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Peak Oil: Even If The Optimists Are Right, Time Is Getting Tight
Mike Byfield, Daily Oil Bulletin
Peak oil proponents and skeptics agree that world production will eventually crest. Also, both sides of this debate accept that the decline curve will be gradual rather than sudden (with a little luck). Their common ground, although limited and easily obscured by emotional intensity, is slowly growing.
Aptly illustrating this blend of acrimony and agreement was a report issued last week by Cambridge Energy Research Associates (CERA) – Why the Peak Oil Theory Falls Down: Myths, Legends, and the Future of Oil Resources – and the rebuttal from the Association for the Study of Peak Oil & Gas (ASPO).
Peter Jackson, CERA’s director of oil industry activity, remarks acidly that the “peakist argument is not grounded in a credible systematic evaluation of available data.” Randy Udall, a co-founder of ASPO, retorts that CERA is peddling “PetroProzac” which lulls attention away from urgently needed actions.
Even so, CERA and ASPO agree on a great deal.
(20 Nov 2006)
Mexico: Energy output short of demand
Andrea R. Mihailescu, Washington Times
Mexico, the No. 2 U.S. supplier of oil, is unable to produce enough to meet the demands of its customers, especially its neighbor to the north, because of outdated national economic policies that have hamstrung its oil and gas exploration and production, analysts say.
Mexican President-elect Felipe Calderon met with Canadian officials this month to discuss trade and explore further cooperation as Mexico’s production capacity dives.
Although Mexico has the potential to be an energy powerhouse, the country’s national oil company, Pemex, lacks the investment funds to improve production in mature fields.
(20 Nov 2006)
The article contains the implicit assumption that investments can bring Mexico back from peak, when in fact its more likely that they would only slow the decline. -AF
Lynch: Oil Prices Expected to Fall Below $45
Economy News Desk, zaman.com
Traders are discussing the future of oil prices after crude oil dropped to $55.26 per barrel, the lowest level in 17 months.
Some experts claim prices will decline even further.
In an interview with Forbes magazine, Michael C. Lynch, president of Strategic Energy & Economic Research in Amherst, Massachusetts, said prices would regress.
Lynch, known for his optimistic analysis in energy issues, asserted that new supplies would amply meet growing demand.
He did not expect price hikes even if an economic embargo was imposed on Iran, which produces 3.75 million barrel per day (bpd).
Lynch said oil disruptions, nuclear threats, wars, terrorism, tornados and pipeline decay affected oil prices with a $20-per barrel risk premium.
According to Lynch, prices might fall to $25 per barrel if risks were eliminated.
However, the American economist expected oil prices to settle at $45 a barrel.
Lynch said price hikes from $30 to $80 began four years ago when Venezuelan oil companies went on strike.
Because of the strike, Venezuela’s 3.25 million bpd-output fell by one million barrels and subsequent policies failed to restore the output.
He recalled that the two million bpd average in Iraqi output was halved due to the U.S. invasion and stressed that the growth in Chinese demand had significant influence on price hikes.
In 2004, China increased its oil consumption by one million bpd to 7.4 million.
Lynch stated that oil supplies shrank by four percent when Nigeria cut production by 500,000 bpd due to political unrest in the country.
Apart from Saudi Arabia, no producer had raised oil production in mid-2005.
The 700,000 bpd reduction due to Hurricanes Katrina and Rita led the markets to fall for pessimistic scenarios.
“These were all one-time transient events that can be fixed or adjusted to,” Lynch said.
…Sohbet Karpuz, an expert on global oil markets, attributed the decrease in oil prices to a selling wave triggered by global hedge funds ahead of the U.S. midterm elections.
“High stocks, above-average weather conditions in the United States and predictions that the Organization of Petroleum Exporting Countries would not reduce output had impact on price decreases.”
Karpuz claimed that the supply-demand balance was made insignificant by market resistance to negative developments in supply.
(21 Nov 2006)
Good to see one of EB’s favorite contributors Sohbet Karbuz get the final word in this article, (even if they did get his name wrong). Lynch’s argument is that these supply disruptions were “all one-time transient events” may be more or less correct in a sense, however as the world’s spare production capacity continues to diminish as we go over the peak, these one-time events, which previously would have been barely noticable nuisances to the global markets, now have broad influence. Expect many more. -AF
