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Oil hits record, Britain calls for OPEC hike

Oil prices jumped to a new peak near $114 a barrel on Tuesday amid lingering supply worries and weakness in the U.S. dollar, deepening concern in world consumer nations that a spike in energy costs could cause severe economic damage.

Britain’s prime minister, Gordon Brown, on Tuesday called on OPEC members to boost production to counter rapidly rising oil prices, which have shot up 80 percent since a year ago, adding his voice to similar requests from the administration of U.S. President George W. Bush.
(15 April 2008)

Surprise discovery off coast of Brazil may confound the oil and gas doom-mongers

Terry Macalister, The Guardian,
Excitement about the potential of Brazil as a massive new source of oil and gas intensified yesterday after a senior energy ministry official declared that the newly found Carioca field could have 33bn barrels in place.

The comments by Haroldo Lima, head of Brazil’s National Petroleum Agency, that the country was harbouring an oil find that vied with the largest in Saudi Arabia and Kuwait, sent the price of shares in BG, the UK exploration company, up 5% and helped lift the wider London market. The news of the discovery also contradicts pronouncements that growth in world oil production may have peaked.

Lima told an industry conference that Petrobras, the national oil company partnered by BG, “may have discovered a huge petroleum field that could contain reserves as large as 33bn barrels, amounting to the world’s third largest reservoir”.

Amid expressions of surprise and scepticism from industry experts, Lima’s agency later issued a statement saying his comments were based on a recent report in a world oil magazine. Other ministers said it was better to wait for official estimates from Petrobras itself.

Industry analysts said it was possible Lima was adding together the reserves of nearby fields in the wider Carioca area off Rio de Janeiro and the figures underlined that Brazil had recently been accepted as one of the great new oil and gas “plays”.

Dieter Helm, professor of energy policy at Oxford University and a British government energy adviser, said: “It does not surprise me that these kinds of numbers [33bn barrels] are out there. Whether it is attributed to Carioca itself or elsewhere it should not distract from the point that there is plenty of oil around.

… Matthew Shaw, Latin American energy analyst with Edinburgh-based oil consultant Wood Mackenzie, said: “I don’t know how he calculates that. It [the 33bn barrels number] is not credible. This is an unfortunate slip of the tongue by a senior member of the NPA. It is likely to be a fairly modest discovery with a few hundred million barrels in place.”

… Peak oil theorists believe the price of crude will forever rise as oil firms try to find increasingly scarce supplies at a time when the fast-industrialisation of China and India is boosting demand.

After yesterday’s report showing Russian output stagnating, the normally cheaper Brent blend reached record levels of £56 a barrel. However, fears of a sharp slide in Russian production look misplaced, says Capital Economics, in London. And there is huge cause for optimism over Brazilian supplies. The UK energy adviser Dieter Helm says the world is not running out of oil; much exists under the now melting ice caps. “Finding oil isn’t the issue – it’s whether we want to find it, burn it and [as global warming increases] all fry,” he said.
(16 April 2008)
Interesting mixture of credulity about a vague announcement, and eagerness to debunk peak oil. -BA

At The Oil Drum: Clarification on Carioca (reported discovery in Santos Basin) by Luís de Sousa.

‘Threat’ to future of Russia oil

The future supply of Russian oil is threatened by a likely decline in production levels, one of the country’s top oil executives has warned. Lukoil’s Leonid Fedun said $1 trillion would have to be spent on developing new reserves if current output levels were to be maintained.

Recent figures show Russian output fell 1% in the first quarter of 2008. The possibility of less oil from one of the world’s key suppliers will add more pressure to prices now at record highs.

… One energy expert said the Russian industry was now acknowledging a crisis which had been evident to independent observers for several years.

“We now see production peaked last year,” Mikhail Kroutikhin, editor in chief of the Russian Petroleum Investor told the BBC.

… Russian worries underline longstanding concerns about whether there is enough oil to meet the needs of the global economy, particularly fast-growing China and India.

They are also a particular cause of concern for several of Europe’s largest economies, such as Germany, which buy a large share of their oil from Russia.
(15 April 2008)
At Financial Times: Fears emerge over Russia’s oil output.

Oil numbers

Paul Krugman, New York Times
There are two basic facts that would seem to explain a lot about what’s happening to oil prices.

First, Gross World Product growth has accelerated – from 2.9 percent in the 90s to almost 5 percent in recent years, according to the IMF. All of this is because of growth in emerging economies, largely China.

Second, world oil production has stalled – after growing around 1.6% a year in the 90s, it’s been basically flat for the last three years.

So we’ve got rapidly growing demand due to industrialization in Asia colliding with stagnant supply, basically because oil is getting hard to find.

… This is what peak oil is supposed to look like – not Oh My God We’ve Just Run Out Of Oil, but steady pressure on the economy and the way we live from rising energy prices and their consequences. And it doesn’t matter much whether we’re literally at the peak, or whether production can rise by a few million more barrels a day; unless there are big sources of oil out there, we’ll be feeling peakish for the foreseeable future.
(15 April 2008)
Second mention of peak oil in the NY TImes in a week. The previous mention was in the “Fashion and Style” section, in an article on the New Survivalism. We’re still waiting for NYT energy specialist Jad Mouawad to put his not inconsiderable abilities to work, and get serious about examining peak oil. -BA