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ODAC Newsletter - 8 June 2012

Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre at nef dedicated to raising awareness of peak oil.

At the end of March, when Brent traded at around $125 per barrel, Saudi oil minister Ali al Naimi wrote a sharply worded article in the FT claiming there was no justification for such high oil prices, and Brent has since slumped to $100, which happens to be the Saudi target price. The decline is likely to be temporary, however, and Mr al Naimi soon shown to be as influential as King Canute. In answer to his complaint, he might like to read a recent paper from a team of IMF economists The Future of Oil Geology vs Technology which demonstrates the ten-fold rise in oil prices since the turn of the century is almost entirely due to depletion.

While output has risen in Saudi Arabia, the US, Libya and Iraq, the more important cause of the oil price slide is the economic slump - with many eurozone countries in recession and growth in China slowing sharply — in which oil prices are clearly complicit. Until 1st June, Brent had stood above $100 for 240 consecutive days, the longest on record, compared to just 170 days in 2008.

OECD oil consumption has fallen sharply since 2008, especially in the US, where it is now back at levels not seen since the mid-1990s, according to figures from the EIA. But the spare production capacity freed up by weaker OECD demand has been soaked up by the BRIC economies — especially China — thus keeping the crude price painfully high for the spluttering economies of the west. Now it looks as if even the 'Chindia' economies are cooling and struggling to pay the depletion premium.

There are also signs that the weakening oil price is beginning to have an impact on production. According to consultants JBC Energy, Saudi Arabia has already cut back shipments following a period of 3 months in which al Naimi claims that the kingdom has been pumping over 10 million barrels/day— its highest level since the 80s. It's worth noting however that in that time Saudi domestic consumption has more than trebled.

What happens next is difficult to predict. A falling oil price will soon begin to affect other OPEC countries like the UAE and Kuwait, which like Saudi depend on oil revenues to keep social unrest at bay. It will also impact the expensive barrels like tar sands, shale oil and deepwater production, perhaps leading to cancellations or delays. This would advance the date of the next oil price spike when — or if — economic growth returns.

On the other hand, a combination of the impact of sanctions on Iran, and a possible OPEC production cut could push prices higher far sooner, causing still further damage to struggling economies.

Either way, it isn't pretty.

Oil

Oil Heads for Longest Weekly Losing Streak in 13 Years

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Saudi Arabia Achieving $100 Oil Signals Output Reversal

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For first time in years, the world is producing more oil than it needs

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Argentina to 'immediately launch' criminal proceedings against UK oil firms operating off Falklands Islands

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Oil rush in the Arctic gambles with nature and diplomacy

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Gas

Halliburton blames guar bean shortage for profit warning

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China's shale future: not as bright as promised?

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Gas Demand To Rise 17% By 2017 On Asia, U.S., IEA Says

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The Biggest Story in Natural Gas That Few are Talking About

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Nuclear

Japanese more opposed to nuclear power a year after tsunami

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Japan PM urged to be cautious about nuclear restarts

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UK

UK signs 'landmark' energy agreement with Norway

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Windfarm subsidy faces huge cut

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Communities should be 'bribed' to accept more wind farms, says MP

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Fraudsters turn to carbon credits, according to FSA

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Lincolnshire County Council approves wind farm restrictions

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Climate

Leaked documents reveal UK fight to dilute EU green energy targets

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CO2 Market Wants Tougher EU 2020 Climate Goal

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Transport

Airline group says biofuels need govt support

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Geopolitics

Obama Order Sped Up Wave of Cyberattacks Against Iran

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