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Oil & coal - June 15

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Many more articles are available through the Energy Bulletin homepage


We need a stable oil price – but we're at the mercy of Opec

David Strahan, Independent
BP famously "doesn't do" oil- price forecasts. After 18 months in which crude has ricocheted from just under $100 per barrel to an all-time high of $147, then down to less than $40, and now up to $73 again, you can see their point.

But at the launch of its annual Statistical Review of World Energy last week, its chief executive, Tony Hayward, came close when he ventured "there is a rational argument to say that somewhere between $60 to $90 a barrel is the right sort of level". At the same time, BP continued to claim that there is no geological shortage of oil, and sought to blame the recent volatility on Opec's refusal to open up to Western investment. These arguments are wrong, partial or beside the point.

... One fundamental problem is that although the economy may be about to rebound, the oil supply probably will not. The precipitous collapse from $147 per barrel has caused upstream investment to slump by $100bn, or 21 per cent. Developing a new field usually takes around six years, so if nervous companies continue to delay investment decisions as the recovery gathers strength, when Opec's current spare capacity is exhausted demand will again outstrip supply and produce another damaging price spike. Shell's chief executive, Jeroen van der Veer, recently warned that this "may already be in the making".

Even if investment conditions were perfect, it is doubtful we could avoid repeated booms and busts; there are more fundamental forces at work than money.
(14 June 2009)
Also David Strahan's site.



Peak Coal, Global Warming Policy and Exponential Math

Jim DiPeso, The Daily Green
Three reports say coal is not nearly so abundant, or cheap, as we think it is.
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Rising gasoline prices brings usually bring bouts of worry about "peak oil," the idea that petroleum supplies will peak and then inexorably decline, leading to price shocks.

Recent studies have stirred up similar concerns about peak coal. Stop right there. Peak coal? Why would anyone worry about peak coal? Haven't we been told that the U.S. is the Saudi Arabia of coal, with a domestic supply exceeding 200 years?

Maybe not, if new information from the U.S. Geological Survey (USGS) is on the mark. In December, USGS reported the results of its detailed look at the mammoth Gillette field in Wyoming's Powder River Basin, the most productive coal region in the country.

Total coal in place is an estimated 201 billion tons, USGS estimated. That's enough to supply 182 years of domestic use, at current consumption rates.

The news goes downhill from there. Much of the Gillette coal is unavailable, because it's physically inaccessible or because people's stuff is in the way - inconvenient highways, railroads, and cities, for example.

Recoverable coal, then, totals 77 billion tons. That's still enough for 70 years at present burn rates.

The 77 billion tons could be recovered if money were no object. But for coal companies, and any other energy business for that matter, money is the object. They will extract coal to the extent that sales will yield an acceptable rate of return.
(14 June 2009)




Rising oil prices will buy off democracy

William Rees-Mogg, Times (UK)
States such as Iran and Russia do not have to listen to their people when they are resource-rich
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... The swing of effective demand to the emerging countries is not in dispute, but there are different views about an even greater shift in the oil market, so-called “peak oil”. That is the point in time when flows of new production are fully cancelled out by declines in existing production. That does not mean that oil is running out; but it does mean that demand will outstrip new supply, as has happened in the North Sea and North America. This time it will be a universal shortfall.

Many experts believe that the recession has indeed passed its low point; in that case demand for oil will recover in the countries worst hit, but will also continue to increase in the emerging countries, particularly the Bric countries. Much of the discussion in Yekaterinburg will centre on the future of oil supplies and particularly on the possible diversion of Russian oil from Europe to China.

If the peak oil theory does prove correct, the present recovery in prices will only be the beginning. Those oil economists who accept the peak oil argument tend to expect the price to reach $150 a barrel, probably in 2010.

This might be accompanied by a rise in the gold price above $1,000 an ounce. Oil and gold prices tend to move together, and the emerging countries have larger dollar reserves than they would altogether like. Gold is the one real alternative to paper currencies as a reserve asset.

The old assumptions are being undermined. It is only too clear that most politicians are still living in the 20th-century world, the world in which they grew up. The peak oil market may already have been reached, but in any case it will be reached eventually. The only question is when. Power is passing from the North West to the SouthEast, from the US to China.

Europe and the euro are very different from what they were. The euro is an oil-poor currency; oil-rich emerging currencies have the edge. Unfortunately, the natural logic of liberal democracy does not fit the natural logic of the oil market. Countries tend to become more liberal when the people are rich and the state is poor.
(15 June 2009)



How Much Oil Is In The Arctic?

Chris Nelder, The Business Insdier: Green Sheet
One way to know that the end of the Age of Oil will soon be upon us is the current excitement and chatter about going—literally—to the ends of the earth to find more oil.

The Arctic Circle, which circumscribes about 6% of the earth’s total surface, is one of the last regions of any significant size to be explored for oil, and for good reason: It’s locked in ice for much of the year, far from support and distribution lines, and is one of the most extreme environments on earth. Whatever oil and gas is extracted from the top cap of our planet will be the most expensive and difficult oil ever produced.

Yet the prospect of new oil production from the Arctic is attracting renewed attention as the world becomes increasingly cognizant of the end of cheap, easy oil, and the security and economic risks associated with the expensive, difficult oil that remains. Exploration opportunities are diminishing every year, as the world continues its 40+-year-long slide down the backside of the exploration bell curve.

With global warming causing the polar ice pack to break up and retreat, it has become possible to sail ships through the Northwest Passage for the first time in recorded human history.
(13 June 2009)

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