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Countdown to $100 oil (48) – 85, 86, 87, 88, …
Jerome a Paris, European Tribune
Oil prices are breaking records so often these days that news papers have to rewrite their stories twice a day to keep up, right now. The NYMEX prices broke through the $85 level yesterday, closed above $86, move above $87 this morning and are now hovering, as I write, just below $88…
…The short term variations of the price are to a certain extent random – they are spur-of-the-moment reactions to news on various fronts, as suggested above – OPEP declarations, inventory numbers, geopolitical events – while the mood on the currency markets as well as reallocation of funds throughout financial markets can also play a role. But what is more striking to me right now is the following combination:
* regularly increasing oil prices have still not had any visible impact on worldwide growth numbers;
* all players have brutally changed their expectations of future prices, and brought them to levels close to current prices.
…What these two tidbits suggest is that oil is still cheap. Its price is driven by strong demand growth and not, as in previous oil shocks, by (artificial) supply shocks, and the continued, regular, increase suggests that investments in places like China are still worthwhile even with higher oil – and other commodity – prices.
As these investments drive up demand, prices will have to go high enough to dissuade them, unless supply can keep up, which seems improbable right now, as this chart shows: production has been flat for almost 3 years now, as per official statistics,
(16 October 2007)
It’s not rocket science: we are nearing the point of peak oil production, the data suggests, and when that happens, oil will start running out. That’s when oil prices will really soar…
Well oil futures today above $85 a barrel it has been very high for the better part of the last month and there is no indication that it will get any reasonable relief any time soon. One Citigroup analyst today saying $90 a barrel is in sight and Simon Ratcliffe the chairperson of the Association for the Study of Peak Oil South Africa is with us on the line from Cape Town now and I was reading a little bit about you in the recent copy of Finweek Simon and the way I see it you are wanting our government to develop strategies to deal with the sustainably higher oil prices.
Yes absolutely Bruce. We put out a document recently which I think was referred to in the article you are looking at where we looked at two scenarios; one is the kind of business as usual scenario and the other one is in a sense put the country on a war footing and develop sustainable energy sources and I don’t know if you want me to go into the reasons.
Absolutely, I mean the business as usual scenario I guess is we anticipate that oil prices will gradually go up over time and we must deal with those consequences. Your other one, the other scenario, is the war footing scenario which I found interesting.
Simon Ratcliffe thanks very much for talking to us this evening from Cape Town. He is the chairperson of the Association for the Study of Peak Oil South Africa. Basically the argument is we are very close to global peak production in oil and what happens when we reach that peak and then oil reserves decline and oil prices go up. We have got to have alternative energy sources.
(15 October 2007)
New findings on peak oil timing and impacts to be presented at Houston Conference
ASPO-USA via Oil Online
The Conference will present new research and findings that indicate Peak Oil impacts may hit sooner and harder than previously predicted, according to Steve Andrews and Jim Baldauf, Conference Co-Chairmen and ASPO-USA co-founders. The term “Peak Oil” refers to the view that world oil production will reach a high point followed by an irreversible decline within the near future.
…On Wednesday night at this week’s Houston Oil Conference, Aage Figenschou will report on the changing date of Peak Oil as predicted by the IFP, the French Petroleum Institute. He says that in 2001 IFP predicted oil would peak in 2020. But in 2006, IFP said the year would be 2015; and in June of 2007, they had moved the peak year forward to 2010.
But more important than the date predicted for peak are the dates when impacts will be felt and the date mitigation steps are taken, say Conference organizers. Many energy analysts believe that $80 oil is creating impacts right now, and that mitigation steps are being taken very slowly, if at all.
Another conference speaker, Dr. Robert Hirsch, expands on the conclusions drawn in “Oil Shockwave – Oil Crisis Executive Simulation,” the 2005 report by the National Commission on Energy Policy and Securing America’s Future Energy. That report stated, “It only requires a relatively small amount of oil to be taken out of the system to have huge economic and security implications.”
“In the context of world oil,” Hirsch says, “relatively small percentage changes are hugely meaningful.” He notes that “a 1% change in current world oil production equates to over 800,000 barrels per day (bpd), which represents a huge volume.” To save that level of consumption through increases in the efficiency of the world’s light vehicle fleet, he says, would require more than a decade, assuming the implementation of a crash program.
His new study has resulted in three scenarios for mitigation of Peak Oil impacts:
- Best Case Scenario – where maximum world oil production is followed by a multi-year plateau before the onset of a monatomic decline rate of 2-5% per year.
- A Middling Case – where world oil production abruptly reaches a maximum, after which it drops into a long-term, 2-5% annual decline; and finally …
- A Worst Case, where the sharp peak of the Middling Case is degraded by oil exporters withholding product, leading to world oil shortages growing more rapidly than 2-5% per year, creating the most dire world economic impacts.
(16 October 2007)
Home-grown demand driving OPEC growth
Shawn McCarthy, Globe & Mail
OPEC members in the Middle East are becoming their own best customers for crude, as the booming region’s growing demand for oil offsets weakness in the developed world to keep supplies tight and prices under pressure.
As crude prices soared above $86 (U.S.) a barrel to record highs yesterday, OPEC continued to forecast healthy growth in consumption, fuelled by China, India, and increasingly the Middle East itself. On the New York Mercantile Exchange, prices for the benchmark crude oil climbed $2.44 (U.S.) a barrel to $86.13.
In its monthly outlook released yesterday, OPEC gave no indication that the producers believe record crude prices are having an appreciable impact on the appetite for oil, but blamed the tepid demand growth in the industrialized world on higher taxes, rainy weather and economic weakness caused by turmoil in the subprime mortgage market.
(16 October 2007)