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Peak Oil

The Peak Oil Crisis: The Real Energy Bill

Staff, Falls Church News Press (US)
Congress has now passed the Energy Bill of 2005 and, as nearly every commentator has observed, it will do next to nothing with “high” gasoline prices, reducing US dependence on foreign oil, or to help cope with the impending peak oil crisis. In short, this bill was mostly a sop, creating the illusion that the Bush administration and Congress are doing something about gas prices and a growing unease about dependence on foreign oil.
It calls for no sacrifices from the American people. Thus, within a few years – or perhaps months – we will need another energy bill to deal with the real crisis that has arisen from peak oil.

What sort of provisions should a real energy bill contain? …

The required congressional actions are obvious and simple: mandatory conservation and the halting of wasteful practices, a shift to renewable energy, and the development of sustainable lifestyles. While this is easy to say, it will require decades and much hardship to accomplish fully. …
(4-10 August 2005)

Transcript of Matthew Simmons Interview on Financial Sense Newshour

Jim Puplava, Financial Sense Newshour
MATT:So we have actually now created a pending domestic embargo, and
we’re going to be lucky to get through the Summer without some periodic
shortages. We probably will, but the odds are probably as high we will have
some shortages, and then if we get through the Summer we have a fabulous
respite from Labor Day to Thanksgiving, until we hunker to try to figure out
how the world gets through the Winter of 2005 and 2006 because oil demand
globally could easily go to 86-88 million bpd during the Winter, and that could
easily exceed supply by 2-5 million bpd.
JIM: If that was to happen we would almost be looking at $75-80 oil, I
MATT: No, no, no. Oil prices could easily go up 5-10 times. …
(8 August 2005)
Audio of
the interview is also available.

Terror fears push oil prices to 22-year high

Julia Kollewe, The Independent
The price of oil rose to its highest level for more than 22 years after warnings
of imminent terror attacks against Westerners in Saudi Arabia. There was also
evidence that the surge in the price of crude oil – driven in part by the
invasion of Iraq and more general concerns about the security of the
commodity’s supply – is poised to have a significant impact on the spending
power of British consumers.
(9 August 2005)
No mention of peak oil or even any reason for general supply constraints. As
supply and demand are so tight, pipeline and oil infrastructure saboteurs now
have the ability to have a greater impact on price, giving some seeming
credibility to these kind of misleading lines of argument. -AF

Other Energy

Shell Canada Oil-Sands Cost Target Jumps to C$7.3 Bln

Staff, Bloomberg
Shell Canada Ltd., the fourth-largest Canadian oil company, said the cost to expand its Alberta oil- sands development will almost double to C$7.3 billion ($6 billion) as prices of steel, cement and equipment rise.

Design changes that will make additional expansions easier also are inflating the cost, spokeswoman Janet Annesley said today in a telephone interview. Calgary-based Shell Canada and its project partners, Chevron Corp. and Western Oil Sands Inc., in April said the expansion would add 100,000 barrels a day of mining and refining capacity at a cost of at least C$4 billion.

Rising oil prices, which today touched a record $64.27 a barrel in U.S. futures trading, are spurring more investment in Alberta’s oil sands, which contain the world’s largest petroleum deposits outside Saudi Arabia. Such companies as Syncrude Canada Ltd., the world’s largest oil-sands miner, have raised spending targets as competition for labor and materials increases.

“Costs are just getting mind-boggling,” said Glen MacNeill, who manages C$800 million in assets, including 105,000 Shell Canada shares, at Sentry Select Capital Corp. in Toronto. “It’s making me a lot more cautious. Investors just can’t go in and buy the models that the companies are giving you because they don’t work.”

Producers are tackling riskier and more expensive projects as easier fields are either depleted or off limits. Demand gains in China and the U.S. have outpaced additions to supplies. …
(9 August 2005)

What’s happened to British Nuclear Fuels Ltd?

BNFL/Nuclear Engineering Magazine
Announcing its annual results to 31 March 2005, BNFL has set out its strategy for the future – a strategy that includes the sale of Westinghouse.

As BNFL announced improved financial performance in its 2005 annual results, the UK government-owned nuclear business also confirmed it has commenced a sales process for its Westinghouse business unit. At the same time, BNFL has undergone major restructuring to prepare for the transfer of its assets and liabilities to the Nuclear Decommissioning Authority (NDA).

Ending months of speculation, BNFL CEO Mike Parker said: “There have been a number of unsolicited approaches for Westinghouse and it was decided at the board meeting on 30 June to commence a sales process to determine whether a disposal would realise appropriate value.”
(27 July 2005)
Long article, lots of detail.

Politics and Economics

Rate hike fears as oil prices hit new high

Brian O’Mahony, The Examiner (Ireland)

INTERNATIONAL oil prices continued to soar yesterday rising to new highs of $64 per barrel and threatening higher interest rates. Dearer oil will push up inflation figures experts warned and the end result could be a hike in rates from the ECB. Every 2 cents increase in the price of petrol adds 0.05% to inflation and the impact overall this year will be significant.

When domestic fuel costs overall are taken into account they will account for 0.3% of this year’s expected domestic inflation figure of 2%, said Alan McQuaid, chief economist, Bloxham Stockbrokers. This will impact across Europe as well as Ireland and the end result could be an unexpected hike in rates this year from the ECB, warned Mr McQuaid. Until recently it was expected the ECB would leave rates unchanged until the second half of 2006 in order to prop up the depressed eurozone area. In the long term rising inflation will also hit economic growth. Every $10 hike in the cost per barrel of oil knocks about 0.5% from global growth economists estimate.

Meanwhile, the Green Party hit out at the Government’s failure to develop a coherent energy policy following the latest oil price shocks.

[Eamon Ryan, Green Party spokesman on Energy] called on Minister Noel Dempsey to detail what type of analysis, if any, the Government has conducted into peak oil production. Many experts believe supply and demand is the key issue facing the global economy and not market speculators exploiting nervousness about supplies. Peak Oil experts argue the core issue the world faces is the fact that demand is starting to run ahead of available oil supplies. …
(9 August 2005)

Why commodities should concern everyone

Staff, Bangkok Post

Google’s share price is now well into dot com valuations at more than 80 times earnings _ and this for a company that most of the world could probably live without. So how much would you pay for the last barrel of oil?

Commodities in the 21st century. The benchmark index for tracking commodity prices is the RJ CRB, the Reuters-Jefferies Commodity Research Bureau Index. In its latest revision as of last month, it now contains 19 core commodities that best reflect the world as it is today. Its components can be broadly divided into energy, metals and agricultural.

Significantly, the former practice of equal weighting has ended, so that the index values of these commodities are now based on their significance to the global economy as well as their price, making this a much improved and more relevant barometer. …
(8 August 2005)

India not influenced by U.S. pressures over gas pipeline

Staff, Tehran Times
TEHRAN — The U.S. has been exercising some pressure on India over the pipeline construction carrying Iran’s natural gas to India.
“But, India has not been coerced by the pressure,” noted Iran’s Deputy Oil Minister Mohammad- Hadi Nejad-Hosseinian, who was referring to the U.S. pressure on India over the construction of a pipeline to transfer Iran’s liquefied natural gas (LNG) to India via Pakistan.

It is possible that the projects currently underway by the National Iranian Oil Company (NIOC) be stopped under the weight of the U.S. political pressures, said Nejad-Hosseinian on Monday, stipulating, “The fate of the current Oil Ministry projects is not determined.” …

Nejad-Hosseinian said that under the contract Iran should offer the project to the contractor by September 2006 and the Indian party would have to construct a platform for LNG delivery and order LNG carriers; otherwise either side violating its commitments would have to pay $50 million a year to the other party. …
(9 August 2005)

Energy investments lure hordes of newcomers

Janet McGurty, Reuters
The search for the best return on investment has led hordes of big Wall Street players into energy markets, a trend that shows no signs of abating as a rally in oil prices pushes ahead. Investors are using various means of turning the high price of oil to their advantage. Some are taking positions in actual crude, gasoline and heating oil contracts on futures markets like the New York Mercantile Exchange. Other investment is more traditional, such as buying shares of energy companies, mutual funds and hedge funds.

But the increased presence of commodity pools and other speculators has many long-time futures traders blaming the newcomers for the volatility and rising price of crude oil as well as gasoline and heating oil. Volatility, however, is often the very reason oil appeals to commodity pool operators, where price movement is a key aspect to making money and the political risk associated with much of the world’s reserves brings a unique kind of premium.

“We make money on volatility,” said Jean Jacques Chenier, a commodity pool adviser with Alterama, a boutique firm that manages $20 million for European institutions and wealthy individuals. “We saw the opportunity with energy.” …

“Energy is loaded with hedge funds right now,” said David Dreman, founder of Dreman Value Managements, which has about $13 billion of assets under management. ” … They add to volatility.” According to Dreman, increased investment in energy began about about 18 months ago when the gap between supply and demand began to narrow. …

“Our view is that there is a fundamental long-term shift in the energy market,” [Jim Atkinson of Morningstar] said. “Demand for oil is growing so rapidly that we are now reaching the practical limits of what we can produce.”
(4 August 2005)

Coup precedes oil exploration

Staff, AFX News Limited via Forbes
LONDON – Hardman Resources Ltd and Roc Oil Co Ltd said they have started spudding the Sotto-1 well, the first exploration hole in Mauritania’s offshore drilling programme this year.

The well is located around 110 kilometres southwest of the oil-rich northwest African country’s capital, Nouakchott, and 42 km south of the Chinguetti field, one of Mauritania’s major oil discoveries.

Sotto-1 is operated by Woodside Petroleum Ltd, which owns a 53.8 pct stake. Hardman and Roc own a 13 pct and 4 pct stake, respectively. Other companies with interests in the well are BG Group, Fusion Oil & Gas and Premier Oil.

Woodside had said that operations at the Chinguetti field has not been affected by the military coup in Mauritania.

Early last week, military troops ousted President Maaouiya Ould Taya. The new regime, headed by the Military Council for Justice and Democracy, also dissolved Parliament but maintained the constitution.
(8 August 2005)

U.S. strategic interests rise in West Africa’s oil-rich Gulf of Guinea

Todd Pitman, AP
Far from home, a U.S. Coast Guard cutter plows its white bow through the seas of
West Africa’s Gulf of Guinea, where an oil boom could outpace Persian Gulf
exports to America in a decade.

The ship’s presence here is a sign of U.S. military and financial interest in an
increasingly strategic part of the world – one American officials say is
vulnerable to piracy, political instability and terrorism.
(7 August 2005)

What’s next for Saudia Arabia

Eric Margolis
NEW YORK – In the interest of full disclosure, let me say that Saudi Arabia has never been one of my favorite places. …

The Saudi royal family and the most powerful elements of the US Republican Party are joined at the hip. A thick network of hugely lucrative business partnerships ties the Bush family and Washington’s powerful Carlyle Group to the Saudi royals.

Princes Turki and Bandar have worked hand in glove with CIA for decades. Turki was the liason between the Saudis and Osama bin Laden during the 1980’s Afghan War. The Saudis, at Washington’s behest, fueled Iraq’s aggression against Iran during the same period, to the tune of US $27.5 billion, and Saddam’s abortive nuclear program.

The Saudis keep $100 billion dollars in US banks with Republican connections. Saudi’s military keeps buying advanced arms it can’t use but which keep arms plants humming in politically important American states. Saudi bases still quietly serve the Pentagon’s wars in Iraq and Afghanistan. And Saudi money continues to pour by devious routes into some Republican campaign coffers. So don’t expect Washington to risk change in Saudi. Window dressing, like empty elections and gushy US prime time TV about Saudi women finally learning to drive, is fine. …
(8 August 2005)

Belgium: Record oil prices send gas, electricity bills soaring

Staff, Expatica
BRUSSELS — Families in Belgium have been warned to expect sharp rises in gas and electricity bills in the coming period. The increased cost of electricity and gas might amount to EUR 25 per month and is blamed on the high price of oil, which has doubled in price in the past 18 months. Oil prices reached new record prices on Tuesday.

Interim gas bills are expected to rise considerably over the next 12 months. Even households which were economical users of gas and electricity in the past year can also expect costlier bills.A spokesperson with energy firm Electrabel said the prices rises were a “preventative” measure. “We are basing ourselves on the expected increase in the gas price”, newspaper ‘Het Nieuwsblad’ reported on Tuesday.

The price rises are being blamed on the high cost of oil, with 30 percent of the price for gas heating directly influenced by oil prices. And because a large amount of electricity is produced with gas, electricity prices will also increase.
(9 August 2005)