Insight and inspiration in turbulent times.
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In truth, the spare capacity that the world cares about — that the oil futures market cares about — is not the inventory level. But rather, actual production capacity that can be brought on immediately. You can see the problem, from a price standpoint. If the world loses Libya’s 1.5 mbpd production for 90-120 days, and starts drawing down above-ground inventories, this only makes the inventory cushion that much thinner for any new supply disruptions. The question on the mind of the oil market therefore is not Mr. Fyfe’s 1.6 billion barrels of crude, but whether countries like Kuwait, the U.A.E. and especially Saudi Arabia or even Russia can lift supply. Immediately.
We need some balance in the Libyan oil story. Is this north African nation an unmitigated disaster for those elsewhere in the world running an economy or driving a gas-guzzling vehicle? Notwithstanding the turmoil, the answer so far is no.
Investigative journalist and author Greg Palast says the era of cheap fuel is over. Now energy companies are scouring the globe for oil, often extracting resources in more expensive and more environmentally sensitive conditions.
As much as a quarter of Libyan oil output has been shut down, Reuters calculations showed on Wednesday, as unrest prompted oil companies to warn of production cuts in Africa’s third-largest producer.
A midweek roundup of peak oil news, including:
-Developments this week
Let’s say that Libya’s entire oil production shuts down, a process that currently seems under way. Would Saudi Arabia genuinely make up the difference, as its energy minister, Ali al-Naimi, has said in Riyadh? The answer is crucial.
Maybe western leaders are afraid that, having seen what it is like when a people dictate to their government what it should do for them, rather than the reverse, we might start to take our own rights back, wholesale.
As elsewhere in the region, the main foreign powers involved — France, Spain, and the US — don’t seem to care much as long as the oil and gas flows, the country implements World Bank/IMF structural adjustment programs to modernize the oil industry to increase output, and their ‘strategic interests’ are protected. As long as these things happen, the country can go to hell in a hand basket – as it has. None of them have lifted a finger in protest to government practices and corruption.
Libya is one of the smaller oil exporters in OPEC. They were producing 1.65 million barrels per day in 2010 (through October) according to EIA data. However, the very serious political upheaval in this North African country poses a genuine threat to that production.
-Revolutions could rob Opec of its ability to manipulate supply
-IEA sees oil price danger, ready to use stockpiles
-Saudi Denial Not What it Seems
-Judge Tells Government to Resume Permits for Drilling
-Gulf spill’s effects ‘may not be seen for a decade’
Consider the first 15 minutes after the Titanic hit the iceberg versus the last 15 minutes before the ship sank. In the first 15 minutes, only a handful of people knew that ship would sink, but that did not mean that the ship was not sinking. In the last 15 minutes, it was readily apparent to everyone that the ship was sinking, but by then it was far too late to try to get to a lifeboat.
