Click on the headline (link) for the full text.

Many more articles are available through the Energy Bulletin homepage

Peak oil: it doesn’t translate into Kurdish

Keith Johnson, Environmental Capital (blog), Wall Street Journal
As oil prices again flirt with records, and the U.S. Energy Information Administration hustles to revise upward its forecasts for the price of oil and gas, the “peak oil” camp seems to win more converts every day. Even veteran oilmen like T. Boone Pickens say the era of “easy oil” is over. Just don’t tell the Kurds.

As Neil King reports today in the WSJ, the Kurdish region of northern Iraq is the last bastion of “easy oil,” where black pools seep to the surface and where wildcatters can strike gushers after a few months of poking around:

“I am not expecting to find another [giant oil field like] Kirkuk,” says Ashti Hawrami, Kurdistan’s plain-talking minister of natural resources. “But I think we will find a lot of fields that add up to Kirkuk.” If he’s right, Kurdistan’s three provinces could hold more than 25 billion barrels of crude. That’s roughly five billion barrels more than the remaining proven reserves of the U.S.

So what’s the problem?
(9 July 2008)

Pemex Cantarell output drops 34%

Andres R. Martinez, Bloomberg
Seven decades after Mexico banned foreign oil investment, President Felipe Calderon is pressing lawmakers to allow Pemex, as the state energy company is known, to hire outside producers to help find and pump petroleum. Cantarell’s decline is costing Pemex $20 billion a year in sales at a time when oil prices have never been higher, and the company lacks the funding to find enough new deposits to keep reserves from dwindling.

“We are at the worst time right now of the decline,” David Shields, an energy analyst and publisher of Mexican oil magazine Energia, said in a July 1 interview. “They should have been developing the fields to be sustainable.”

Falling production is curbing exports to the U.S., which buys about 80 percent of the oil Mexico sells abroad. Sales to the U.S. declined to 1.07 million barrels a day in May, the lowest since November 1995.
(7 July 2008)
Contributor David Landgren writes:
The article trots out the convenient half-truth “If only they would spend more money on exploration we would soon be back to the good old days”, not realising that Cantarell is the poster child for decline due to geological constraints.

Of note: PEMEX has curbed their exports to the US, now equivalent to 1995 levels, a consequence of decline the Export Land Model has been predicting for a while.

Why isn’t the price of gasoline even higher?

Gail Tverberg, The Oil Drum
In the last year, the price of gasoline has risen by 38%. The prices of other fuels have risen much more–diesel has risen by 64% and jet fuel has risen by 91%, and the price of West Texas Intermediate (WTI) crude oil has risen by 100%. Why aren’t gasoline prices rising more than they are? Some will recognize this as the “crack spread” issue.

I see several possible explanations, including a long term shift in prices valuing diesel (or “distillate”) more highly than gasoline; political pressure to keep gasoline prices low; and integrated oil companies not really needing a high gasoline pricing margin to keep overall profits at an acceptable level. I do not see ethanol as playing a significant role at this time. Regardless of the explanation, refineries and gasoline stations that are not part of oil conglomerates may find this a difficult storm to weather.

Figure 1 shows that the differential between the retail price of gasoline and the per-gallon cost of crude oil has recently dropped dramatically, leaving a much smaller margin to cover expenses and profit. It is this shift that I am discussing in this article.

… In this post, I divide my observations into four sections:

1. General observations and background
2. Changes in world product demand and recent US consumption
3. Who are the market players, and why this matters
4. What might be ahead?
(9 July 2008)

We’re not yet running on empty
(audio and text)
Alex Brummer, New Statesman
The upward movement in the price of oil has far more to do with speculation than with a shortage of supply

…Two factors appear to have turned the free market in oil – up to 80 per cent of oil is delivered on the basis of long-term contracts between suppliers and users – into a speculators’ paradise. The first is the idea that the world is at peak oil production and that it is downhill from now on, as the Chinese make ever more demands on limited supplies. All the indications are that there are between five and six decades of known oil supplies, from the slopes of Alaska to the oceans off the Philippines. Moreover, sources such as the tar sands of northern Canada – once thought too costly to exploit – are now economical.

The second factor is oil security. Much of the supply is in difficult places such as Iraq, Iran and Russia. Some of these would be affected directly by an attack on Tehran. This has given a new stimulus to the speculators, supported by some of the world’s largest hedge funds.

In much the same way as the credit crisis was generated by bankers and hedge funds dealing in “securitised assets” – US trailer-park mortgages dressed up as high-quality debt – so the oil market has become a playground for the financiers. The pattern, according to Robert Mabro of the Oxford Institute for Energy Studies, is clear.

Each week, two of the large investment banks, Goldman Sachs in New York and Barclays Capital (part of Barclays Bank), assess the energy market. On the basis of their assessment, which invariably points to higher prices, investors buy oil futures on the global markets, driving the price ever upward.

Alex Brummer is City editor of the Daily Mail
(10 July 2008)