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The Call on OPEC?

Dave Cohen, ASPO-USA
An earlier column, “Decline Rates and Non-OPEC Supply,” investigated a likely peak (or plateau) in oil supplied by nations outside the Organzation of Petroleum Exporting Countries (OPEC) by 2010. The “call on OPEC” to satisfy growing world oil demand must inevitably increase thereafter. Will OPEC answer the call? The people running OPEC are businessmen. They will answer the call only if there is a financial incentive to do so.

On April 16, 2007, the UAE’s Mohamed Al Hamli stated that OPEC remains fully committed to providing a reliable oil supply for the consumer nations.

There should be no doubt that OPEC members are fully committed to ensure regular supplies to consumers and maintain market stability,” said Mohamed Al Hamli, who also serves as UAE’s energy minister.

Al Hamli told an oil conference in Dubai that the organization’s commitment has been proven “time and again, during crises brought about by severe weather conditions, geopolitical tensions, or disruption of supplies caused by unrest.

OPEC’s committment comes with conditions. Al Hamli emphasized the organization’s view that efforts by the Organisation for Economic Co-Operation and Development (OECD) member nations to reduce their import dependencies through subsidies for alternative fuels “discriminate” against oil, thus undermining future OPEC investment in capacity expansion. OPEC’s worry about sustained oil demand may be seen as an ordinary business concern; it may also be seen as blackmail – consume oil or suffer the consequences of future shortages.
(2 May 2007)

Failing the Energy IQ Test

Randy Udall and Steve Andrews, EV World
History suggests that energy is an IQ test that Americans tend to fail. In response to the Oil Crises of the 1970s, the United States wasted billions in a futile effort to jumpstart oil shale and other synfuels. Then federal automotive fuel-efficiency standards and flush production from newly discovered giant fields in Mexico, Alaska and the North Sea bailed us out. By 1985 oil prices had dropped to $10 a barrel and American energy policy went back to its default position, “stuck on stupid.”

With respect to today’s twin crises – accelerating climate change and an imminent peak in world oil production – our margin for error is far smaller. Consider our predicament: There are now 2.4 billion more people on the planet than there were in 1975. In the intervening three decades, we have used roughly 650 billion barrels of oil. Indeed, half the oil humans have used has been consumed since 1980. Although China has gone mad for cars and the world’s automobiles now consume four times more energy, in the form of fuel, than people consume in the form of food, this time there are few virgin giant fields waiting in the wings.

…We are not running out of oil, but the era of expanding oil production is rapidly closing. We don’t think it makes sense to sugarcoat what peak oil means. Within a few hundred to a few thousand days, global oil production is likely to have peaked and be in permanent decline.
(4 May 2007)
The authors are co-founders of ASPO-USA.

Exxon Mobil Says Peak Oil Unlikely in the Next 25 Years

Byron W. King, The Daily Reckoning (Australia)
…At the end of the argument, however, Exxon Mobil is not stating that there will never be a peak in rates of oil extraction. Instead, the company is arguing that any valid predictive methodology should properly place that event 25 or more years in the future. Specifically: “It does not follow that there is unlimited potential for production growth, rather that the eventual peak in global production is likely to be much further in the future than is commonly suggested.”

Exxon Mobil also notes that “it is possible that the peak, when it occurs, may result from a cause other than resource limitation (e.g., government policies, lack of access to existing resources, competition from alternative energy sources, improvements in energy efficiency).”

So Exxon Mobil is not claiming that there is no Peak Oil problem. It is just a question of timing and time frames, and according to the world’s largest publicly traded oil company, the time for Peak Oil is not now or in the immediate future. To the extent that there is an oil supply problem anywhere on the near horizon, the Exxon Mobil view is that it derives from limited access to prospective regions and under-investment in exploration, development and other related extractive infrastructure. To the extent that prices are rising, it is because global demand for liquid hydrocarbon has been strong and growing, particularly in the developing world, and certainly in China and India.

Whether Mr. Vierbuchen and Exxon Mobil are correct or wildly incorrect about the timing of a peak in world oil production is something that many of us will probably live to see.
(3 May 2007)

OPEC’s Dilemma

James L. Williams, EV World
The dilemma, whether OPEC members acknowledge it or not, is that OPEC must increase capacity and lower prices or face the permanent loss of a substantial portion of oil’s market share in the energy market. In the intermediate term the also risk losing market share within the petroleum segment of the energy market. In the last issue in this series we began the first of several articles addressing “Peak Oil.” Today’s article qualifies as a peak oil article but its focus is politics and economics rather than the geologic and technical factors that will eventually lead to a peak in production. One might call it a discussion of peak oil consumption.

OPEC’s Monthly Bulletin starts with an article titled “Dependence is a two-way street.” This is the most prominence OPEC has given to its security concerns. Those living In consuming nations, including your author, have expressed concern about import dependence and the concomitant threats to security. It is not surprising that OPEC views it differently. As Dad used to say, “Don’t judge a man until you have walked a few miles in his moccasins.”

We will let the OPEC speak for themselves. The following are from OPEC’s latest Monthly Report.

As the DoE states candidly on its website, “oil is the lifeblood of America’s economy”.

In the US and some other key consuming countries, the fear that supplies of oil might be interrupted is the main reason why governments have decided to support the development of alternatives, such as solar and wind power, nuclear energy and biofuels.

What the leaders and opinion makers of consuming countries seem to have overlooked in their frenzied search for energy security is that producing countries need security of demand since they too are dependent on oil. Maybe even more than they are.

(3 May 2007)

Global Oil Production Peaking: What Happens Now?

Carlton Kanner, Seeking Alpha
One needs to note that the energy issues at hand are not purely economic. While the market will indeed force supply and demand into sink, the issue of petroleum reserves and exploration is not an economic issue but is rather an issue of geology.

While it is true that non-conventional sources, such as the synthetic oil from the tar sands, will provide additional reserves and production capacity, one needs to be cognizant of the decline rates of the super giant and giant fields. There are in excess of 40,000 oil producing fields in the world, but 94% of all known recoverable oil is concentrated in 1,500 giant and super giant fields. Of this 94% the majority can be found in the Middle East, and particularly in the “golden triangle of energy” as CEO of Simmons International, Matt Simmons calls it. This golden triangle can be viewed on the map below.
(2 May 2007)
Here’s one investment advisor who’s taken peak oil and run with it. Later in the article, Kanner says: “From an investing stand point there is the potential to make huge returns.” (Warning: always take investment advice with several shakers of salt.) -BA

Submitter Rod Campbell-Ross writes:
This article is well written and says it all. If only the MSM had this front page for a week!