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Perryman: Oil at $100 could have psychological impact on consumers
Mella McEwen, Midland Reporter-Telegram
“Oil could easily hit $100 a barrel,” said Economist M. Ray Perryman…
Oil at $100, he continued, “could have a psychological impact” on consumers and oil traders alike.
…Perryman noted that in January 1982, he predicted what he called the first oil bust, based on data that told him supply was far outstripping demand and oil was being stored not only in tanks but in tankers anchored offshore. Oil prices are driven, he said, by supply, demand and speculation.
“The question I’ve been asked most often in the last 25 years is what would oil prices be without any speculation, and today, without speculation, I believe prices would be in the mid-40s to $50,” he said. “Today prices are twice that and I don’t think speculation is going to go away soon.”
…Prices also are being impacted by the recent mortgage crisis, he said, which has prompted investment funds to move from mortgages to something with a high rate of return — oil and gas contracts. The mortgage crisis also means, he said, that asset lending has become more expensive.
Such tensions, combined with a seemingly unquenchable thirst for energy means there is a lot going on in the world of oil and gas, he told the gathering. Globally, he said, demand for oil and gas has “just exploded.” He cited China as an example, saying in 2001 China used about one barrel of oil per person, compared to 30 barrels per person in the U.S. Today, he said, China now uses two barrels of oil per person and if they follow that pattern, that could double to four barrels in five years and to eight barrels in another five years.
“When China goes from one barrel to five or six barrels per capita and you multiply that five extra barrels by 1.1 billion people, you’re going to need 7 billion more barrels and we just can’t produce that; we don’t have it — and that’s just one country,” he said.
That is why, he said, when this country’s politicians — or consumers upset about high gasoline prices — talk about energy independence, they’re actually talking about energy security. This nation will never be energy independent, he said, but there are steps it can take to lessen its dependence on foreign energy sources, beginning with using less energy.
Another important step is developing energy sources beyond oil and natural gas, which likely will reach peak production worldwide in the next 10 to 15 years — technology has helped extend the life of many of the world’s fields, he said — and estimates of reserves left range from 900 billion barrels to 15 trillion barrels and there are “tons” of potentially productive areas that have yet to be explored, and portions of the oceans that haven’t been explored. But peak oil production — and peak cheap oil production — is a practical reality, Perryman said, meaning all energy sources will be needed to keep economies growing and improving quality of life for the world’s residents.
(6 November 2007)
Production from oil majors struggles to keep up as oil shoots for $100
Platts
China — October 29 – Nov 2 2007
The wheels may be wobbling and a few clouds may be gathering on the horizon for market bulls, but the bandwagon that seems to be taking headline crude oil futures relentlessly towards a watershed $100 per barrel level carried on purposefully last week.
Critically, the peak oil debate that has started to frame the current rally in crude futures attracted new data to consider on November 2.
A Platts survey showed third-quarter global production of oil liquids at seven key publicly traded international majors declined 6% from last year, with output down 664,000 b/d at a time when some officials are calling for increased production from OPEC.
…Peak oil enthusiasts took note of the disappointing production results from the majors, with Charles Maxwell, the senior oil analyst for Weeden & Company, warning that the downturn simply underscores fundamental changes afoot that the major producers want to ignore.
“They can’t tell you why this is happening,” said Maxwell, a noted peak oil lecturer and observer. “It’s like a tennis player who can’t explain why he is losing to someone he has beaten all the time. They haven’t figured it out.” He said he was surprised to see the decline emerging in production data earlier than he had expected, and predicted the implications include continued rising oil prices.
(updated 5 November 2007)
Telling the Whole Truth About Oil
Gwynne Dyer, Arab News
…now we have the spectacle of oil companies telling the truth about oil supplies — or at least more of the truth than usual. The occasion was last week’s Oil and Money conference in London, and the most spectacular truth-teller was Christophe de Margerie, CEO of the French oil company Total, one of the international “big five.” Last year his predecessor, Thierry Desmarest, caused a flutter in the industry by predicting that world oil output would peak around 2020. This year, de Margerie said that “100 million barrels (per day)…is now in my view an optimistic case.”
He was referring to the International Energy Agency’s estimate that world oil output would reach 116 million barrels/day by 2030, and the slightly more optimistic US government prediction that it will reach 118 million b/d by that date. Even these acts of faith are really a forecast of crisis, since calculations based on current trends (like a 15 percent annual growth in Chinese demand) suggest that 140 million b/d will be needed by 2030.
The implication of De Margerie’s remarks is that the crisis is coming a lot sooner than that.
…It is still deeply unpopular in the oil industry to talk about peak oil, but essentially what de Margerie was saying, albeit in a cautious and coded way, is that it is here or nearly here.
…The recent surge in the oil price, which may see it reach $100 a barrel in the near future, is largely a mirage caused by the collapse in the value of the US dollar. (The price of oil is generally quoted in US dollars, but cost of a barrel of oil in euros or yen has risen far less dramatically this year.) But the longer-term trend, which saw the price rise fivefold between 1999 and 2005, was driven by the tightening supply situation as demand raced ahead while production did not.
(6 November 2007)
Gwynne Dyer’s home page.
In a private meeting with Matt Simmons
The Press and Journal (Scotland)
…Simmons said he regretted not making his predictions for the future of Big Oil much more dire than had been portrayed in his controversial book, Twilight in the Desert, published two years ago.
“If I was redoing Twilight in the Desert today, I’d sharpen the severity of the warning quite significantly.
“May, 2005, still stands out as the all-time record high for global crude production … 74.3million barrels per day, and now we’re down 1.2million barrels per day. The IEA shrug that off, saying that if you look back over the last few years, records have been set several times; a peak followed by a falling off, then another peak, and so forth.
“That’s an interesting thesis. But as we watch Mexico start into its big-time decline and UK and Norway continue their rapid declines, plus Indonesia, Egypt, Argentina and others besides … you can see several years of relentless decline. Add them up and say, find me one area coming on in the next few years that will halt such a collective decline … it’s just not there.
“Major oil companies have quadrupled their spending over the past five years and, other than acquisitions, basically they’re in liquidation.”
Simmons reiterated his tough stance on drilling, which is the key to unlocking new resources. Given the criticality of a sustained offshore effort in that regard, he said the level of understanding of the current rig crisis and the need for renewal, let alone growing the global fleet was woeful.
(5 November 2007)
Oil is king – but for how much longer?
Sylvia Pfeifer, Telegraph (UK)
…”We are of course concerned about high oil prices,” Mohammed bin Dhaen Al Hamli, the president of Opec, said last week. But he added: “The market is increasingly driven by forces beyond Opec’s control.”
So what is really going on in the oil market? Opec’s view is by no means an isolated one. Many oil industry executives, including Shell’s van der Veer, believe that there is no fundamental reason why crude prices have hit their current levels. “There is a lot of psychology in the price,” he said in September.
…What no one disputes is that the high prices and market volatility have attracted a new breed of oil speculator into the market in recent years. Investors, including hedge funds, pension funds and individuals, have all discovered that the real black gold is oil futures, where people trade the right to buy oil at a predetermined point in the future electronically. Experts reckon that oil trading has increased by almost 10 times in recent years as new players have flooded into the market.
Other players, such as Morgan Stanley, have gone one step further: employees at the US investment bank don’t just trade in futures but handle real barrels of oil, getting involved in transportation, storage and delivery. The bank even supplies jet fuel to United Airlines. Its position gives it a huge advantage over competitors as it can tell if the market is oversupplied or undersupplied.
…While there is no question that speculators have contributed to the run-up in the price, others believe that people who blame them are ignoring just how tight supplies really are.
“Blaming the speculators is a lazy explanation. There is a genuine problem here,” says Paul Horsnell, the head of commodities research at Barclays Capital.
(3 November 2007)
Peak oil comic: Luz, Girl of the Knowing
Press release, The Comic Brief
Toronto collective Transmission-X (www.transmission-x.com) is pleased to add “Luz: Girl of the Knowing” by Claudia Dávila to its daily schedule of free webcomics.
Luz (pronounced “loose” but meaning “light” in Spanish) is a city girl on a mission to gather “the Knowing”: knowledge and experience about sustainable survival for humans, specifically in urban centers.
She knows a big change is coming as she hears on the news and sees in headlines that petroleum is becoming expensive and scarce, and the climate is noticeably getting more erratic. Although surprised that no one seems very concerned, she doesn’t wait for somebody else to take the lead.
She tries to figure out what her community will need when energy runs out as city-wide blackouts get more frequent, learning from her mother, grandma, neighbours and friends.
With her handy notebook at the ready, Luz begins her list of skills to learn (like first aid, how to grow and preserve food, collect rainwater, make a woodstove from an oil drum…) and begins to gather vital “knowing” from her neighbourhood.
(6 November 2007)
The URL for “Luz: Girl of the Knowning” is www.transmission-x.com/luz/ .
Where EOR Succeeds and Where it Does Not, Part 2
Tom Standing, ASPO-USA
…Conclusion
The long history of industry research and field applications of [oil extraction by miscible gas injection (MGI)] and chemical waterfloods tells us that once the vast majority of the world’s oil fields are depleted using primary and secondary recovery methods, (those with light or medium weight oil in reservoirs with good permeability), they will likely produce only negligible amounts of oil using current MGI technology. Conventional pressure maintenance of such reservoirs will govern how fast and how long oil can be extracted. In fields with poor permeabilities, MGI can extend field life, perhaps for decades. Production rates, however, will be at a fraction of the field’s peak rate, all the while production continues to diminish.
Tom Standing began his career as a chemical engineer in refinery operations and later shifted to work as an engineer for the San Francisco water system. He is self-taught in the sciences of petroleum production, geology and geochemistry.
(5 November 2007)
The Energy and Environment Round-Up: November 6th 2007
Stoneleigh, The Oil Drum: Canada
The dominant theme today is water, notably the effects of too much or too little of it. Climate change is predicted to impact on water supplies severely in many places, through both diminished rainfall and increased evaporation, while in other areas rainfall may increase to dangerous levels. Food supplies are also likely to be impacted. This has significant implications for the stability of the human societies affected, which has been recognized as a security issue for wider areas.
On the Canadian energy scene, resource royalties, pipeline construction and a reduction in natural gas drilling stand out. Oil and gas exploration continues in the Orphan Basin in the Newfoundland and Labrador deep offshore, and Alberta research institutes get excited about biodiesel from canola.
(6 November 2007)
ODAC News – Monday 05 Nov
Douglas Low, Oil Depletion Analysis Centre
Big Oil – Production
1/ Production from oil majors struggles to keep up as oil shoots for $100 – Energy Futures Weekly Review (Platts, Mon 05 Nov)
France – Road and Airport Development
2/ Road-building turns a corner (Financial Times, Fri 02 Nov)
Economy
3a/ Business comment: Le crunch is not over by any stretch of the imagination (The Telegraph, Sat 03 Nov)
3b/ Business Show (Telegraph TV, Mon 05 Nov)
3c/ The Citi Tsunami (BBC News [Robert Peston], Mon 05 Nov)
3d/ Foreclosure wave sweeps America (BBC News, Mon 05 Nov)
Oil and Money Conference 2007
4/ Oil Output Debate Reaches A Watershed (Energy Intelligence [Petroleum Intelligence Weekly], Mon 05 Nov)
Geopolitics – Russia and the UK
5/ Relations between Moscow and London (Energy Intelligence, Fri 02 Nov)
(5 November 2007)
