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Peak oil and supplies - June 22

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Despite Relatively Low Demand, Oil Prices Spike
(text and audio)
Tom Gjelten, All Things Considered, NPR
The price of oil this week has been hovering around $70 a barrel, down from last week but twice what it was just three months ago.

AAA says the average price of gasoline around the country is now $2.69 a gallon, up 36 cents a gallon just in the past month. But there is something strange about these price increases: Market analysts say the demand for oil is largely unchanged.

Oil As 'Alternative Investment'

The more people use oil, the more the price goes up. When supplies are limited, the price goes up even more. In the oil market, however, the law of supply and demand is just one of the factors affecting the price. For one thing, it is not just the users of oil who buy it; it's also people who play the market.

"This has much more to do with oil seen almost as an alternative investment," says Daniel Yergin, chairman of IHS Cambridge Energy Research Associates.

In part, oil investors figure that even if the demand for oil isn't all that high now, it is likely to grow in coming months.

An anticipated future demand for energy should drive up prices of other energy products, such as natural gas. That has not happened, however.
(19 June 2009)



Greens told no alternative to fossil fuels

Dominic O'Connell and Jonathan Leake, Sunday Times (UK)
Saudi oil boss says that despite the world push towards greener energy, there is no choice but to rely on fossil fuels
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LISTEN to ministers and green campaigners and you would think that we are on a happy path to greener energy, with renewable sources of power freeing us from reliance on fossil fuels.

It is a pipe dream, according to a leader of Saudi Arabia’s oil industry. Abdallah Jum’ah, who stepped down last year as chief executive of Saudi Aram-co, the state-owned oil company, said objective assessment of the world’s energy needs showed renewable resources would provide only a minute share of what was required. Oil, gas and coal would remain the fuels of choice - and there was plenty of oil left, he told the Royal Academy of Engineering last week.

Jum’ah’s words will anger environmentalists, economists and former oil-industry executives who have argued we are near peak oil production, and that it will run out sooner rather than later... Jeremy Leggett, boss of renewables company Solar-century and chairman of a UK industry taskforce on peak oil, said Jum’ah’s comments were to be expected.

“We believe this at our peril. Western economies allowed themselves to be duped by the investment-bank-ing industry, which massively overstated assets, and we cannot make the same mistake with the oil industry.”
(21 June 2009)



Study Shows Expense of Finding Oil, Nat. Gas Soared in 2008

Kristen Hays, Houston Chronicle via RigZone
The U.S. oil and gas industry's costs of finding resources rose 35 percent last year amid the wild rise and fall in commodity prices, an Ernst & Young study released Thursday showed.

The three-year average cost per barrel of oil equivalent, excluding acquisitions of proved reserves, was $27.22. But in 2008 that spiked to $51.96.

"This validates that finding oil and gas reserves is very, very expensive," said Marcela Donadio, oil and gas sector leader for the Americas. She noted that cost also demonstrates why some companies have delayed final investment decisions on costly expansions or new projects, such as those in Canada's oil sands or deep-water exploration.
(19 June 2009)

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