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Where Is Oil Going Next?

Clifford Krauss, New York Times
From the Indian Ocean to the South Atlantic to the Gulf of Mexico, giant supertankers brimming with oil are resting at anchor or slowly tracing racetrack patterns through the sea, heading nowhere.

The ships are marking time, serving as floating oil-storage tanks. The companies and countries leasing them for that purpose have made a simple calculation: the price of oil has fallen so far that it is due for a rise.

Some producing countries are trying to force that rise by using the tankers to withhold oil from the market, while traders are trying to profit by buying cheap oil now to store and sell at a higher price later. Oil storage has become so popular that onshore tank capacity is becoming scarce.

Only six months ago, companies up and down the energy pipeline were rushing oil to market, struggling to keep up with galloping demand and soaring prices. Now, with the global economy slumping and people driving less, demand for oil has plunged — and the same companies are acting in ways that would have been unimaginable until recently.

Oil producers are shutting down rigs, refiners are producing less gasoline, and investment planning throughout the industry is in turmoil.

The problem for the companies is not just that prices are lower, but that they have become volatile — historically, a sign of an unstable market whose direction is uncertain.
(14 January 2009)

More Evidence That Peak Oil Is A Reality Just Around the Corner

Pelikan, Clips & Comments
In the last month or so there have been two very public indications that not even the Middle East’s oil states are counting on endless supplies of the black gold which in the space of one or two generations moved their economies from the 18th century to modernity.

First came a puff piece on Saudi Aramco from CBS’ 60 Minutes. Although there was a lot of information in Lesley Stahl’s report, it leaned a bit too heavy on the promise of technology to greatly impact the output of Saudi Arabia’s aging oil fields. There is no doubt that the Kingdom is the promised land of oil – and will remain so – but their oil is getting harder to find and harder to extract than it once was. The massive nature of Saudi fields such as Ghawar camoflage this, but the fact is there have been no major discoveries there since the 1960s and they jump through more hoops per barrel today to get it out of the ground than they once did. Very telling was this from the end of the piece:

Rather than oil pushers, the Saudis see themselves as good global citizens who are trying to save the world from a catastrophic oil shortage. But, as Al-Naimi told 60 Minutes, the kingdom is hedging its bets.

He told Stahl the kingdom is doing research on solar energy, as sunshine is more than abundant in Saudi Arabia.

And he says it won’t hurt their oil industry, but supplement it. “Our vision is that we will be exporters of gigawatts of electricity. We will be exporting both: barrels of oil and gigawatts of power.”

And so, he says, the kingdom will still be in the energy business long after the sun sets on the age of oil.

Also hedging their bets are the Saudi’s neighbors in the United Arab Emirates. Abu Dhabi, home of man-made islands and other ostentatious displays of oil wealth will host the Second World Future Energy Summit next week. World business and political leaders will be in attendance for what the New York Times describes as the Davos of alternative energy. The entire Times story is worth a read. I found interesting some of the statements being made by Arab oil men other than Ali Al-Naimi, the above mentioned Saudi Oil Minister.

So even as President-elect Barack Obama talks about promoting green jobs as America’s route out of recession, gulf states, including the emirates, Qatar and Saudi Arabia, are making a concerted push to become the Silicon Valley of alternative energy.

They are aggressively pouring billions of dollars made in the oil fields into new green technologies. They are establishing billion-dollar clean-technology investment funds. And they are putting millions of dollars behind research projects at universities from California to Boston to London, and setting up green research parks at home.

“Abu Dhabi is an oil-exporting country, and we want to become an energy-exporting country, and to do that we need to excel at the newer forms of energy,” said Khaled Awad, a director of Masdar, a futuristic zero-carbon city and a research park that has an affiliation with the Massachusetts Institute of Technology, that is rising from the desert on the outskirts of Abu Dhabi.

Notice how the language is changing? Yesterday they were oil exporters – now they are trying to remake themselves as “energy exporters.” Even the Arabs are saying that the future is in alternative energy. If oil supplies were endless these guys wouldn’t be wasting their billions on alternatives.

(14 January 2009)

A sticky ending for the tar sands

The Economist
A boom based on extracting oil from tar sands turns bad

LOOK west from the office towers of the energy companies that dominate Calgary, and the view is spectacular: rolling prairies rise to tree-clad foothills, with the jagged, snow-capped peaks of the Rockies on the horizon. Looking down, however, is more unsettling. The city is dotted with motionless construction cranes poised over the pits of abandoned projects. A five-year energy boom here in the administrative heart of Canada’s oil patch and in the tar sands far to the north has ended. The only debate is how painful and persistent the bust will be—not just for the biggest city in Canada’s richest province, Alberta, but for the whole country.

Alberta, which produces two-thirds of Canada’s oil and gas, has been here before. The wrenching oil slump of the 1980s still looms large in the public consciousness. Companies fled the province and thousands abandoned homes they could no longer afford. “The situation is much different this time,” insists the energy minister, Mel Knight, whose Progressive Conservative Party has ruled the province since 1971. Not all of the differences, however, are positive ones.
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Mr Knight thinks continuing demand from places like China and India will mean that oil, and thus his province’s economy, will recover faster this time. However, two decades ago there was nothing like the current global credit crunch. Also, Alberta now extracts 60% of its crude from its tar sands (those in the business think “oil sands” sounds nicer), a much bigger proportion than in the 1980s, and concern about the environment and carbon-based fuels is far stronger now.
(15 January 2009)