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Noteworthy Notes From “Oil Supply And Demand Symposium, New York City”

MontyHigh, World of Wall Street

Where the wallstreet suits look at Peak Oil without using the phrase (click here for conference web site). They are looking mainly at the next five years, but also out to the end of the decade.

QUICK SUMMARY: A quite valuable set of empirical data and expert opinion which mostly seems to be sincerely intended to bring a valid perspective. Very high density of valuable info to time spent. A good place to find the best expert advice, if you can afford it. I expect I will attend the next event sponsored by this event’s sponsors. I expect I will pay up for the conference proceedings.

The consensus outlook (with one outlier) is for liquid fuel production to plateau to the end of the decade. This will constrain economic growth, particularly in the OECD as the OECD sheds liquid fuel consumption to allow consumption growth in the Chindia and oil-exporter developing world. Unconventional oil (deep-water, arctic, tight-shale) all have significant geologic/geographical limits. They can be expected to support a limited duration liquid fuel plateau but are not big enough or can be brought online soon enough to support increasing production. Saudi Arabia needs $80/bbl to support its committed government spending and has stated that $100/bbl is the “fair” price they expect. This should support, apart from short term financial crisis-type demand drops, the price of oil.

The one outlier’s (Edward Morse, Citibank) bearish outlook on the price of oil is based on an assumption that nothing has changed and that recent high prices are due to industry underinvestment not due to limitations on available high energy return on energy invested available resources. This seems clearly incorrect from my perspective.

BUSINESS MODEL: This conference is sponsored by (with most of the speakers coming from) oil industry analysis consulting businesses. As such, I expected and got, I believe, their very best big-picture outlooks as they are trying to impress potential clients. I did not get (and did not expect) the proprietary detailed empirical data and opinion on special situations that are only available via much more expensive consulting arrangements.


This is going to be good because Dr. Jeffrey Brown, originator of the Land Export Model is here, not as a speaker but as an attendee. I guy like this would only attend if there he expected something of value not available elsewhere.

I’m going cover the highlights of each speaker and whether they seem like someone worth following. I am paraphrasing and may not be completely accurate as I’m typing as fast as I can.
(23 June 2012)

The Folly of Energy Independence

Gal Luft & Anne Korin, The American Interest
The United States stands on the cusp of a global strategic advantage of huge significance. It is now within our grasp to cut the Gordian knot of energy policy, transforming our economic prospects in a fairly short period. Seizing this advantage does not require or depend on an esoteric technological breakthrough. It does not require allied assistance. It does not require a great deal of citizen sacrifice, discipline or patience. It does not require new taxes or convoluted cap-and-trade schemes. It merely requires that the Administration and the U.S. Congress get their collective head straight for once about a policy area in which politically ecumenical futility has been the norm for nearly forty years.

It has been an article of faith at least since the Nixon Administration that, in order to strengthen its energy security and, through that, its international position generally, the United States should reduce its dependence on imported oil, particularly from the Middle East.

… Leaving aside for the moment the actual reasons that successive U.S. Administrations failed to achieve what all professed to be a critical national security goal, the fact of the matter is that the goal of import reduction was misguided. Typical Americans throughout the years have labored under a series of misconceptions about how the international oil business works, the most common of which is that exporters have the ability to fine-tune the destination of their oil exports for political or commercial purposes. This is simply not true. Think of the oil market as a swimming pool: Producers pour oil in, consumers take oil out. The oil itself is totally fungible, and everybody faces essentially the same price. While individual producing countries may have contracts with consuming countries, most oil is purchased on the spot market for an international price. This arrangement is enabled by the fact that the international oil companies determine what happens to the oil once it enters the global market. With rare exceptions, the governments of oil-exporting countries are simply unable to control where their oil goes.

… The problem we face is not about supply but about price. In recent years America’s volume of imported oil has dropped significantly even as the price we have paid and are still paying for it has sharply increased. It follows, then, that the policy options we ought to consider differ significantly from those of the past half century.

… The inability to keep the price of oil at bay, not the volume of imports, is the crux of America’s vulnerability. But—and this is the critical yet still generally unrecognized key to the solving the energy puzzle—the price is what it is because virtually all the cars and trucks in the world are unable to run on anything but petroleum-based fuels. Oil faces no competition from other energy commodities in the sector from which its strategic importance stems, namely transportation.

Gal Luft and Anne Korin are co-directors of the Institute for the Analysis of Global Security (IAGS) and senior advisers to the United States Energy Security Council. They are co-authors of Turning Oil into Salt: Energy Independence through Fuel Choice (2009) and Petropoly: The Collapse of America’s Energy Security Paradigm (Forthcoming, 2012).
(July/August 2012 issue)
Suggested by Asher Miller of Post Carbon Institute.

The European Refining Blues

Stephen Bowers, The Oil Drum
This is a guest post by Stephen Bowers (TOD user carnot) who works for Evonik, a major chemical company based in Germany. Stephen is a petroleum chemist with over 30 years experience and started his career as a mud logger drilling oil wells.

Oil refining in Europe enters a new phase as the combination of emissions legislation and dieselisation of transport fuels demand really starts to bite. In the past months we have seen the rather muted bankruptcy of a major independent refiner, Petroplus, which was set up in the last decade by one Thomas O’Malley, who had previously set up the independent and very successful refining group Valero. Petroplus, it would appear, tried to emulate the strategy of Valero, and in Europe purchased 7 refineries of rather mixed capabilities at relatively low cost: two in France (ex Shell), two in the UK (ex BP and Phillips), one in Germany (ex Exxon), one in Belgium, and one in Switzerland. By the time of the bankruptcy announcement Petroplus had shuttered two of the refineries: one in the UK and one in France.

How did it all unravel?

In this article, the changing landscape experienced by European refiners will be explored to help understand how a business that was profitable a few short years ago became much less so.
(22 June 2012)

As Rock Phosphate Runs Out, What is More Important – Food Crops or Fuel Crops?

Professor Chris Rhodes,
World rock phosphate production is set to peak by 2030. Since the material provides fertilizer for agriculture, the consequences are likely to be severe, and worsened by the increased production of biofuels, including those from algae.


The depletion of world rock phosphate reserves will restrict the amount of food that can be grown across the world, a situation that can only be compounded by the production of biofuels, including the potential large-scale generation of biodiesel from algae. The world population has risen to its present number of 7 billion in consequence of cheap fertilizers, pesticides and energy sources, particularly oil. Almost all modern farming has been engineered to depend on phosphate fertilizers, and those made from natural gas, e.g. ammonium nitrate, and on oil to run farm machinery and to distribute the final produce. A peak in worldwide production of rock phosphate is expected by 2030, which lends fears over how much food the world will be able to grow in the future, against a rising number of mouths to feed. Consensus of opinion is that we are close to the peak in world oil production too.
(21 June 2012)