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Why the Saudis aren’t lifting a finger to ease oil prices
Steve Yetiv and Lowell Feld, Christian Science Monitor
Here’s one of the most important puzzles of global oil security: Since the late 1970s, Saudi Arabia has pumped the market with oil, fearing that high prices could hurt global growth, reduce demand for Saudi oil, and anger its protector, Uncle Sam. Now, oil has almost doubled in one year to more than $90 a barrel, and the Saudis have barely lifted a finger despite the fear that high oil prices could increase the likelihood of an American, and therefore a global, recession. Why? The answer may define oil in the 21st century – or at least underscore the reasons for the US to seek greater oil independence.
The Saudis may have been thinking in the past year that the American and global economy could tolerate $90 oil. Until now, the global economy has been growing, and the US economy has avoided recession in spite of months of very high oil prices. However, on his recent trip to the Middle East, President Bush pushed the subject. The Saudis noted that the weakening US economy is a valid concern, but they remain reluctant to increase oil supply.
Oil producers say that high prices are partly due to speculation in oil markets as well as to the dollar’s decline, and not because oil is lacking. That may be true, but the high price, whatever the cause, remains a big problem. Saudi Arabia’s reluctance to address sustained high oil prices, even in the face of a potential recession, represents an important break with past Saudi oil policy.
(6 February 2008)
Brazil’s Recent Oil Discovery
minsley, Energy and Oil (“Profiting in an energy driven world…”)
The world’s oil patch has gotten a little bigger, as Brazil’s national oil company Petroleo Brasileiro SA, or Petrobras, announced that its new “ultra-deep” Tupi field could hold as much as 8 billion barrels of recoverable light crude. Petrobras shares soared $24 on the news, to $116. Instant speculation focused on Brazil joining the ranks of the world’s “top 10″ oil producers.
We asked our resident oil man Byron King what he thought. “Not so fast,” said Byron, who pointed out that the Tupi field is 286 kilometers (177 miles) offshore in the South Atlantic Ocean. Tupi lies under 2,140 meters (7,060 feet) of water, more than 3,000 meters (almost 10,000 feet) of sand and rocks, and then another 2,000-meter (6,600-foot) thick layer of salt. “You can look this up,” added Byron.
Getting that oil out of the crust will be a formidable challenge and require many years of expensive investment. Most of Brazil’s oil-bearing potential lies off its Atlantic coast. Byron noted, however, that he has long admired Petrobras for its outstanding technical competence. Byron told us that Petrobras is a global leader in ultradeep offshore oil extraction.
“Plus,” added Byron, “by the time that Brazil’s oil comes on line in any significant way, many other oil provinces of the world will be producing less.” So congratulations to Petrobras, but don’t use this news as an excuse to buy a new gas-guzzling Hummer.
One more item from your resident oil man:
“A discovery of 8 billion barrels is in the same class as Prudhoe Bay. ARCO and BP have spent over 30 years drilling and extracting oil from Prudhoe Bay. So it is not as if all 8 billion barrels from Tupi will see the light of day any time soon. Petrobras has a very long-term program in front of it.”
(4 February 2008)
Energy Prices, Inflation and Denial
Euan Mearns, The Oil Drum: Europe
Higher energy prices are feeding through to rampant consumer energy price inflation. And yet the authorities and many investment houses still see energy prices falling in the future. This naive view of global energy supplies is starving energy markets of the capital required to expand conventional and alternative energy supplies.
… I mention our markets here because, since I started to follow energy markets and companies in 2003 the expectation for the future has always been that prices will fall – even though energy futures prices switched to contango.
This century, energy companies have bought back stock on an unprecedented scale whilst contemplating their corporate navels and avoiding real investment in future energy supplies. No wonder then that energy supplies are waning and prices are going through the roof.
… When an energy sector presides over falling production whilst forecasting prices for their product will also fall it is little wonder that their stock values are priced in the bargain basement of Global Stock markets. It is high time that the energy industries, capital markets and governments recognise that falling production and rising demand are not compatible with falling prices and that they come together to invest this profit bounty in our energy future. That future does not lie in low eroei liquid fuels like ethanol and syncrude but in solar energy, wind energy, electricity, batteries, electric transportation and global scale HVDC grids.
It is time to invest and build.
(3 February 2008)
Asia coal prices at record high
Fayen Wong, Reuters
Coal prices at Australia’s Newcastle port, a benchmark for Asian coal prices, jumped to a fresh record of more than $US115 a tonne ($127.25), as a global supply crunch worsened after a series of supply disruptions in key coal exporting nations.
Thermal coal prices jumped $US23.09 from a week earlier to $US116.44 per tonne, globalCOAL’s NEWC weekly index showed in the week ended February 1, based on free-on-board (FOB) prices loaded at Newcastle port.
… “Spot coal prices will continue to rise. It doesn’t look like there are many bearish factors in sight to push prices down,” said Mark Pervan, a resource analyst at the Australia & New Zealand (ANZ) Banking Group.
(4 February 2008)
