• Embed Doc
  • Copy Link
  • Readcast
  • Collections
  • CommentGo Back
 
 
Peak Oil Review
 
Vol. 4 No. 5February 2, 2009
Tom Whipple, EditorSteve Andrews, Publisher
1. Production and Prices
Oil prices climbed as high as $48 on Monday, collapsed to the low $40s on Tuesday and remainedthere for the rest of the week. The fall was precipitated by another round of bad economic newswhich once again outweighed the prospects of OPEC production cuts. Although OPEC officialsmaintain that the organization was on track to finish its 4.2 million b/d production cut by the end ofJanuary, tanker-trackers say the members are still shipping at least 1 million b/d above that goal.OPEC’s Secretary General reiterated at the Davos meeting that producers want crude between$75 and $100 a barrel and will not hesitate to cut more production at the March 15
th
meeting inVienna, if prices do not increase by then.The EIA issued a revised estimate showing that US oil demand in November was down by 7.7percent or 1.5 million b/d, year over year, to 18.9 million b/d. Demand for gasoline in Novemberwas revised down to 8.8 million b/d, the lowest November demand since 2002. Weekly figures forDecember and January have been showing a small increase in demand since November likely dueto the holidays and lower prices.The possibility of a strike at US refineries this week kept prices firm on Friday.Natural gas prices fell some more on Friday to close at $4.41 /mbtu. During January, natural gaswas down by 21 percent on falling industrial demand.
2. Obama’s stimulus
The American Recovery and Reinvestment Plan currently making its way through the Congresscontains, among much else, the seeds of a multi-billion dollar overhaul of energy. As part of theefforts to sell the bill, President Obama gave a brief speech last week outlining his goals forrevamping the supply and use of energy. Starting with the assertion that “America's dependenceon oil is one of the most serious threats that our nation has faced”, coupled with the threat – “violent conflict, terrible storms, shrinking coastlines, and irreversible catastrophe” – of climatechange, it is clear the new President clearly understands the seriousness of our oil problems.Moreover, he seems determined to do something about them after decades of inaction.Once you understand that “energy independence” is a politically acceptable euphemism for peakoil, the details of the proposals such as doubling the production of alternative energy, 3,000 milesof new transmission lines, fuel efficient cars, and massive weatherization make sense. The primarypurpose and justification for the expenditure of $800-900 billion envisioned in the plan is to create jobs quickly, not to prepare for oil depletion. While not optimum to prepare for peak oil (do we reallyneed more new roads and more ethanol from corn?) and slow global warming, the plan is the bestwe have had in recent times and at the minute seems likely to become law.The major concerns about the plan are the massive cost and its effectiveness in creating jobs. Canborrowing on a multi-trillion scale be accomplished without triggering a period of devastatinginflation and will disappearance of jobs be reversed quickly enough? These are the questions forwhich there are a thousand opinions.
 
3. Venezuela
Of all the oil exporting countries, Venezuela appears to be suffering the worst consequences fromthe rapid fall in oil prices last year. Russia and Iran may be running close seconds. Caracas says ithas averaged $36 a barrel for its oil this year, well below the $60 planned in the state budget.For several weeks it has been rumored that Venezuela has not been paying its bills and thatpayments on the order of $8 billion are due the oil service companies that do much of the drillingand keep the oil flowing. Last week troubles arose as several oil service companies, seeing nopayments in sight, simply stopped working. In one case the Venezuelans actually seized a foreign-owned drilling rig after the company stopped work. In a second case a US oil driller stopped workat several locations saying that PdVSA owed it $100 million.Short of a rapid rebound in oil prices there is no end to this problem in the offing. Caracas hasbeen vocal in calling for still more OPEC production cuts which—short term--would make theirsituation still worse. The patience of Venezuela’s partners and contractors is clearly wearing thin.Should they start halting or slowing work en masse, Venezuela’s oil production is likely to fall,further exacerbating the situation. In some areas, local employees of oil service companies areonly receiving partial pay despite government orders that the companies continue to pay theiremployees. Caracas appears to hope falling costs and lost business will force the oil servicecompanies to renegotiate for less expensive contracts.The only bright side to the situation is that Caracas has restarted talks with the French oilcompany, Total, about expanding its operations in Venezuela. Total was one of the companies hurtwhen Chavez nationalized much of the foreign oil production.
4. Briefs
( 
clips from recent
Peak Oil News 
dailies are indicated by date and item
#)
•
Fatih Birol, the chief economist at the International Energy Agency, estimates that around$100 billion in
projects
, mostly outside of OPEC, have been
delayed or canceled
over thepast year because of weaker oil prices. In some cases, companies are waiting for lowercosts. In others, they are deferring projects that have become unprofitable at today's oilprices. The collapse of the financial sector has made it much harder to finance multibillion-dollar projects. (1/31, #14)
•
 
Global oil prices
need to stay above $40 a barrel to keep deep offshore oil production andexploration economically viable in Nigeria according to the head of the country's state-runoil firm. (1/28, #6)
•
 
Nigeria
's main militant movement said it was ending a four-month ceasefire and wasgearing up for a "sweeping assault" on oil and gas companies rekindling the risk ofescalating disruptions in the country's restive Niger Delta. (1/31, #6)
•
 
Saudi Arabia
may cut output more as it seeks to set a floor under oil prices. The kingdomplans to pump in February below its OPEC target of 8.05 million b/d, undershooting whatwas already a record OPEC supply cut agreed in December. (1/30, #9)
•
 
OPEC
Secretary General el-Badri said the group may achieve its new output quotas in fullbefore the end of the month, even as tanker-tracker estimates suggest otherwise.
PetroLogistics
says OPEC members will produce about 1.3 million b/d more than theirnew collective target this month. (1/29, #3)
•
 
Shell
Nigeria’s Bonny Light and Sea Eagle and Forcados crude fields can produce around800,000 b/d between them when running at full capacity. The company's actual output,severely hampered by attacks on its facilities by local militants, averaged 361,000 barrels aday in the fourth quarter of 2008 compared with an average of 409,000 barrels a day a yearearlier. (1/29, #8)
•
The head of Brazil's oil company
Petrobras
said there would be no oil project delays in2009, and that production was about 2.4 million barrels per day. The company has said its
 
output will reach 3.3 million barrels of oil equivalent per day by 2013. Petrobras had basedits calculations on relatively low prices of around $37 a barrel for Brent crude in 2009 andaround $45 for the longer term. (1/31, #7)
•
 
Mexican President Calderon
, at the World Economic Forum in Davos, sought to sell theheads of the world's biggest energy companies on his nation's oil industry, touting newopenings for foreign firms. Mexican oil output fell 9.2 percent last year to 2.8 million barrelsper day. (1/31, #8)
•
In a year where oil rose to a record price before having its steepest-ever collapse,
ExxonMobil
still managed to set a record as the most-profitable U.S. corporation. It earned$45.2 billion in 2008, up from $40.6 billion in 2007. The Exxon CEO has signaled that thecompany may actually increase its investments by 20 percent this year. (1/31, #14)
•
On Friday January 16th, the Bush Administration’s
Electricity Advisory Committee
 published a lengthy study in which it said the government needs to make a significantintervention in the power market, it's completely failed to do so for the past eight years (andlonger), and conservation needs to be part of anything we do. (1/31, #18)
•
 
BP’s CEO
Tony Hayward said crude oil prices between $60 and $80 a barrel are“appropriate” to sustain essential levels of investment. (1/30, #6)
•
A continuing oversupply in the US crude market could force
Canadian oil sands
producersto cut back production, says a report by Merrill Lynch. (1/27, #11)
•
 
Iraq
seeks to export 2 million barrels of oil a day in 2009 according to Oil Minister al-Shahristani. (1/28, #5)
•
 
Canadian oil and gas drilling
could fall 21% this year on slowing petroleum demand andlow commodity prices according to the Petroleum Services Association of Canada. (1/29,#16)
•
 
The International Air Transport Association
, which represents 230 airlines worldwide,reported that December's international air passenger traffic fell 4.6% year-over-year, andonly 74 percent of plane seats were sold. International air cargo volume fell anunprecedented 22.6 percent year-over-year. This is the first time in memory that airlines invirtually every region of the world have been simultaneously hurt by falling passenger andcargo loads. (1/30, #7)
•
The cost to
transport crude oil
from the Caribbean on Aframax tankers has dropped 62percent in four weeks as rising stockpiles of crude oil and the weakening U.S. economyreduced demand for shipments. (1/31, #4)
•
 
Japan
, the world’s third-largest oil user, said gasoline sales fell 4.2 percent during 2008,the most in more than half a century as record prices prompted motorists to drive less. Itwas the biggest drop since the trade ministry started collecting data in 1952. (1/30, #13)
•
 
Japanese industrial production
fell a larger-than-expected 9.6 per cent andunemployment rose sharply to 4.4 per cent in December, highlighting the rapid deteriorationin economic activity in the face of fading global demand. (1/30, #16)
•
Oil analyst Paul Ting says
China's
December oil demand declined by 4%, the sharpestmonthly demand decline in the past decade. Earlier this month, the IEA predicted thatChina's oil demand would grow 1.1 percent this year (1/29, #9)
•
 
India's crude oil imports
slumped in December to their lowest in more than four yearsdespite Reliance Industries' new refinery coming on stream. Demand sank amid aneconomic slowdown and maintenance shutdowns. (1/28, #9)
of 00

Leave a Comment

You must be to leave a comment.
Submit
Characters: ...
You must be to leave a comment.
Submit
Characters: ...