Prices & supplies - Dec 17
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Oil Prices Below $40 per Barrel
Luis de Sousa, The Oil Drum: Europe
Oil prices under forty dollars per barrel? It can't be true.
Yes it is true, oil prices are back to where they were more than four years ago. Time for a few thoughts on these past years and what led to apparently dissonant energy prices.
Back in July, no one that I am aware of was forecasting a 100$ drop in oil prices during the following six months. Even Daniel Yergin, the Nemesis of modern day Peak Oil study, was at the time predicting higher prices. Back then a friend told me to go short on oil, because all price forecasts by CERA are wrong. If I were a trader, I would have probably followed that advice, but could never imagine what was to come.
One of my first dives into the Peak Oil world was with Kenneth Deffeyes' book Beyond Oil. In it, the Princeton Professor explains how resources' prices go through chaotic periods in face of scarce supply. Without knowing it, he derived an expression to explain movements like spot Natural Gas prices in the US after 2002, that was equivalent to Queueing Theory. This made immediate sense to me, after studying this theory in my formative years at the University.
Let me try to explain briefly what this theory is. Imagine a supermarket with a certain number of points-of-sale (POS), to which a certain number of costumers arrive per hour. Queueing Theory allows one to derive information like the average queue length at each POS and the average waiting time each costumer spends in the queue. This information is not only useful for supermarket managers but also in other fields like transport and tele-communications.
Queueing Theory shows also provides another important result: if the load on the system goes above a certain threshold, it becomes impossible to predict queue lengths or waiting times, and the system goes into chaos.
(16 December 2008)
Also at Energy Tribune.
Will postponed investment push peak oil forward?
Oliver L Campbell, Petroleum World
... It is true the current postponement and slow-down in projects support Mr Skrebowski's contention and those who think like him, but are they right? I much doubt it because history is not on their side. Back in 1998, the oil companies took their foot off the pedal and changed down a gear, but they soon accelerated when conditions started to change in 2003. I see no reason why they cannot do the same once oil prices pick up again and reach, say, the $60 a barrel mark. Offshore production in deep waters is costly--some say in pre-salt offshore Brazil it could be as high as $40 a barrel--and so is production from tar sands, but both should be sufficiently attractive at a price of $60 a barrel.
Though I agree the development of new capacity in high cost areas will slow down during the current downturn, I believe it will continue at a slower pace. Because the oil companies all want to increase their production capacity, I also believe investment in lower cost areas will continue at the same pace as before.
Oliver L Campbell, MBA, DipM, FCCA, ACMA, MCIM was born in El Callao in 1931 where his father worked in the gold mining industry. He spent the WWII years in England, returning to Venezuela in 1953 to work with Shell de Venezuela (CSV), later as Finance Coordinator at Petroleos de Venezuela (PDVSA). In 1982 he returned to the UK with his family and retired early in 2002.
(16 December 2008)
UK peak oil warning (video)
Michelle Carlile-Alkhouri, Reuters
UK companies warn government against an impending oil supply crisis.
A recent report from the Industry Taskforce on Peak Oil and Energy Security warns that supplies of cheap, easily accessible oil will start to diminish by 2013.
The industry lobby group, which includes Virgin, Yahoo, Solarcentury and transport operator Stagecoach, wants the Government to dramatically increase investment in clean energy and renewables to avoid an energy crisis.
(16 December 2008)
UK Industry on Peak Oil: Virgin, Yahoo and Others Raise the Alarm (video and text)
Sami Grover, Treehugger
Big Business Starts Warning of an Oil Crunch
While some in the business world have recognised and spoken out about the threat of peak oil – from Shell CEO Jeroen van der Veer’s prediction that energy depletion could hit us in 7 years, through to oil banker Matt Simmon’s warning that the energy crisis could dwarf the financial crunch soon - in general the silence from corporations on this issue has been deafening.
This is a particularly puzzling state of affairs when you consider how dependent our entire economy is on cheap oil. But there are signs that things are changing – a report, which Matt posted about last week, from the newly formed UK-based Industry Taskforce on Peak Oil and Energy Security, has now been launched at the London Stock Exchange. The video above shows the kind of heavy hitters involved in this initiative - including Richard Branson of Virgin - as they aim to raise awareness of the threat, and what can be done to counter it.
(12 December 2008)
EB contributor writes:
Video at the link refers to the group's report: "The Oil Crunch: Securing the UK’s Energy Future," which can be found here:
For some reason, the link referred to in the video, www.peakoiltaskforce.net, doesn't work