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

Brad Plumer, Washington Post
Remember when, a few short months ago, the whole planet was panicked about cripplingly high oil prices? That’s changed in a hurry. Crude prices are now plummeting. Oil in London is trading for $96 per barrel, way down from $126 back in February.
The big reason why: supply and demand. The world is pumping out more oil and other liquid fuels right at the moment when the global economy is starting to slacken and people are using less of the stuff. Matthew Phillips of BloombergBusinessweek offers up this great chart

* By the way, that chart actually shows “liquid fuels” production, which includes crude oil, natural gas liquids like propane, and ethanol. See here for a fuller breakdown. And note that while the most important liquid fuel, crude oil, recently hit new highs, it’s also largely stagnated since 2005 — so the chart is still consistent with various peak-oil worries.
(5 June 2012)

Bill Reinert Describes What the Future of Energy Looks Like to his University of Colorado Audience

K.M, Big Picture Agriculture
When an audience member at the April 2012 Conference on World Affairs at the University of Colorado asked Bill Reinert what he would do if he were in charge of energy policy in our nation, he retorted, “Aren’t I?”

Spoken in jest, his answer wasn’t all that far from the truth. Reinert was the coordinator of Toyota’s research, development and marketing activities related to alternative-fueled vehicles and emerging technologies, and the former Prius product planning team leader. He continues to be one of the company’s foremost futurist thinkers, now working on fuel cell vehicles, electric vehicles and other technologies which will help to define future transportation in America and the entire world.

As he showed us slides and gave his talk, he told our CWA audience that we would not be able to find better information anywhere, including from government agencies, about the decline in the spare capacity of global liquid fuels…
(6 June 2012)
See original for charts and data.

The Saudi Oil Problem

Tam Hunt, greentechmedia
Saudi Arabia is once again the biggest producer of oil in the world, surpassing Russia to regain its title. Saudi Arabia also happens to be one of the most repressive and undemocratic regimes in the world. The Economist magazine ranked Saudi Arabia 161st out of 167 countries in its most recent Democracy Index.

The Saudis have massive economic and demographic problems to deal with, including a pending peak and rapid decline in oil exports. You heard right: Saudi Arabia, the world’s largest producer of oil, is facing a peak in its oil exports and a rapid decline thereafter…

The problem of “peak oil exports” is the even more scary sibling to “peak oil.” Peak oil is, by itself, a massive problem, but peak oil exports highlight the problem even further, particularly for major oil importers like the U.S., Japan, China and Western Europe. The Saudis and other nations experiencing a demographic explosion will suffer greatly from reduced revenue from oil exports, but they will at least have the energy resources to maintain their economies. Countries that are net importers of oil will suffer in their own way, primarily from much higher prices for oil and possible shortages of oil as demand far outstrips supply.

As the world’s biggest importer of oil, by far, the problem of peak oil exports highlights the need for the U.S. to get off oil as quickly as possible.

The package of solutions to achieve this shift away from oil must include major and ongoing investments in energy efficiency and renewables. Energy efficiency is steadily improving with new technologies and higher fuel prices. Similarly, conservation (behavior change, as opposed to technological improvements that foster energy efficiency) will occur automatically with higher prices…
(6 June 2012)

Citi’s Ed Morse Has A Huge Note Blasting Everyone Who Believes In Peak Oil

Matthew Boesler, Business Insider
In eight years, oil may be trading more or less right around where it is right now.
That’s the call energy economist Ed Morse made in a recent note to clients.

The commodities research chief at Citi says he expects crude prices to stabilize around $80-90 per barrel by 2020.

Morse writes that “peak oil biases continue to blind analysts to an emerging oil cycle turning point” and that “unless the end of history has arrived, the long period of price increases that started in the last decade appears to be coming to an end.”…
(6 June 2012)

The Oil Bubble Is Popping, But Will It Pop Down To $67?

Andrew Butter, Seeking Alpha
The story so far:

1: There was a bubble in oil prices in 2008. The evidence for that is it popped which is a pretty good clue, although so far no one has figured out what drove the bubble. Yes it was probably speculators with access to easy money, but sadly no smoking gun has been found, although one gets the impression no one looked very hard.

2: The bubble popped, like bubbles tend to do, and then the price drifted back to what appears to have been the “equilibrium” at the time of $80 to $90 a barrel if you are talking Brent. Although by that time too Brent and WTI de-coupled so there is a bit of uncertainty about which line you should be following – if either using your genius model which was based on a history when WTI used to sell at a premium to Brent.

Regardless, the dynamic of the bubble – blow-pop-recover – looks about as perfect an example of the “theory” of BubbleomiX as you will find anywhere…
(6 June 2012)

Aggregate factors in the price of oil

James Hamilton, Econbrowser
It seems that no matter what financial series you look at, there’s a similar pattern of ups and downs over the last few years. I was curious to get a quick quantitative impression of how much of a contribution aggregate factors have been making to recent movements in the price of oil.

I commented on Sunday on recent big swings in stock prices, which rose in the fall of 2010, declined sharply over sovereign debt worries last summer and fall, rebounded early this year, and over the last month have moved back down. The same basic patterns are seen in the dollar price of oil.

How much of the recent moves in oil prices can be explained by changing perceptions of global economic activity? One way I thought to get an impression of this was to look at the extent to which recent oil price movements are mirrored in other commodities…
(6 June 2012)