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Does the latest IEA number matter?

Stuart Staniford, The Oil Drum
… Thus, it isn’t significant at all, and is not meaningful evidence that anything is going on more than the usual noise that affects the amount of oil produced each month.

Nor will it be particularly significant if the EIA series also makes a big jump up when we finally see their October number. The 87% r2 between the two series makes that more likely than not.

Of course, if the IEA series stayed this high for another couple of months, that would be another story altogether. Given the lag-one auto-correlation, a single extra high month wouldn’t compel. But three consecutive residuals this high would be very unlikely based on the past history.

And for that reason, my bet is that it won’t happen that way. If it were to happen, I would accept that as pretty strong evidence that something new was happening and oil production was now increasing again….
(3 December 2007)

Several trends directing flow of capital into oil markets

Mella McEwen, Midland Reporter-Telegram
A closer look at the flow of capital into the oil and gas industry identified several trends impacting that flow.

Those trends were the subject of a recent speech before members of the Natural Gas Producers Association.

“My talk took a 30,000-foot view and focused on what I referred to as four macro trends,” said Bill Weidner, managing director at Cosco Capital management LLC in Simsbury, CT.

…A third trend impacting capitalization is dollar-pegged global trade, he said. Currency fluctuates worldwide, but export-dependent countries peg their exports to the dollar, and America’s trade deficit has brought those countries “huge increases in paper currency and financial assets,” Weidner said. Those assets come back to the U.S. and investors hedge against inflation by investing in oil and gas.

Finally, he said, global peak oil and the depletion of the world’s hydrocarbon resources “is not lost on the investment community and they want a piece of a resource in limited supply. As a result, there’s a shift in interest by institutions towards more direct ownership in oil and gas operations.”

The upshot of these four macro trends, Weidner said, is there is more capital for oil and gas operations.
(2 December 2007)

Natural resources: World likely to rely on Saudi oil in the future

Ed Crooks, Financial times
As the world’s biggest oil exporter for decades – a title it now shares with Russia – Saudi Arabia has been central to the health of the global economy.

Rex Tillerson, the chairman and chief executive of ExxonMobil, recently lauded the relationship between the US and Saudi Arabia as an “energy partnership” that “has been a lynchpin of the global trading system”.

Yet there remain deep concerns about whether Saudi Arabia will be able to continue to play that role in the future.

Over the next two decades, according to official forecasts, the world will rely even more heavily on Saudi oil.

…In the vanguard of the pessimists is Matthew Simmons, chairman of the energy investment bank Simmons & Company. His 2005 book Twilight in the Desert reviewed technical papers on Saudi fields and concluded that production “could soon approach a serious, irreversible decline”.

Other analysts disagree. Peter Jackson of Cambridge Energy Research Associates, a consultancy, says there is no reason to doubt that Saudi Aramco is making progress with its plans for increased capacity, or to think that output from its existing fields, particularly the giant Ghawar, is declining faster than the Saudis have admitted.
(4 December 2007)

Energy expert warns about peak oil

Scott Weaver, C-Ville (Charlottesville, Virginia)
As you’re hopping into your car, gearing up for the holidays, driving every which way to pick out shiny gifts, think about this: According to Robert Hirsch, a past senior energy program advisor for world oil production with Science Application International Corporations, the one resource that provides all those things could soon be in dangerously short supply.

Hirsch delivered a lecture at the UVA School of Engineering and Applied Science about the bleak prospect of “peak oil,” the tipping point where the worldwide production of oil starts to fall short of world demand. From that point forward, said Hirsch, the entire world (not to mention all of its economies) is in for some serious trouble.

In the model that Hirsch presented to a roomful of UVA graduate students and professors, once oil production peaks, shortages will increase around the world. These shortages will drive prices up.

According to economists, this wouldn’t be such a huge problem. Using a purely economic model, such a shortage in supply and unusually high prices are nearly always negated by a surplus introduced into a market starved for product. One little problem, said Hirsch. Oil is a finite resource, and there won’t be any of it to put into the market to restore balance.

“Many economists,” said Hirsch, “just don’t get it.”
(4 December 2007)

Of hierarchies, thresholds and the rising price of oil

Simon Ratcliffe, Business Day
OVER the past year the price of oil has more or less doubled to its current level of close to $100 per barrel . With $100 in sight, it provides us with an opportunity to reflect on what forces are driving the price of oil so high.

By looking at wealth hierarchies we can examine how it is affecting both rich and poor countries. While there are a number of complex factors – such as speculation, the fall of the dollar and a number of geopolitical issues – which all have a bearing on the price of oil, the fundamental issue driving price increases is what the main stream economists euphemistically refer to as “supply problems”.

These “supply problems” are rarely examined in depth, leaving a gaping hole in analysis of current events. There is a growing body of research and opinion that global oil production is either near or has passed its peak in production. The implication is that from that point onwards production in oil will decline.

…What effect does the high price of oil have on our world and on our country in particular? It is perhaps useful to think of the hierarchies of wealth that we find among countries, within individual societies and among businesses. We can picture these as a ranking with the wealthiest and most powerful at the top and moving in descending order to the poorest and weakest at the bottom. Whether these are countries, families, individuals or businesses, those at the bottom are more vulnerable than those at the top. The wealthiest are best able to bear the effect of high oil prices. They have a higher threshold before they are seriously affected. This applies to all of the categories described. Thus European countries can absorb the high price of oil better than the poorest African countries.

Living in a country with a higher oil-price threshold, it is easy not to notice what is happening in poorer countries. It is perhaps important here to examine the effect of the current prices on a number of poorer countries. Perhaps the most dramatic case is that of Burma, where fuel price rises sparked nationwide demonstrations which were brutally crushed by the military regime which saw then as a political threat.

In Nepal in July, the Kathmandu valley was hit with its worst energy crisis in history as the state-owned petroleum importer and distributor stopped supplies to gas stations entirely.

Ian Ratcliffe is an independent energy and sustainability consultant and chairperson of the Association for the Study of Peak Oil-South Africa.
(3 December 2007)
UPDATE (Dec 4) Contributor Greg T. recommends the article:
Here’s why peak oil has been so painless for developed countries, so far!

Peak Oil in the Australian media

Big Gav, Peak Energy
Peak oil coverage in the mainstream Australian media has generally been quite good in recent years – while the idea of an imminent peak is far from the accepted wisdom, pretty much every major news outlet has provided decent coverage of the subject at some point or another (see the Australian Financial Review, Sydney Morning Herald, ABC, Melbourne Age and Brisbane Courier Mail for a random set of examples)

While I tend to regard The Australian’s Nigel Wilson as the best journalist covering energy news in the country, his column in – “Long-term oil prophecies proven wrong” – this week left much to be desired.

… [Wilson’s] quip about the Club of Rome is also rather annoying, showing (as is common with almost every reference to the Limits To Growth that I come across) a complete misunderstanding of what the book said. For those who can’t be bothered reading the book (which apparently includes Mr Wilson):

  • it outlined a number of different scenarios

  • it didn’t claim to predict the future
  • it didn’t say that global economic expansion would go into reverse with 30 years – the scenarios were modelled over a 100 year period (which we are now 35 years into)
  • as a result of the concerns raised by the book, a lot of actions were taken in the 1970’s which made the more dire scenarios that were explored less likely to occur (see the oil consumption graph and look at what happens to it during that period – and Europe and Japan at least seemed to have learned some lessons from the experience)
  • not all scenarios resulted in resource shortages and collapse – some had good outcomes
  • the conclusion to the book concentrates on the positive scenarios, along with a long description about how to make the “transition to sustainability” (which doesn’t include population reduction, world government or any of the other measures some conspiracy theorists talk about – it recommends sustainability/equity/efficiency, clean energy, closed loop industrial techniques, regenerative agricultural practices, nonviolent conflict resolution, accurate/unbiased media and “decentralisation of economic power, political influence and scientific expertise”)

To a certain extent, The Australian seems to be following the lead of new Murdoch press stablemate The Wall Street Journal, which made a number of similar arguments recently – dealt with at The Oil Drum (twice) and Energy Bulletin, amongst others.
(5 December 2007)
Links and more at original.


Douglas Low, Oil Depletion Analysis Centre
Biofuels – UK
1/ Planned UK Biofuel Plant Seen Risky as Wheat Soars (Planet Ark (Reuters], Fri 30 Nov)

Natural Gas Prices – USA
2/ Record gas storage doesn’t mean market can relax (Platts, Tue 20 Nov)

Natural Gas – Ukraine / Russia
3/ Crisis Looms as Ukraine Talks Price Hike (Energy Intelligence [International Oil Daily], Fri 30 Nov)

Food Prices
4a/ Soyabeans to stoke food price inflation (Financial Times, Thu 29 Nov)
4b/ U.S. food banks, in a squeeze, tighten belts (International Herald Tribune, Fri 30 Nov)

Economy – UK
5a/ The Business Show (The Telegraph, Fri 30 Nov)
5b/ Is the roof falling in on the housing market? (The Independent, Fri 30 Nov)

Peak Oil in Australia
6/ The party’s over and Liberals will soon be history (Sydney Morning Herald, Thu 29 Nov)
(2 December 2007)
Excerpts, links and commentary at original.

Peak Oil Review: 3 December 2007
Tom Whipple, ASPO-USA
1. Production and prices.
2. The OPEC meeting
3. The Venezuelan Election
4. Energy Briefs
(3 December 2007)
Not available yet in HTML format. Also in the PDF:
Commentary: Remembering and Learning from a Legend
by Steve Andrews (on the death of Ali Morteza Samsam Bakhtiari)