“Data always beats theories. 'Look at data three times and then come to a conclusion,' versus 'coming to a conclusion and searching for
some data.' The former will win every time.”
—Matthew Simmons, ASPO-USA conference, Boston, MA, October 26, 2006
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Being optimistic is getting harder everyday. I'm starting to get downright scared.
I can't help but wonder what sort of world our children will live in. Assuming they live at all, which may be a big if. I do not yet have children, and I am beginning to wonder now if I ever will. I could not justify bringing a child into a world gone mad, and adoption may soon no longer be an option. By the time I finish grad school, it may be too late for that.
I expect something half-assed to start, but hope that it will be forced toward the smart by hard reality, and that will be enough.
But I wouldn't worry about being able to adopt. There's always lots of unclaimed children around during any time of hardship and disaster.
On the issue of children, please do not succomb to fatalism. Even in the worst of times there are joys in being alive. Having children is one of those joys. My wife and I started a little late (in our forties), but recently adopted a little boy and have started paperwork on a second adoption. I know that they will not have the physical comforts in their adulthood that I had in mine. But that is not necessarily a bad thing. They will have opportunities to build a new world, if I can encourage them to gain the skills needed in a changed world. It is those who are most attached to our materialistic values who will have the hardest time surviving, them and the billions of very poor.
(Trying hard there to recognize my privelage in being born when and where I was.)
In my view, it will be the poor who will actually be better prepared for the crash. It is they who have to "make do" with very little, so for them not much will change.
I read a blog a few months ago written by a gentleman who lived for a few months in a rural area in Bangladesh. It was his assessment that they would be far better prepared for the advent of Peak Oil -- even though they weren't as informed as their western counterparts -- because they were almost completly self-sufficient. He stated that he would consider moving there when TSHTF rather than staying in the US.
I can't think of a population in history that will be more ill-prepared to deal with collapse than Americans. Completely pampered, with unreasonable expectations in terms of an acceptable standard of living, the stark reality of chronic deprivation is going to hit hard.
On kids: I'm in my early 40s and don't have any, nor do I plan to. I cannot in good conscience bring a life into the world with the realization of the brutal future that today's society faces.
If you are looking for a safe place after the crash, Bangladesh would be one of the worse places you could possibly choose.
I hear both of you. Bangladesh wouldn't be my choice either - I was just reporting what was said. I would tend to favor some of the less-densely populated Caribbean islands.
The best choices, IMO, are countries that still have large surpluses of oil and gas. But they also run the risk of being invaded too, so it's a little give-and-take.
Well, we have more than a few good estimates on when Peak Oil will occur (or when its already occurred), but are there any educated guesses as to when the oceans will rise 20' due to Global Warming? As I understand it, such an event isn't as imminent as Peak Oil, though I'm not as well informed on that subject.
I'll say this: if the oceans do rise 20', a lot more places than Bangladesh and the Caribbean islands will be in deep trouble. I guess we just have to pick our poisons. No place is going to be perfect in the coming collapse scenarios.
http://www.realclimate.org/index.php?s=sea+level&submit=Search
I appreciate the link, odograph. That's a great source.
Also, Bengali Islamic jurisprudence has reconciled itself to the necessity of stabilizing the population (although our Wahabbi Saudi friends are hard at work undoing that..), so the local culture has at least some chance of organizing their society to a stable condition.
I'm still not eager to join them, but they do have some chance.
I took exactly the opposite mood....here's a post I have done on some other message boards....
We must be in better shape....
(44/M/KY) 08/07/06 03:31 pm
Msg: 65804 of 65807
Folks, we can look at this another way....
We must be in somewhat better shape than we thought....
Think about it...at the front of summer, those who saw the world darkly were predicting oil prices over $100 a barrel and gasoline at $4.50 by the 4th of July....
Since that time we have had everything but the kitchen sink thrown at us, and still have not gotten there yet....
We made the MTBE switch on gasoline additive with only minor disruptions, the switch to Low Sulfer Diesel, minor disruptions, the continued Iranian war hawk talk, minor price moves, the explosion of way in Lebenon and Gaza....minor moves....several refinery fires/accidents, minor moves, Iraq descent into civil war, minor moves, Nigerian and Venesualan tensions, met with a yawn, widespread rumors that Mexico is peaked and Canterell (third biggest oil field in the world) is dropping on production, no one noticed, labor and technical issues in Norway, did anybody even read it (?) and continued declines in the British North Sea, which we seem to see as their problem, even though only a couple of years ago they provided us with 3% of our oil, and now, the Prudhoe shutdown.....and a little buck and a half to two buck jump on a 42 gallon barrel, (the way people operate today, that's couch change money)....
You can look at it one of two ways.....
>Them damm oil boys is ROBBIN' US!! :-O
>or, We pay them oil boys pretty damm good but the sonza' biitches SEEM TO KNOW WHAT THEY'RE DOIN' :-)
Take your choice, but either way, we have to admit the oil market delivery system, love it or hate, has worked surprisingly well....I think now is about the right time to test it for strenth with another blow like a hurricane....by shiit we'll see how much she can take and keep tickin'!
:-)
-------------------------------------------------
I am starting to get ready to stake my bet....what we are seeing right now is a logistical peak, much like the 1980's. Leharre called right....peak on all liquids around 2020, and then down some 5% a year. By the way, the consensus on this would be VERY STRONG, almost across the board, with even CERA seeing the "bumpy plateau" period, and most major energy agencies growing very leery at the 2015 to 2020 mark.
That in NO WAY reduces the emergency, and still doesn't give us much time, and the logistical disruptions along the way (such as this one) will be very disconcerting. As Hirsch pointed, MITAGATION on a massive scale has to be underway NOW. Strategic storage and fuel diversity has to be widespread and NOW. WE ARE CUTTING IT RAZOR THIN, either way, not a catastrophe if we plan well and CHANGE AT THE PERSONAL LEVEL NOW, but cutting it very, very close.
I could be wrong, but that's my call, that's where my money and prep goes...and it's my money, and me up shiiit creek if I misguessed it....:-)
---------------------------------
Roger Conner known to you as ThatsItImout
http://www.energybulletin.net/news.php?author=jeffrey+brown&keywords=&cat=0&action=searc h
Thanks for the counter argument Westexas, I actually had read that post some time ago, but the reminder is good. to do a bit of review.
The most compelling link is probably
http://www.energybulletin.net/13575.html
with it's excellent explanation of HL as applied to the top 4 world producers, Saudi, Russia, Norway, Iran. It is to be admitted that grouping these 4, of which real reliable information about 3 of which (Russia, Saudi Arabia and Iran) is almost impossable to obtain is interesting, in that it makes a bit of guesswork as to actually who's on first! It is to be noticed that a considerable amount of creaming has to be done to make the nice red bell curve fit! However, i don not argue with the chart, that is not my strong area
http://static.flickr.com/39/108519699_68c06e7df5_o.png
Also compelling is the recent work of Jean Laherre and the discussion of all liquids:
http://www.hubbertpeak.com/laherrere/EGUVienna2006.pdf
My contention is that "conventional crude oil" could well peak before 2020 (it could already be peaked, there is absolutely no way to know), but that "conventional crude" and in particular, conventional light sweet crude is becoming less of the energy picture anyway. All liquids is to me of more extreme importance, in particular as the grid and natural gas becomes a bigger part of the transportation enerrgy picture in the future (in my view, now due much sooner than previously expected)
The other issue is what can be called "data shift" due to extremely unreliable data. Even Colin Campbell himself expresses reverservations, as he shifts peak date further out in front:
From ASPO Newsletter, Sept 2005
"It is a summary of a depletion model and database that have been maintained for about 15 years, being subject to continual revision and refinement. It will be readily understood that public reserve and production data are grossly unreliable, and that even the industry databases show widely different estimates. Accordingly, it is necessary to look for trends and relationships, as well as apply common sense and geological knowledge, to try to come up with realistic assessments.
"Much interest devolves on the date of peak, but this really misses the point. It is not an isolated or high peak, merely the indicated maximum on a fairly gentle production curve."
But this in no way reduces the magnitude of the problem, Campbell's words again:
However, the importance is not so much in the date of peak itself but in recognition of the long, remorseless decline that follows."
Mitagating factors in my view
-Despite the recent concern about "plateau" by statistical experts such as Stuart Staniford and others, the "plateau" is almost at new highs, and not indicative of peak in and of itself. It is also not at all a new feature of the Saudi production history, as Saudi Arabia has been at "plateau" throughout the 1990's.
-Despite repeated and ongoing predictions of Saudi peak, the dates keep getting pushed further forward. The peak may, as I have said, already occured, (we know in fact that until 2003, the peak had indeed occured in 1981, however, through two decades no one noticed!
-The possibly false assumption that OPEC, Saudi Arabia, and in particular, Ghawar are being pumped flat out. Evidence indicates that since a period around 2001, when the 9/11 attack reduced consumption, that several large producers reduced production even more, to assure avoidence of complete price collapse. I am gaining in my belief that Saudi Arabia, while often talking a big game, has NOT raised production back to their capability, instead prefering a higher price lower production regime.
Some ask why they would not have done this in the 1990's. My assertion: That Saudi Arabia could not be sure that large producers Britain, Norway, and Canada could come in and fill the gap. They now seem more confident that these nations cannot.
-The fact that even with constant world emergencies, it has been almost impossible to get oil prices above $75 dollars per barrel. My assertion: That although that price may be painful, the great bulk of it can be accounted for by
inflation from the prior record lows of the 1990's, the need for infrastructure investment, geo-political interruptions, weather events, and demand increases from China and India. Despite a half decade of rumors and worry, at this moment, production has not seemed unable to meet a very high level of demand.
-The discovery peak. While the discovry rate did in fact peak in 1962 approx., this does not mean that discovery has ceased, and the decline from that old peak, when viewed in context, is not nearly as great as some would make it out. (indicated in the Vienna presentation by Laharre on page 3) and that the most profound collapse came after 1982, when the price of oil collapsed, thus collapsing expenditure on discovery efforts. There was a sizable recovery of discovery in 1995, but then a decline after 2001 and 9/11 back to the 1995 levels.
Willingness of the oil and gas industry to engage in discovery efforts is questionable, as companies like BP and others wish to pacify shareholders with large returns after the long drought of the 1990's, and whether they are open when they do make a discovery is questionable. Taxation and legal issues still impinge on discovery, for example, the often talked about Russian frontier which was once presumed to have large promise has been delayed in E/P by the turmoil in the Russian industry. Likewise, exploration off the coast of Greenland, Iceland, and Australia has been delayed by an array of economic and environmental concerns.
-Where efforts have been undertaken, the results have been fruitful, in particular in Brazil, which has for the time being essentially removed itself from the world competition for oil, in a very great success offshore.
There is promise in other areas along the coast of South America, the Pacific, the Gulf of Mexico, and the Outer Continental Shelf. At this moment, it is political/economic factors and not geological concerns that are keeping the world from E/P in these areas.
-Deep offshore oil E/P is much more promising than originally thought, mirroring the possibility of the "North Sea Miracle of the 1970's and 1980's. People forget that the bets were against the success of these ventures in the early days, and it completely altered the world oil markets.
-The fact that the oil and gas industry repeatedly seem to fear a price collapse much more than a supply shortfall. This creates a resistance to E/P that is badly needed ONLY IF the goal is to reduce price, which, as stated above, is not that high anyway (and shown virtually no real demand destruction due to price) when viewed from the priorities of the oil companies/producing nations. As in any business, the producer will charge what the market can bear as long is it does not destroy sales.
At this moment, we see depletion in the North Sea, (well known now for a half decade), and depletion in Mexico (expected by those in the industry). We some depletion in all the aging fields in OPEC, but none of these a surprise except possibly Bergen, which seemed to impact the oil markets very little.
Ghawar is unknown, but pre-remediation depletion is relatively certain. The effect of the remediation is important. Given that Saudi Arabian production has been flat throughout the 1990's, the Saudi fields cannot be viewed as overstressed, and in fact the production in Saudi Arabia has been turned up in volume, interrestingly, only when the need is present (and they have been making it quite clear that THEY will decide when the need is present.)
Conclusion: It is my conclusion, for purposes of my own planning, that there can be no real certainty of "peak" in the near future, although due to complete lack of information, no insurance against it, and no way to know that it has not already occurred. Thus, the complete onset of hysteria and panic we have seen in the last few monthes in some quarters is completely unwarrented. The need for mitagation by way of conservation, design, technology, and planning for fuel diversity and strategic emergency storage is ABSOLUTELY MANDATORY given the lack of information we have. The conclusion that there is going to be such a fantastic drop in oil/gas production that it renders the world too short of fuel to make remediation/restructering possible is overreaction to the wildest extreme, and frankly cannot be accepted as any type of logically supportable conclsuion given current evidence.
Just as production drops may surprise many, the drop in consumption through restructuring could be extremely great, and occur much sooner than expected, with no damage to the economy, if the consumption drops are done through efficient restructuring. The challenge to get people to break current habits will be great, but as oil and gas prices remain high, incentives for making needed changes will be apparent, and new, efficient technology will be coming into the market as old inefficient technology ages out.
Roger Conner known to you as ThatsItImout
That said, one argument I don't find the least bit compelling is the argument about oil not going over 75/barrel. First of all it's over that mark now, but I'll assume you mean the ballpark. But the reality is, we only hit that last year after Katrina, and at that time it was a crisis high. Now we have slowly creeped up to the point where it is commonplace, and the next crisis will most likely push us up to $80 or above. There's not a long enough track record of $75/barrel to say that oil cannot go higher, nor is there any evidence to support it being a top. On the contrary, more evidence seems to point to the $75 price point no longer being extraordinary.
Even oil company chiefs who deny a current peak in total oil say conventional oil has peaked. Of course, we keep our fingers crossed that production can grow enough to build alternative infrastructure (if the masses ever come to their senses).
sofistek
Ah, you are on to something there, and I have addressed that in a great number of posts.....
I have come to the decision that the real reason for concern is not "Peak" per se but the absolute blindness we are are running in, and see as the ABSOLUTE first job of the energy aware crowd as letting the public how absolutely little real information, statistics, data, and transparency we actually have in the knowledge of our energy supply, souces, and world resources.....this is the greatest immediate danger.....whatever happens, good or bad, will be a complete and total surprise.
(brief aside: The biggest news about the Alaska pipeline was not that the pipeline needed maintainence and repair (gee, who'd a thunk it?) but that it seemed to catch the world by ABSOLUTE SURPRISE that the pipeline needed repair and maintainence!! :-0 How much are we paying these expert reporters in the engergy industry?
Roger Conner known to you as ThatsItImout
Tony
So why stop the hope pipeline repeatedly, each time just to repair a short section? Might not the optimal approach to run it until it breaks, fix everything broke, and run it again?
... now maybe they got the timing wrong on the "when" but assuming the "run it until it breaks" stategy results in minimum total downtime, maybe it was worth it.
http://www.chron.com/disp/story.mpl/ap/fn/4103225.html
Tony
We're not at worldwide geological peak (i.e. the peak as imposed strictly by geological factors) quite yet. So I really think that our best bet is to hope for lots of logistical/geopolitical/weather impacts. It means more pain sooner, which will hopefully translate into less pain later. The danger, of course, is that too much stress could shatter the economy and the production systems that we need to use to build the transition infrastructure. But so far the economy has been more resilient against high oil/gas prices than I would have expected.
well, my opinion remains unchanged - peak is here, now. We can certainly discuss various aspects, and this is merely an opinion, but what is coming out of the pipeline is less than a year ago - and essentially, that is the reality we will be living with for the next several decades.
It is entirely possible that it will take years for that truth to set in for a majority of people after peak - whenever that may be.
At what point does a logistical peak become the real one? In other words, where are the major discoveries to replace what we have drained from the now tattered kings and queens?
The one caveat is that I think that they have been injecting water into the gas cap in order to boost the pressure in the field. I don't know if months of no production might have some longer term negative impact if it gives more time for the water to reach the oil leg through gravity drainage.
....Conspiracy thought: What if Pudhoe decline is worse than reported and this a convenient way to cover it up?
And came across these figures for depletion
from the 2005 Annual Report ..
Historical Production
Production from the Prudhoe Bay field began on June 19, 1977, with the completion of the Trans-Alaska Pipeline System. As of December 31, 2005 there were about 1,111 active producing oil wells, 33 gas reinjection wells, 82 water injection wells and 136 water and miscible gas injection wells in the Prudhoe Bay field. Production from the Prudhoe Bay field has declined over the past five years. The average well production rate was about 546 barrels of oil per day in 2001, 375 barrels per day in 2002, 350 barrels per day in 2003, 317 barrels per day in 2004 and 293 barrels per day in 2005.
Triff ..
But then again, what is the dollar value up slope?
293 * 1,111 = 325523/bpd.
Where's the other 75,000 bpd coming from?
And that's a 2005 number. 2006 would probably be 7% less then that.
Garth
"The net proved remaining reserves of oil and condensate associated with the BP Working Interests is approximately 1,043 million barrels as of Dec 31, 2005."
Also re. Field Geology:
"Gross reservoir thickness is 550', with a maximum oil column thickness of 425'.The original oil column is bounded on the top by gas-oil contact, originally at 8,575 feet below sea levelacross the main field, and on the bottomby an oil-water contactat approximately 9,000' below sea level. A layer of heavy oil and tar overlays the oil -water contactin the main field and has an average thickness of around 40'."
re. Oil characteristics:
"The oil produced from the Prudhoe Bay (Permo-Triassic) Reservoir is medium grade, low sulfur crude with an average specific gravity of 27 API degrees. The gas cap composition is such that, upon surfacing, a liquid hydrocarbon phase, known as condesate is formed."
http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?FilingID=4282125&Type=HTML
Triff ..
Seems quite suboptimal. It should be better to get them to do other maintainance or do simple supportive tasks for the pipe replacement workers such as supplying local knowledge and handle stuf for them and then restart the facilities withouth any retraining costs.
But what do I know? I have never been CEO.
The market isn't so sure.
And off-shore Florida.
Whether this particular incident is used as an excuse to drill ANWR or the OCS or the CA coast or anywhere else is academic. The real battle will be how much effort we can put into minimizing the environmental damage from the extraction and use of those resources.
I've mentinoed this several times over on my site, and every time I do I get at least one e-mail from a reader talking about how we "can't" drill in these pristine areas. I think that view is laudable but flawed.
FWIW, I oppose drilling in those areas, on the theory that we will need it more later, and we'll drill it then.
Will that pipeline hold up long enough to get it delivered if it does exist?
P.S. Book your trip to Florida's gulf coast this year (after the hurricane season) to enjoy those pristine white sand beaches while they last. Pretty soon it will look like Texas.
That would be an enormous shame. Inevitable it would seem. But a shame, nonetheless. We ate at Crab's the other night (right on the beach by the water tower) and the view was superb. Light breeze, white sand, the whole bit.
I agree with two themes above:
Once (or if) we come up with a viable alternative way of doing things, then there's no reason to go back to using oil anyway. So, realistically if we "saved" oil it would only be never to be used, because we'll have made a transition by that point. And even if we haven't saving a few drops of oil to stretch out our current society a bit longer would be just pointless if it's become clear we can't operate without oil.
I will not be surprised if we end up drilling there and basically everywhere else in a desperate attempt to find more oil. But the end result will be the same, and if we were smart and working for a faster transition, we could easily just skip on drilling in those areas. As it is, maybe we'll have environmentalism to thank for buying us a little bit more time. Wouldn't that be an ironic turn of events from the standpoint of all parties?
Anyway, hopefully we'll never drill there, but realistically, the way things are going, it's basically inevitable.
(It is foretold.) ... ;-)
Or is this a big enough problem that safety issues don't come into it and they have to work through it.
The SPR will need to release about 12 million barrels per month to replace the Alaskan oil shut in at the momemt. Will SPR oil be released now if it is estimated to take 3 months or longer to effect all repairs? I guess that is the $64 quesion.
http://www.petroleumnews.com/pntruncate/573947058.shtml
That timeframe would seem to justify replacing 73% of the pipeline and take things out of the "conspiracy" realm.
The paper I have on my desk is called Telluric Current Effects on Pipelines by DH Boetler and L Tritchenko of the Geomagnetic Laboratory, Geological Survey of Canada:
Further, Lebanese living in Scotland are feverishly working to get Blair for war crimes, http://www.informationclearinghouse.info/article14393.htm
There's also a massive revolt going on in Labour, http://news.independent.co.uk/uk/politics/article1214560.ece
Again, perhaps someone in the industry can comment but I can't see any way to repair a pipeline where pipe itself needs replaced without shutting it down. If that is the case, then this is pure demagoguery.
Let's not kid ourselves, or look for scape goats, that is the reason we are facing the crisis we are now.
Score another one for Simmons. He has been warning about our ageing energy infrastructure for several years. I know this problem is not directly related to Peak Oil, but the more I see his various warnings come true the more I am heeding his warning that we have peaked.
http://www.simmonsco-intl.com/research.aspx?Type=msspeeches
I'd kinda like to know, too, why they let their golden goose get the flu.
Stop for preventive maintenance- price gougers
Stop for corrective maintenance- incompetent a**holes
Some Alaska oil/pipeline/specialty-construction workers I know work half the year in Alaska, make more than a hundred grand in six months, then come to to their Hawaiian condos for a winter of R and R. Not a bad life . . . .
("R and R" stands for "Rest and Recuperation," but the military version is I and I, and what those letters stand for I'll just have to let you guess;-)
Having a robust system with redundant paths is uneconomical. I see in this everywhere - a system/paycheck/resource leveraged to the max, running at the smallest possible margin, without a net. Just in time (or better if a little late because one can charge more....). Same story for every sector of society under monopoly control: the costs are not born by the producer, but by the consumer. Let alone the citizen.
My thinking is capitalism as currently implemented cannot cope with limits. It's a giant entropy machine, converting natural wealth to waste. At least compared with membership owned cooperatives, it seems a poorer choice for a world with limits.
cfm
Wonder if it will be run in a Soviet manner in a few years? Only patching up the biggest spills and fuck the rest. Our long term environmental care depends on the short term problems being manageable, freezing or starving changes the prorities to here and now.
Their 'golden goose' has been in decline for some time, and they may simply have concluded it was cheaper and easier to let it rust than perform expensive maintenance operations.
I won't be surprised at all if BP comes out once the markets calm down from this and announces that it's not economical to replace that much pipeline on a declining field, and therefore they intend to shut the field down permanently.
Any opinion on this.
Then the markets would go bonkers. Temporary removal of 400KBP can be accepted, although prices will go higher. Permanent removal would be very different. Although, at current and probable future prices, I don't see BP shutting it down. If it did, I would think its lease would be pulled and resold to some other IOC.
"We can't let our pipelines fall apart!"
"How about a tax break to motivate the companies to maintain their assets?"
"What a great idea!" etc.
To me this is not much different from the "we don't have enough refinery capacity because it doesn't make economic sense to build a new refinery" issue.
So these are smaller local transit pipelines? I do assume that they are also insulated against the cold temps up there in the frozen North? Does the insulation make it more difficult to check on the condition of the oil carrying pipe? (I would think they have to remove the insulation to be able to run wall thickness tests - And that must be time consuming and expensive and difficult?)
FWIW
http://money.cnn.com/2006/08/07/news/international/oil_alaska/index.htm?cnn=yes
BP spokesman says '16 miles of major pipeline in the field' will need to be replaced.
I don't know for sure it that is indeed the case. But it would certainly make a lot of sense, because a crude oil/water mixture that hasn't been yet been fully degassed will contain not only saline water but also some hydrogen sulfide and carbon dioxide, both of which can cause serious corrosion in the presence of water.
If the pipe in question is above a certain size, I don't think the presence of insulation would interfere with inspection (at least internally), as that would be likely done by running an inspection 'pig' down the inside of the run of pipe in question.
This whole thing smacks of maintenance knowingly deferred in order to keep production at maximum levels. Pipes don't corrode overnight, so BP must have long been aware that the margin of safety on its pipe walls was getting thinner and thinner but kept on putting off the needed repairs.
This no different than having an old high-mileage car that you know is in need of major repairs but which you keep running and running until it finally craps out.
All we need now to hit the trifecta is a category 4 hurricane in the Gulf of Mexico and war with Iran.
They do have to take measures to keep the permafrost from melting where the pipeline supports stand but I am not sure what they are. Too bad we don't have an old pipeline worker to explain all this to us. When I worked in Saudi Arabia I worked with several people who helped build the Alaska pipeline but I have lost touch with them.
The pipe itself is not insulated.....impossible in a 800 mile pipe.
More info:
http://www.theoildrum.com/comments/2006/4/17/135253/457/201#201
The problem is astoundingly simple: BP hasn't pigged the affected transit pipelines since 1992, relying on x-ray inspection and anti-corrosion treatments instead. They made a mistake, and now it's come back to bite them.
In other words, there is something we are missing to this story.
FWIW, we had a one-cent uptick in a long down-trend yesterday:
http://www.orangecountygasprices.com/retail_price_chart.aspx
When that happens there will be serious drop in oil demand, many other things will come to fore, but it will buy a little time.
If that's so, then a couple of those Saudi tankers that are crusing around the oceans looking for a buyer should be able to fill the west coast needs <RGBG> [sarcasm]
Prior to the Simmons/Kunstler sysmposium last year in Dallas, Matt and Jim did a one hour talk show on the local PBS station. I have been trying for months to get a copy of it, and I finally called the right person. They are supposed to be sending it to me within a week. It was a very good talk show. Matt and Jim, who had not met each other until that day, were basically finishing each other's sentences.
I'll see about getting it posted, and I'll see how much it will cost to get it transcribed.
Matt Simmons: "If we don't do something to address Peak Oil, Jim Kunstler will have turned out to be an optimist."
Well, they complain that even making 5% of the EU petrol/diesel out of biofuels will use up 50% of the rapeseed stock, and that will affect their margins in the "yellow fats" market segment. But the underlying message is "the EU not only lacks enough oil and gas for its inhabitants, we dont have enough landmass for growing things, not once we lose the petroleum based fertilizers". biofuels just aggregates a problem.
BP Moves Beyond Petroleum
on the US West Coast
No Physical Shortage of Supply
Are People Anxious? No Physical Shortage
Please.
The price of oil has soared because of rising demand in the face of inelastic supplies. Econ 101.
And I don't know if people aren't anxious. The truckers in Colorado sounded anxious to me the other day. Hell, I went and filled up my tank this morning on the Alaskan news.
People won't get anxious untill it effects them directly. Either shortages at the pump, or another big jump at the pump. Then you'll see complaints for 4-6 weeks, then it'll die down and things will be business as usual.
Oh, never mind !
Dave,
That comment was directed at the CEO from BP. In hindsight I probably could have let the sarcasm speak for its self, but I was just so flabbergasted after reading that quote...
It wasn't a good day in the Oil patch.
-- best
In order for the price to be driven higher, buyers must be willing to spend more to acquire their share of X. Why would political anxieties affect the day-to-day demand? Political anxieties lead to hoarding, not increased consumption.
So, does he mean that such anxieties are leading to higher-than-expected consumption by SPRs around the world?
Political axieties don't have more than a small effect on oil prices, that's the point. See the Israeli/Hezbollah war. You might have expected a sharp increase in price if anxiety were all there was to it. In fact, there was only a modest gain. Nonetheless, anxiety plays a role but no one agrees about what it is and how can you quantify anxiety?
Browne is talking about the geopolitical "risk premium" on oil prices and blaming the resultant anxiety -- remember, this means A state of uneasiness and apprehension, as about future uncertainties -- for high prices. What he is not acknowledging is that price may be based on the supply & demand fundamentals of the marketplace. This is his sly way of reassuring all of us that if oil traders and all the rest of us would just a take some tranquilizers, everything is going to be OK. In his self-serving view, there is no supply problem.
Since BP has screwed up the Prudhoe Bay pipeline maintenance -- I mean, c'mon! how could they let those pipelines get into such an advanced state of decrepitude? and permitted a 200 thousand barrel oil spill a few months ago -- they have just effectively reduced American supply by 400/kbd indefinitely. That's not something to get anxious about. It's a done deal. The result is even more pressure on price. I wonder what Lord Browne has to say now? What a hypocrite.
Now that I've told you this, maybe you can explain it to ggg71.
What is a risk premium? How can increased risk lead to increased demand, other than demand for long term storage?
The increase price from a risk premium has nothing to do with increasing demand. Instead, petroleum users and traders are betting that supply disruptions may occur in the future. They would rather pay a slightly higher amount (the risk premium) to lock in supplies than a potentially much higher price if there is a production loss.
The real issue with the risk premium argument for why prices are so high is the fact that risk premiums only exist because supplies are so limited. If there was a substantial excess capacity in the world, then supply disruptions would not be able to cause a significant effect upon price. By saying that there is a risk premium, the PO naysayers are admitting that there is no excess world production capacity.
- Changing expectatations shifted the whole demand curve and
- The changing expectations that shifted the supply curve also in this case tend to shift the demand curve up and to the right. Why?
Because, not only has the situation on the ground changed, the risk premium (which is part of the demand curve, not only the supply curve) has also changed in a way that makes crude worth more than it was yesterday.In GENERAL factors that affect supply curves do not also affect demand curves. Expectations are the huge elephant that is an execption to this generalization. Note that both supply curves and demand curves are based on opportunity costs, and in this case the opportunity costs affecting supply have shifted the supply curve up and to the left, while the demand curve has been shifted up and to the right.
This goes a bit beyond the way Econ 101 is usually taught, but we leave a whole lot out from the introductory class so as not to confuse students with the truth.
If it works for the government why can't I do it??? :)
400,000 real barrels of oil are now going away for what appears to be a long time. Where will the real replacement come from and how will it really get here? Sound bites for for a while, but they are not oil/ or gasoline.
I would like to add that the ensuing fuel shortages will perhaps have an impact on industrialized food production in California which may cause a ripple effect into food production and availability.
salt water cut. wow.
http://news.yahoo.com/fc/Business/Oil_and_Gas
----------------
BP PLC said Monday it will replace 73 percent of the pipelines from the nation's largest oil field and that production could be closed for weeks or months, crimping the nation's oil supplies at a time of peak demand. BP, the world's second-largest oil company, began shutting down the pipelines on Monday and said it would replace 16 miles of the 22 miles of transit pipeline it operates in the Prudhoe Bay field following a leak discovered Sunday.
--------------------
Does anyone know how much spare pipe of the right dimensions and carbon content is available in Alaska now-- or does it have to come on a 'slow boat from China'? The Chinese military is probably already ordering that any request for Alaskan replacement pipe goes to the back of the line, no matter the profits to be gained!
Replacing this loss of Alaskan crude to the West Coast by shipments from OPEC in a timely matter may be difficult. Does anyone have stats on how many spot-market VLCC-tankers ply the Pacific? Or would it be easier to send Venezuelan crude through the Canal to resupply the West Coast? Or do Mexican oil exports to the US go to TX, LA by pipeline or boat? I am not aware of any Mex exports going by pipeline to CA refineries--or am I mis-informed?
Anybody know how much oil prices have to rise to cost/justify the entire Alaska pipeline replacement for the remaining crude? Or do the economics of Canada oil-sands make sending this steel to Athabasca a better decision?
Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?
I can't give you any information regarding pipeline materials in Alaska, but I can assure you that they're readily available in the Lower 48. If BP starts to discuss the replacement of pumpstation components, however, this outage will last some time. Pumps can require months to manufacture, and that doesn't count the time required for placement, tie-in to the line, and hydro-testing. Luckily, I have yet to see any mention of this. A bigger factor than material availability may be the weather.
----
There was widespread disagreement in the regular AK Legislative session (winter and early spring) about what the exact production tax rate and tax credit for capital investment should be. There was a lot of bickering and hair splitting around the number 20% tax rate, i.e. some said 21, some said 22.5, etc, and on the second to last day of the session (which lasted until 4am or so, which I attended to the bitter end) they were still bickering about the exact rate and tax credit.
This was all when all of Murkowski's expert consultants (including the internationally renowed energy consultant Pedro van Meurs) recommended a rate of at least 25%, and state Democrats (in a pretty slim minority, esp. in the House) advocated for 30%. Murkowski, having had closed-door discussions with reps from BP, ConocoPhillips, and Exxon on the gas pipeline and the oil tax (which the corps wanted included as a term in the gas pipeline contract discussions, a potentially unconsitutional measure), tried to hold firm at 20%, giving the oil companies as low of a tax rate as he figured would fly with Alaskan citizens, who gradually became more disenfranchised with the machinations of the oil companies (and their related PR campaigns, which were resounding failures).
On the last day of the session it looked like Murkowski's legislative cronies were going to muscle through a rate of around 21 or 22 percent, I believe, but then there was a major schism amongst the Republican majority, between some older establishment Republicans and Murkowski's legislative proxy, Senate President Ben Stevens (son of Ted). The bill didn't pass and the regular session ended.
Into the second special session oil tax reform still hasn't been resolved. In a way what I wrote above was a long-winded way of saying how big of an issue oil tax is in Alaska right now, and some of the controversy and contention that have gotten into the legislative debate so far this year.
The bottom line is that reforming this archaic production tax, along with a natural gas pipeline to be built some day, was hailed as the future revenue generator for the state of Alaska, and a way of ensuring that the suckle of Alaskans' PFDs (that's Permanent Fund Dividends to you - a lump sum of cash every Alaskan who signs an intent-to-stay form receives every year from oil and gas revenues, right now around $900 or so) continue into the future.
The problem, as we are now seeing, is that expected revenue does not always pan out, like for instance when a major oil producer shuts down a field that produces half of Alaska's oil. From the Seattle PI:
Like I said before, in anticipation of these and future revenues, the Alaska legislature (led by ostensibly fiscal conservatives) spent like a drunken sailor in its capital budget. The infamous "bridges to nowhere" and Juneau "road to nowhere" were not wholly federally funded. The state has to pony up matching funds in each case, over $45 million in the case of the Juneau road.
So if this Prudhoe Bay shutdown draws out for a long period of time, it could become, at worst, a spark in a room of dynamite for Alaska. I hope not, and I hope this changes the collective mindset in Alaska to focus more on finding alternative sources of government revenue (say, income taxes) for the future.
a) more than
b) a quarter
c) a third
d) half
of the world's spare production capacity.
No matter how you answer that question, you have to believe that the crisis will dramatically increase the near-term volatility of oil prices/magnify the price impact of any perceived threat to supply.
Consequently, even if the Alaska news doesn't send prices into record territory tomorrow, any additional bad news from Iraq, Nigeria, Iran or Venezuela will really, truly rock the boat, baby.
Isreal will allow "humanitarian traffic" though, yeah, right.
I never thought things would go this way - Israel is really "screwing the pooch" here. Translation: utterly fucking up. The world, and in this I include a large portion of the US public, is appalled by their actions.
Let's examine the West Coast supply logistics as Prudhoe Bay is shut down, bearing in mind that this loss of crude was relatively light and sweet compared to what is coming from elsewhere to replace it. So, right off the top of my head: I want to know the future status of West Coast refineries reduced outputs as they process more heavy, sour [if they can!]. What is the probable gasoline shortfall--10, 20, 40%?
Consider that the West Coast's supply chain has doubled or tripled in length overnight due to the Prudhoe shutdown. What use to be a relatively short run down the coast now will require these tankers to go to OPEC to fill up instead, then turn around for a long haul back to LA, Frisco, and Puget Sound. IF these tanker-ships were designed to have small bunker-fuel holds for the short West Coast run [normally refilling in WA, OR, CA], then it may require mid-Pacific refueling for them to make the whole trip.
Another consideration: how many of these former West Coast tankers will fit through the Panama Canal as they try to bring crude from the SPR or Venezuela westward? If they are too big, then PanaMax tankers can charge outrageous prices for the traverse from the GoM and Carribean to the West Coast! If there are not enough spare PanaMax tankers-- then we may be looking at very large tankers having to transfer their loads to barges on one side of the Canal, then repumping the fuel from the barge into another ocean-going tanker on the opposite side of the Canal. These extra steps and time will cost BIG $$$ if the West Coast refineries have to have a minimal percentage of light, sweet in order to optimize their refinery production.
If the Canal cannot handle this sudden jump in shippng traffic-- will we see tankers actually going around South America desperately trying to get crude of the proper API to the West Coast refineries? Will it get so bad that the Nigerian light, sweet will go all the way to the West Coast?
Hopefully, some experts will weigh in to answer these questions. Hopefully the shortages won't get so bad that the West Coast crops rot in the fields because the trucks and trains cannot get them to the markets all over the country. Nevada, being 100% dependent on CA refinery supplies, could shutdown the casinos and dissuade tourist gambling: this would allow more fuel to be diverted to food harvesting and shipping. Yikes! I sure hope it doesn't get this ugly too quick.
Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?
I believe that there is a pipeline across Panama for just such uses, but I don't know its capacity or utilization level.
A quick google yields:
http://www.photius.com/countries/panama/economy/panama_economy_oil_pipeline.html
Kudos, excellent find! Now does anyone know if this is operational today-- or is it inactive, corroded, and clogged with sludge like the BP transit pipes feeding into the Alaskan Pipeline? Does Panama have sufficient kilowatts and skilled techs to power this Isthmus transit system?
Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?
these are the best questions on this thread and I don't hear the big dogs chiming in. Cali, the world's sixth largest economy, needs to start asking these questions like nine hours ago.
thanks again
Whatcom County's BP Cherry Point refinery gets about half its crude oil supply from Alaska's North Slope, but BP's shutdown of North Slope production won't affect refinery operations here immediately.
Refinery spokesman Mike Abendhoff said crude oil stockpiles at Cherry Point and in Valdez, Alaska, can keep things up and running normally for a few days, along with crude already aboard tankers bound for Cherry Point. But if the oil field remains out of production for more than a week or two, the company will have to scramble to find new sources of crude on world markets.
Ten years ago, the Cherry Point refinery got all of its crude oil supply from Alaska. Since then, the company has diversified its supplies, and now about 115,000 of its 230,000 barrel-a-day input comes from Alaska, Abendhoff said.
http://www.bellinghamherald.com/apps/pbcs.dll/article?AID=/20060807/NEWS03/60807004
Cherry Point is the largest refinery in Washington State
http://bpcherrypoint.com/external/index.cfm?cid=67&fuseaction=EXTERNAL.docview&documentID=26 95
From your 2nd article. Great info! Esp. today.
BTW How come gasoline seems to average higher in the B'ham area than most other places in Wa.?
It seems that Canadians, who are paying significantly more for fuel just a few dozen miles north, may be contributing to a run-up of prices in the Bellingham area as they travel through Whatcom County on their various endeavors in the U.S. Instead of filling up in, say, Vancouver, why not wait and fill up south of the border, where it's a whole lot cheaper? I suspect that this is just part of the story, however...
-best
No one's been able to adequately explain why Bellingham has the highest prices in the state. I've found lower prices even in Lynden which is even closer to the Canadian border.
BTW, I haven't yet noticed a significan uptick in prices here since the announcement. Regular gas has been selling for $2.99 to $3.22
http://www.washingtongasprices.com/Bellingham/index.aspx
The Bellingham Herald has updated the article I pointed to last night on the BP Cherry Point refinery:
Abendhoff expressed confidence that BP could keep the refinery operating at capacity with new fuel sources. But energy analyst John Kilduff of Fimat USA, a global financial services firm in New York, said that could be a challenge.
"I'm skeptical of the argument that they can get the oil from elsewhere," Kilduff said. "In the current environment ... it's all spoken for."
Kilduff said the crude oil supply disruption likely means that motorists will face spikes of about 10 cents per gallon in this region, and could also mean spot fuel shortages. While severe shortages probably won't develop, Kilduff would not rule them out either.
"This is uncharted water for us," he said.
http://www.bellinghamherald.com/apps/pbcs.dll/article?AID=/20060808/BUSINESS/608080350
For those that think in economic terms, this increased the price of oil over $2 today and might help accelerate substitutes. But its a real time example of net energy.
True, and is exactly where Matt Simmons hit the nail on the starting in the late 1990's. The first time I ever heard of him back at the turn of the century he had written a white paper on the need for massive infrastructure investment in ALL ASPECTS of energy exploration/production/transport and research. The remark that struck me and caused me to go to his website was something close to "for those who argue about renewables vs. fossil fuels, there is no argument. We will need both of everything we can get."
At that time, Simmons was calling for a trillion dollar investment in energy infrastrure in all the areas above over the next half decade. We are now six to seven years past the time he started saying this. Has anyone seen that kind of investment? Either way, that alone would have driven the oil/gas price up, with or without peak fears....
Roger Conner known to you as ThatsItImout
Good point! I wonder if Skrebowski, Campbell, and Laherre are incorporating ever-increasing downtime allowances for infrastructure replacement due to maintenance issues.
Hey Freddy Hutter--you out there? Can you email these 'Peakoil topdogs' and ask them how problems like Prudhoe affect their timelines? Big Thxs.
Has Yergin & CERA held a press conference yet on how Alaska being one-half offline helps drive crude to $38/ barrel soon? <GRIN>
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Xethanol
I especially enjoyed these quotes:
I have got to work on my quotability. I think I can do a bit better than that. :-)
But at least I know to hold my tongue when under the influence of alcohol and with a video camera rolling. :-)
Back on topic - why did oil go up so much today and gasoline futures were only up one penny? (Sep basis). Do we have plenty of crude to refine to end product for Sep irrespective of 400,000 bbl shortfall?
It would appear that we do, because crude inventories are a good 50 million barrels higher than normal for this time of year. If we allow the inventories to be pulled down, and tap the SPR if we need to, we should have plenty. However, I expect more volatility as we pull inventories down. I still think $80 oil is an easy bet in the near future. Oh, and I don't know why gas didn't move any more than it did. I suspect it is because the bottleneck is refining capacity, and because of the high inventories there shouldn't be a gasoline shortage. But I anticipated an upward move on gasoline.
I spent another hour on the phone with Khosla tonight. We talked mostly about energy balances. My 4-year kept screaming at me to play with him, and my wife wasn't here to help me out. It was a bit comical.
Oh, and I think I know why you can't find any ethanol stocks to short. Mavericks owner (and billionaire) Mark Cuban has been shorting them. From the Sharesleuth story that I was quoted in:
On shutdown. Note quote from A.G. Edwards
We estimate it could take between 2-3 months to get it back on line," Bruce Lanni, an industry analyst with A.G. Edwards, wrote in a research note. "However, there are no assurances that it will return to current capacity, given the complexities and age of the reservoirs. Thus, we would not be surprised to see volume losses in the area of 5 percent to 10 percent."
Great find BTW!
...So if they don't just pick up the same production from before the repairs ....why not? (A possible explanation from Westexas upthread?)
"The one caveat is that I think that they have been injecting water into the gas cap in order to boost the pressure in the field. I don't know if months of no production might have some longer term negative impact if it gives more time for the water to reach the oil leg through gravity drainage"
Is that what Lanni means by age and complexity of the reservoirs?
(1000% cost overrun, hasty work, not a confidence booster)
http://www.pbs.org/wgbh/amex/pipeline/filmmore/pt.html
Then a question, for anyone who might know the legal details of the Alaska/Big Oil tax rules: The Seattle PI reports that the state will lose $4.6 million a day in revenues for the duration of the shut down, or $1.68 billion a year.
So how much will BP lose? Should be easy if you know what percentage the state tax is. (or do the Feds take a percentage as well?)
http://www.pbs.org/wgbh/amex/pipeline/sfeature/flyover.html
"Producers' group Opec expressed worry at the closure, but said it had enough spare capacity to meet any shortfall."
"It certainly isn't going to create any shortages," Tancred Lidderdale, an analyst with the federal Energy Information Administration, said.
http://news.bbc.co.uk/1/hi/business/5251458.stm
http://www.theaustralian.news.com.au/story/0,20867,20054496-601,00.html
Nice quote about it being the "No 1, BBQ stopper". Point being that not much in the way major policy questions makes it into everyday conversations.
Anyway, the discussion about alternative liquid fuels is happening in oz now.
Why are Saudi's raising the price of oil if there is more than enough to go around?
Where are the extra 400,000 barrels?
Where is the extra light sweet oil?
What the hell is Bush doing in spite of knowing about peak oil?
These and other exciting questions will answered in next week's exciting new episode of Peak oil.
may have n haled... but can't remember... alcohol is a fuel?
It's in German, but I believe the general gist of the lyrics and images is universal. Enjoy!