chute...back to square one...

I am sure Big Honey was not involved in those new regs. LOL.

The Black Market of the future will be hard to regulate ;-) Keep making bees and honey.

Now when will Big Business get out of the way of Big Government and allow small producers to make some basic food in the local economy? LMAO

I had some fun with CNBCs interview today with the Merryl Lynch analyst. The interview just got so off the rails I couldn't resist. And it was such a classic and beautiful example of the MSM being very put out when their party line wasn't being followed... and a couple clueless talking heads getting schooled by a sarcastic brainiac.

Here's my little edit

The original interview is included in the description.

Very informative and amusing at the same time. Thanks. CNBC is full of arrogant bubble heads.

Not only bubble heads,
but often they employ the 6 versus 1, gang shout, interrupt and beat-up techniques.

This was a rare case of just two versus one
And the dye haired beauty got some smack down punches
Thrown right back into her long batty eye lashes

Replay the thing and note her rude interruption techniques

"But, but, Fransisco ! "

Killer response: We talk economics rather than [your BS CNBC] discussion [points]

That was pretty funny. It was quite clear the interviewer didn't have a clue what the analyst was talking about, and she didn't like being contradicted at every question.

She particularly didn't like it when he told her the price of West Texas Intermediate is irrelevant to the world oil market because, of course, that's the price the MSM always uses for the "world oil price".

Yes, it's pretty clear the MSM doesn't have a clue why the world oil markets are doing what they are doing. They're way out of their depth.

"It was quite clear the interviewer didn't have a clue what the analyst was talking about, and she didn't like being contradicted at every question."

When a guest on these shows challenges the point of view of the interviewer, the guest generally will loose. Since most viewers are 'regulars', they likely share the biases and opinions of the interviewing personality. She is their friend, there at the push of a button, guiding them through the complexities of the world in a way that strokes their prejudice; reinforcing their worldview. Her job is to preach to the choir, and if she doesn't exploit her advantage, the viewers will find another church.

People love a debate, and it doesn't have to be a good or fair debate, as long as their side wins.

I'm glad folks got as much of a chuckle out of it as I did. :)

Nice !

Iraq's Baiji oil refinery shut by bombing - official

BAGHDAD Feb 26 (Reuters) - Iraq's Baiji oil refinery was shut down on Saturday after militants carried out a bomb attack and set it on fire, the governor of Salahuddin province said.


The refinery capacity is 300K Bpd per day.


Yikes. This is the biggest refinery in Iraq, according to Wikipedia.

it seems they didn't just blindly bomb it, but they knew were to put the bombs:

The militants killed four people and planted bombs at production units for kerosene and benzene at the refinery in the town of Baiji, a former al Qaeda stronghold about 180 km (112 miles) north of Baghdad, Governor Ahmed al-Jubouri said.


This will further pressure the Iraqi government, as the people in Iraq have already complaining about oil products shortages; Iraq oil infrastructure remains very vulnerable especially in the centre and north of the country.


Do you think this is related to the unrest in Egypt, Libya, etc., or is it just part of the normal level of violence in Iraq since the war?

I don't believe it is related to the unrest; this is the usual insurgency modus operandis; they stay quite for a bit, and then attack some high level target; however if shortage of oil products adds to the anger in the street, this would fit with the insurgency agenda especially in light of the unrest in region.


Nawar, I saw your post yesterday with the memri link. 15 people, at least, died yesterday during various protests, Baghdad was shut down and tens of thousands of people protested, spread around the country, mostly in major cities. The Libyan uprising started way smaller.

Iraq is the next plausible frontier, and you seem to be in the know about the country, at least more than most of us, can you keep us as updated as you can in the comments section?

What's happening and what is likely to happen, at least in the next coming days.


It is probably related, Leanan. At least in some minor way, if not directly coordinated by the same people who are directing the rest of it.

A question back to you, though. If it is related, and all are being coordinated, who benefits from all of this? It seems to both sides of Islam are represented on both sides in one country or another, either as backing the revolt or standing behind the monarch or dictator.

"Speculators," ala Enron? Oil companies (I don't think so. Just asking.)? Some terrorist group, ultra nationalist group, or right wing nut job?

This is going on for a long time, and seems very coordinated to me. Just look at Egypt. Demonstrators back in the square! Watching on the tube, they look like they're having a party. Who brought them back? Why?

Or is this all one big distraction? And if so, from what? Now THAT is a frightening consideration!


Quoth Michael Con-man Lynch:

And recovery rates — the percentage of those reserves that we are technologically able to collect — have grown from 10 percent a century ago, to 25 percent a half-century ago, to an estimated 35 percent now. In some areas, like the North Sea, the figure is above 60 percent.

Is that last statement (about the North Sea) even true?

Technologically able to collect is not the same thing as economically feasible to collect. Not even close!

Other than that reality, I cannot say whether a 60% recovery of North Sea oil is feasible or not. If it is, I would say it will take longer, and it WILL cost more!


Technologically able to collect is not the same thing as economically feasible to collect. Not even close!

Well sure, but 60% strikes me as awfully high regardless. Would love to hear from a North Sea expert.

AL – Recovery factor is not specific to a region. I don’t have experience in the N. Sea but RF is determined by the reservoir dynamics which are identical around the globe. This means there is really no such thing as an average RF that has much value IMHO. RF generally decreases in any trend over time. Essentially the low hanging fruit concept: the poorer RF reservoirs tend to developed later. There have been constant improvements in efficiency but only 2 major tech improvements in the last 40 years. The older development was gravel packing (I’ll skip the long tech explanation) that allowed wells to be produced at a higher rate. The higher rate allowed better economics that allowed wells to be produced long which allowed improved RF’s. Folks are more familiar with the second tech: horizontal drilling. Really took off by the mid 90’s. And what about the other EOR methods like water floods and CO2 injection: been going on since the 30’s so they’re not much a game changer for more than half a century.

Now the rest of the story: from a physical standpoint many reservoir could have very high RF’s if, a Craig points out, the economics work. The price of oil and the production costs have as much, and sometimes more, impact on RF than the tech. I’ve seen RF’s as high as 80% but that was a bizarre case where Shell Oil produced a field far beyond economic limits. As important as tech may be, in the end the key is time: the longer you can produce a field economically the higher the RF. N. Sea RF’s suffer the same limitation as all offshore trends: high operating costs. Hundreds of offshore fields were abandoned at production levels that would have been maintained for decades had they been onshore. And here’s the kicker that really bites: suppose tomorrow someone develops a magic bullet that can boost RF’s in any offshore field by 20%.

Unfortunate it won’t help much for the fields where the wells have been plugged and abandoned and the platforms removed. It could help the remaining fields but they represent a rather small portion of all offshore oil reserves. Similar problem onshore. I make a WAG and say that 70%+ of all onshore oil wells have been plugged. A new tech to improve RF’s better be really good if it’s going to justify the expense of TRILLIONS of $’s to redrill those wells. This is typically the huge flaw when folks make generalities such as there has been X billions of bbls of oil produced since the oil patch started and thus Method Y will recover Z% more. Maybe…but only if the wells still existed. And the great majority doesn’t.

Broad statements can excite the cornucopians. But reality…not so much

Recovery factor is complicated by the fact that the baseline you are comparing against is uncertain. So X% of an unknown number remains a guess. Check the book The Oil ConunDrum where I have a section on RF and a pretty good explanation of how to think about it.

There have been constant improvements in efficiency but only 2 major tech improvements in the last 40 years. The older development was gravel packing (I’ll skip the long tech explanation) that allowed wells to be produced at a higher rate. The higher rate allowed better economics that allowed wells to be produced long which allowed improved RF’s. Folks are more familiar with the second tech: horizontal drilling. Really took off by the mid 90’s.

Rockman, in general I agree with your analysis. However, I would expand it slightly by saying that much of the more recent improvement in recovery comes from the combination of techniques. In the big N Slope fields for example, horizontal drilling was a big advance, but what really was a game changer was horizontal wells drilled with coil tubing guided by better 3D seismic. In thin remaining oil columns horizontal drilling allows more of the reservoir to be exposed. Using coil tubing to horizontal sidetrack old wells dramatically reduces costs. Using better 3D seismic has allowed those horizontal coil sidetracks to be very precisely targeted.

Prudhoe, being the oldest and biggest field is where this has been most advanced. Coil tubing allowed a step change in drilling costs. Some wells in Prudhoe have been sidetracked as many as 4 times. Over the last 30 years most of the field has been shot with 3D, that 3D survey has been reprocessed, that area shot then shot again with better aquisition methods, then that second survey reprocessed at least once.

For future advances in recovery I would look not so much for a single dramatic new method, but rather for combinations of methods that together make a significant difference. None of this will be a magic bullet that fixes PO, but it will buy some time.

3D seismic can be a major tool in redeveloping an old oil field. I remember some 3D seismic images they had at a company I worked for, pinpointing the oil that the company they had bought it from had missed.

They were lovely 3D computer images of the oil field showing the oil in green, the gas in red, and the water in blue. And right in the middle of it were some jaggies caused by noise on the seismic from the pumps at the tank battery.

They drilled wells into all the green areas, and yes they produced oil, and they drilled 3 wells into the blue area to make sure they had the geology right, and yes they produced water. It was a real money-maker.

Unfortunately, once you're done, you're done. When the oil wells start sucking 100% water it's all over. The wells are now all plugged and abandoned, and the company is gone, too. But it was fun while it lasted. I just wish I had cashed in all my stock options before the stock value crashed and I got laid off.

The recovery rates in the North Sea are the highest in the world. I don't purport to be a North Sea expert, but I can read technical reports. According to the reports, the best field is the Statfjord field, which has recovered 66% of its oil, and the average for the North Sea is about 46%.

But keep in mind this has already been factored into reserve estimates. They are not going to recover another 66% of the oil in Statfjord. Production from the North Sea peaked in 1999 and production is now in steep decline. Using enhanced oil recovery techniques is not going to improve things because they used EOR right from the start.

Most oil fields are not managed nearly as well as those in the North Sea, especially not in OPEC. To get the best results they needed to put the fields on EOR right from the start. By the time fields have been producing oil for 60 years, like Saudi Arabia's biggest field, the reservoirs are already thoroughly screwed up, so they are never going to recover anything close to 60% of the oil in place.

Lynch makes Yergin seem rational. LOL. I am new to appraising the thoughts of these trolls. ;-)

And then there is a White Swan.

On February 10 and 11, 2011, Levi et al. (U. Bologna) performed another test of the Rossi device


And it seems repeatable. And there is a device. And now it has been tested for a longer time. That’s a big difference that seems crucial.

From http://www.nyteknik.se/nyheter/energi_miljo/energi/article3111124.ece

Absolutely no apologies for plugging this issue.

The experiment needs to be independantly repeated by other people.
And then of course avalanche into new research as high temperature superconductors did.
Then we might actually have a silver bullet, so far it follows the script for the regular perpetum mobile or cold fusion scam.

Gary Taubes said that claims such as cold fusion discoveries are useful because they tend to expose who the charlatans are in various fields. Gary's book on prior cold fusion claims:


But read it more closely and there is something about secret catalysts--how much energy was required to amass those I wonder?

And the other ingredients too: the hydrogen, for example. Getting pure hydrogen would take energy.

Probably there are no free lunches out there, although we would all like to find one.

So far, this looks like a white swan all right. The kind you see everywhere. A device with secret elements? Sounds like another Orbo to me.

”You just have to embrace a new technology that might solve the energy problems of mankind, at least until it can be rejected,” Swedish professor Sven Kullander said in a scientific discussion...

This person is trying to flip the scientific method on its head.

The scientific community will not embrace any new concept until sufficient quality and quantity of proof is presented and replicated by independent experimenters.

I think it's a Red Herring rather than a White Swan.

The biggest issue is the total lack of dead bodies lying around the lab after the experiment is over (the most telling sign of cold-fusion failure). As the interview mentions, physicists have pointed out that the reaction Rossi describes should produce lots of gamma radiation, and no heat.

The second issue is that the reaction Rossi describes is endothermic and should consume heat rather than producing it.

In thermodynamics, the word endothermic ("within-heating") describes a process or reaction in which the system absorbs energy from the surroundings in the form of heat.

And the third issue is that it is impossible to create copper by nuclear fusion alone. Most of the copper in the world was produced by Supernova nucleosynthesis resulting in the Iron Peak .

For elements before iron, nuclear fusion releases energy. For elements heavier than iron, nuclear fusion consumes energy, but nuclear fission releases it. Chemical elements up to the iron peak are produced in ordinary stellar nucleosynthesis. Heavier elements are produced only during supernova nucleosynthesis. For this reason we have more iron peak elements than in its neighbourhood.

Thank you for listening. We now return you to your normal confusion.

We hear a lot about the supply side of oil by country on the TOD. Take a look at the best selling cars driving oil demand by country here:


I see lots of cars that are smaller and likely considerable more fuel-efficient that typical U.S. vehicles on the road today.

Price of home heating oil to hit record high

Home heating oil prices in Northern Ireland are set to reach an all-time peak after violence in Libya disrupted output.

Statistics provided for the Belfast Telegraph showed the average price for 900 litres was £525 yesterday — up £30 in just three days — after violence in Libya disrupted output.

Yesterday, the majority of local distributors increased prices from a little under £500 — with industry insiders predicting there will be more hikes.

See: http://www.belfasttelegraph.co.uk/news/local-national/northern-ireland/p...

Locally, those same 900 litres will set you back a cool $1,000.00 (£630). If you haven't been making plans to get off oil, what's holding you back? [Some of my neighbours are spending $5,000.00 to $6,000.00 a year to heat their homes whereas I pay perhaps $700.00.]


Paul, please contact me at bigskygen{at}gmail{dot}com to discuss a residential heating system you may be familiar with in NS. Can't find your contact email on TOD.


An e-mail is on its way to you now.


Warren Buffett Shareholder Letter – It Appears Peak Oil Was Part of the Burlington Northern Investment Thesis

My thinking was that Buffett believed the railroad game had changed from 20 years ago. Once a capital intensive low margin business. Now a business with a huge moat around it. What is the moat ? High oil prices. The main alternative to moving goods around the country is trucking, and high oil prices make moving goods by rail much more attractive.

Buffett on Energy CNBC Video

Buffett isn't buying oil sands stock right now but my bet is that he will be doing that very soon.

Ron P.

I bought my 25 shares of BNSF for the same reason and learned a hard lesson about investment when I found out that I could be and was forced to sell my shares to Berkshire Hathaway. I could have received BH stock but I didn't want that. I wanted the railroad.

I doubt that Buffett will buy any oil sands companies. The Chinese and others got in there ahead of him and bought up interests in a lot of oil sands companies, bidding up prices higher than Buffett would like to pay. The Chinese, after all, have trillions to invest and Buffett only has billions.

Buying Burlington Northern Santa Fe was brilliant, though. Only the big boys (Buffet and Bill Gates) can afford to play with the big toys - Class 1 railroads. Buffet owns all of BNSF and Gates owns a big piece of CN. It takes money to make money, and they have money.

The basis of the strategy was that BNSF can move freight for 500 ton-miles per gallon of diesel fuel. Try to do that with a truck. And if things get really tough, he can spend some extra money, string wires, buy electric locomotives, and use no diesel fuel at all.

Buffett is a long-term investor and he expects to make a lot more billions in the long term.