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Approaching the Olduvai Cliff?


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#121 advancedatheist

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Posted 15 April 2004 - 05:31 AM

http://news.independ...sp?story=510938

Sterling set to fall as oil revenue dries up

By Damian Reece
13 April 2004

The pound is set to come under pressure as its near 30-year status as a "petrocurrency" comes to an end, a new study predicts.

The Centre for Economic and Business Research will issue its latest quarterly business forecasts today, which will show the euro rising against sterling by as much as 23 per cent over the next four years as the balance of payments deficit continues to balloon.

The widening deficit will be exacerbated by a turnaround in the UK's net position in traded fuels. Official forecasts for UK oil production show production by 2008 will be down to 56 per cent of its peak. Gas production will also be falling at the same time, albeit at a slower rate. By 2008, UK gas production will be down to 70 per cent of its peak level.



#122 advancedatheist

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Posted 20 April 2004 - 12:32 AM

http://news.bbc.co.u...ure/3623549.stm

Posted Image


When the last oil well runs dry

By Alex Kirby
BBC News Online environment correspondent 

Just as certain as death and taxes is the knowledge that we shall one day be forced to learn to live without oil.
Exactly when that day will dawn nobody knows, but people in middle age today can probably expect to be here for it.

Long before it arrives we shall have had to commit ourselves to one or more of several possible energy futures.

And the momentous decisions we take in the next few years will determine whether our heirs thank or curse us for the energy choices we bequeath to them.


Also link to:

http://news.bbc.co.u..._oil/html/1.stm

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#123 advancedatheist

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Posted 22 April 2004 - 04:17 AM

http://www.janes.com...40421_1_n.shtml

World oil crisis looms

The oil industry has been gripped by scandal since Royal Dutch/Shell twice this year downgraded its proven oil reserves by 20 per cent, or nearly 4bn barrels. Shell may not be alone.

Other companies and even governments have hyped up the estimates of how much oil they have, which is a vital factor in measuring their economic health. If exaggeration proves to be widespread, it would have an immense impact on the Middle East, whose economic weight is almost totally dependent on oil and natural gas.

Geologists and analysts have been saying for some time that estimates of global oil reserves may be dangerously exaggerated. If you take oil prices currently at around US$37 a barrel, the highest for nearly 15 years, US petrol prices at record levels and you add terrorist attacks and diminishing supplies, you have a recipe for inflation and economic slowdown. The question of reserves becomes a much more important factor.

Earlier this month, The New York Times reported that internal documents and other data indicated that Shell had over estimated its proven oil reserves in Oman by as much as 40 per cent. But that seems to have been done because everyone hoped that the latest drilling techniques would reach more deposits than in the past and merit upgrading the estimates of reserves.

The Oman estimates were based on assessments made in May 2000 by a senior Shell executive who was subsequently fired. He was among several executives who were said to have known about the unrealistic estimates of reserves and to have done nothing about it.

If the exaggeration is confirmed, the estimate of recoverable oil will have to be lowered. That is bad news for Oman, which claims reserves of 5.4bn barrels and is heavily dependent on oil and gas exports but it is also bad news for the world as a whole.

As the world's natural resources shrink and global warming changes the environment, competition for unimpeded access to them has intensified and will continue to do so. About four-fifths of the world's known oil reserves lie in politically unstable or contested regions.



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#124 advancedatheist

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Posted 23 April 2004 - 04:11 PM

http://news.bbc.co.u...ech/3623675.stm

What to use when the oil runs out

Last Updated: Thursday, 22 April, 2004, 22:57 GMT 23:57 UK 

By Alex Kirby
BBC News Online environment correspondent 

Part of the attraction of oil for most of us has probably always been its key-turning, switch-flicking simplicity.
This one substance has given us food, warmth, chemicals, medicines, clothing - and above all mobility.

So it is natural enough for us to look for one neat and simple replacement which will be the perfect substitute for oil in all its versatile guises.

But the harsh truth is that nothing is going to be capable of doing everything that oil does - not yet, perhaps never.



#125 advancedatheist

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Posted 28 April 2004 - 12:45 AM

http://news.ft.com/s...p=1012571727085

Fed warns of dramatic rise in oil futures

By Andrew Balls in Washington and Kevin Morrison in London
Published: April 27 2004 19:42 | Last Updated: April 27 2004 21:13


Alan Greenspan, chairman of the US Federal Reserve, warned on Tuesday that the "dramatic" rise of oil and gas futures was "an economic event that can significantly affect the long-term path of the US economy".

In the latest of a series of cautions from economic policymakers, Mr Greenspan said the rise in six-year oil and gas futures was "almost surely going to affect the growth of oil and gas consumption in the US and the nature of the capital stock investments currently under contemplation".

The benchmark Brent crude futures on Tuesday hit their highest level since the Iraq war when it reached $34.33 a barrel. US gasoline futures hit a lifetime record of $1.2040 a gallon.

Addressing an energy conference by the Center for Strategic and International Studies in Washington, the Fed chairman said the strength of crude oil prices reflected "fears of long-term supply disruptions in the Middle East that have resulted in an increase in risk premiums".

The US, he added, needed to increase its capacity to import liquefied natural gas (LNG), to reduce gas price volatility. Imports of LNG accounted for only 2 per cent of US gas supply in 2003.

"If North American natural gas markets are to function with the flexibility exhibited by oil, more extensive access to the vast world reserves of gas is required."

Mr Greenspan's comments came as the Organisation of Petroleum Exporting Countries said it was considering raising its preferred price band of $22-$28. Purnomo Yusgiantoro, Opec president and the oil minister of Indonesia, said: "The $22-$28 range was decided in 2000. It's 2004. Some Opec members have proposed a change, therefore we are now analysing whether to change the range."

Opec's future actions were put in doubt, however, by Ali Naimi, Saudi oil minister, who said the kingdom remained committed to the cartel's current preferred range. At this month's Opec meeting in Vienna, Saudi Arabia supported a reduction in the cartel's output because of fears of a sharp seasonal fall in demand.

That Vienna decision was criticised on Tuesday by Kyle McSlarrow, the deputy US Energy secretary, who met Mr al-Naimi in Washington.

"People need to understand that the inventory levels are tight enough that if a pipeline goes down, if there's a refinery fire, or something like that, you could see significant price effects," Mr McSlarrow said.

"The people who are refining gasoline today do not have an incentive to build a cushion because they're buying more expensive crude."

Indonesia - along with Venezuela - has been a vocal supporter of a higher Opec price band, as both countries have struggled to meet their quotas. Indonesia faces a long-term production decline and Venezuela has struggled to recover from the oil workers strike in late 2002.

Claude Mandil, chief executive of the International Energy Agency, the energy watchdog of OECD countries, plans to discuss the price band issue with Opec ministers in Paris this week.

"If this is confirmed, it will be very detrimental to the global economy," Mr Mandil told the Financial Times. "It will also ultimately be very detrimental to Opec producers because they are looking for short-term revenue increases, but it will come at a cost with the loss of market share and as a consequence revenue," he said.



#126 advancedatheist

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Posted 07 May 2004 - 12:33 AM

http://cbs.marketwat.....}&siteid=mktw

The looming oil crisis will dwarf 1973

Commentary: Forces converge to create worldwide woes

By Paul Erdman, CBS.MarketWatch.com
Last Update: 8:02 PM ET May 5, 2004

Editor's note: This is the first in a three-part series by CBS MarketWatch columnist Paul Erdman.

HEALDSBURG, Calif. (CBS.MW) -- As the price of crude oil keeps rising toward $40 a barrel and beyond, it has become increasingly clear that the world is heading toward a major oil crisis -- in terms of both price and supply -- that will dwarf that of 1973.

There can be no doubt that the fall of the House of Saud would be thrust the entire Western world into an energy crisis of unprecedented proportions.
   
For many of us who have been observers of global energy trends for what now amounts to decades, this has become not a matter of "if" but rather one of "when." We are facing a convergence of three forces that will have a potentially explosive effect on the market for crude oil.

They are:

1. A growing geopolitical crisis in the Middle East, which is now threatening to spread beyond Iraq to Saudi Arabia, the world's largest producer and exporter of crude oil.

2. A surge in global demand for energy and particularly crude oil and its derivatives, fueled by the recovery of both the American and Japanese economies and the unprecedented growth of China, which has just replaced Japan as the world's second largest consumer of crude oil.

3. A structural deterioration of the world's oil supply. What is involved here is nothing short of an imminent peaking out of production of crude oil on a global basis -- known by energy industry insiders as "Hubbert's Peak" -- which would turn a cyclical supply/demand crisis into a structural energy crisis of unprecedented proportions.

This is the first a series of articles dealing with this pending crisis and its potential impact on our economy and financial markets

Where the role of geopolitical events on the price and supply of crude oil is concerned, the early warning signals of a major crisis are now coming in every week. In late April it came in the form of a terrorist attack on the Persian Gulf oil terminal through which 90 percent of Iraq's crude oil exports flow. The attack forced the temporary shutdown of the facility. This event merely adds to the mounting evidence that those who have been trying to convince us that Iraq will soon reassume its role is a major supplier of oil to the world market -- as much as 3.5 million barrels a day this year, and 5 million barrels per day within five years -- have been leading us down the garden path.

As a result of the disastrous security situation prevailing in Iraq, all attempts at restoring the output potential of its oil field have now been put on an indefinite hold. Even the first $20 billion dollars of funding originally committed to needed repairs of the facilities there has been cancelled. The sad truth is that in the foreseeable future Iraq will supply less crude oil to the world market than it did before the war.

But compared to what could happen inside its neighbor to the south, all this barely deserves a footnote. The first indications that the supply of oil from the entire Mideast may be on the edge of implosion are now beginning to take on concrete and unmistakable form.

I refer here to the massacre of five employees of the Swiss-based ABB who had been contracted out to run a petrochemical a joint venture of Exxon Mobil and Saudi Basic Industries Corp in Saudi Arabia. It was an inside job. Their killers were Saudi nationals who worked there. This prompted the US ambassador to Saudi Arabia to urge all US nationals -- numbering in the tens of thousands -- to leave the country immediately, because neither the kingdom nor the United States can guarantee their security. This represents a retreat by the United States of historical proportions.

Since World War II, our country has essentially acted as a protectorate of the rulers of Saudi Arabia, the House of Saud, in return for that nation's commitment to act as the great stabilizer of both the supply and price of crude oil in the global market for this key commodity. Saudi Arabia is uniquely able to play such a role, since it is universally recognized as the world's key "swing" producer of crude oil. On average its output of 8 million barrels a day accounts for 10 percent of the world's supply of crude petroleum, almost all of which is exported. But what is perhaps even more significant, Saudi Arabia is in a position to increase output and exports to 11 million barrels a day almost overnight should a supply crisis occur elsewhere in the world.

Were, however, the rulers of this supplier of last resort be brought down by the revolutionary forces of the Islamic Fascists whose numbers seem to be increasing geometrically inside Saudi Arabia, their first step as the nation's new rulers would be to suspend all oil exports, demonstrating for all to see the ultimate power which Islam wields over the West.

For there can be no doubt whatsoever that the fall of the House of Saud would be thrust the entire Western world into an energy crisis of unprecedented proportions. Lest there be any doubt about this, as Larry Goldstein, president of the Petroleum Industry Research Foundation told the Wall Street Journal this week: A disruption of Saudi oil supplies is "one event to which no one has an answer."

As will be described in the next article in this series, such a supply crisis could hardly come at a worse time. The world's dependence on oil is spiking with the revival of economic growth in the U.S. and Japan, and the emergence of China as a major competitor for the limited supply of petroleum, even as all attempts to introduce energy conservation on a major scale have been essentially abandoned.

Editor's note: The author of this series has equity positions in three major international oil companies: ChevronTexaco, ConocoPhillips, and Exxon Mobil.



#127 advancedatheist

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Posted 07 May 2004 - 12:43 AM

NPR's "Fresh Air" interview with Paul Roberts, author of The End of Oil, which was broadcast on Thursday, 6 May 2004:

http://www.npr.org/d...=1&mediaPref=WM

#128 advancedatheist

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Posted 07 May 2004 - 09:57 PM

Time to take the Olduvai Scenario seriously?

Posted Image

http://www.forbes.co...rtr1364511.html

Coal stocks at US power plants spark blackout fear


Reuters, 05.07.04, 4:50 PM ET

By Steve James

NEW YORK, May 7 (Reuters) - Coal supplies at U.S. power plants are at their lowest levels in more than three years, sparking concern of possible blackouts this summer when demand is heavy for electricity to power air conditioners.

CoalPeople.com, a coal industry newsletter, said supplies may be 10-20 percent lower than at this time last year, while National Mining Association experts believe that on average, coal-fired American plants have probably 40-45 days supply compared with 60-90 days which was normal in the 1990s.



#129 advancedatheist

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Posted 14 May 2004 - 07:07 PM

http://cbs.marketwat...gle&dist=google

Hubbert's Peak goes global
Commentary: Why the coming oil crisis will be structural

By Paul Erdman, CBS.MarketWatch.com
Last Update: 12:01 AM ET May 13, 2004

Editor's note: This is the second in a three-part series on oil by MarketWatch columnist Paul Erdman. See Part 1

HEALDSBURG, Calif. (CBS.MW) -- Before considering the effect of surging global demand for energy on the price of crude, I would like to discuss the potential structural change in the supply of oil.

This change will have deep-seated implications beyond the cyclical supply/demand crisis we are experiencing at present.

In 1956, M. King Hubbert, an American geophysicist working at the Shell Oil research laboratory in Houston, came up with a startling prediction: Oil production in the United States would peak in the early 1970s, signaling the beginning of an irreversible decline in the domestic output of crude petroleum. This event would be merely the precursor of a peaking out of oil production on a global scale, signaling the onset of the end of the Age of Oil.

Almost every energy expert on earth rejected this thesis out of hand -- until the early 1970s when, indeed, exactly that happened. Output of crude oil in this country peaked in the year 1970, and it has been falling ever since.

This event has since become known in industry circles as "Hubbert's Peak." Despite its fundamental significance where the future of our oil-based economy was concerned, for decades it turned out to be a scientific thesis that remained generally unknown. For those who had heard of it, it was derided as just another of those crackpot "end of the world as we have come to know and love it" theories that are usually espoused by gold bugs or other doomsday prophets of the same ilk.

That has now changed. Its acceptance by the academic world is evidenced by the recent publication of two books dealing with this subject:

"Hubbert's Peak: The Impending World Oil Shortage" by Kenneth. S. Deffeyes, professor emeritus at Princeton University and a former colleague of Hubbert at Shell.

"Out of Gas: The End of Age of Oil" by David Goldstein, vice provost and professor of physics at the California Institute of Technology.

These scientists have applied the same methodology developed by Hubbert in his analysis of the outlook for American crude oil output to world oil production. They have come to the conclusion that global output of crude oil now also is on the verge of peaking out and that when this happens, contrary to all expectations, the amount of crude of oil flowing into the world market will most probably begin fall by somewhere between 5 and 10 percent annually.

This conclusion runs contrary to all previously held expectations, for two reasons:

1. It was assumed that rapid new discoveries of oil reserves would continue well into the 21st century, ensuring that the future supply of oil would continue to stay well ahead of demand, just as it had during the entire 20th century.

2. Aside from the impact of new discoveries, given the amount of crude petroleum known to have been in the ground when we first started to pump it -- roughly 2 trillion barrels -- were we to continue to pump oil and consume it at the rate we are doing now, we will not have pumped the last drop for at least another 40 years. And it is only at that point where the so-called supply crisis will occur.

Those who subscribe to Hubbert's theory tell us that both of these expectations are dead wrong:

1. As regards new discoveries, they point out that the last great oil field, the Ghawar field in Saudi Arabia with reserves of 87 billion barrels, was discovered 45 years ago. Since then geologists have scoured the earth searching for major new fields -- to no avail. The largest remaining unexplored area is the South China Sea, which is considered by geologists to be promising but not spectacular.

But as Goldstein points out: "Let us suppose for one euphoric moment that one more really big one is still out there to be discovered. Even if we were to stumble onto another 90-billion barrels field tomorrow (the equivalent of another Ghawar field) Hubbert's Peak would be delayed by a year or two, well within the uncertainty of the present estimates of when it will occur. It would hardly make any difference at all."

2. Regarding timing, the bell shape of the history of crude oil output dictates that the supply crisis will begin in earnest not when the last drop of oil has been pumped out of the ground sometime in the hazy future, but rather when we have used up half the oil that existed, not all of it. Once we have reached that halfway point, existing oil fields will start to become exhausted faster than the new oil fields can be tapped. The rate at which oil can be pumped out of the ground will then start to decline.

This, as Goldstein points out. is the essence of the bell-shaped curve hypothesis. There is a growing consensus that the crucial turning point in output will probably occur in the second half of this decade, in or around 2007.

The crucial remaining question is: how fast will the gap then grow between supply and demand? All other things being equal, the decline side of the curve will be a mirror image of the initial increase. But of course there will be mitigating factors, such as energy conservation measures or the development of substitutes to oil as a primary energy source, ranging from hydrogen to nuclear to solar.

But the odds seem overwhelming that none of this will happen in time to head off an energy crisis that will dwarf anything we have ever experienced.

Editor's note: The author of this series has equity positions in three major international oil companies: ChevronTexaco, ConocoPhillips, and ExxonMobil.

Economist and author Paul Erdman is a CBS.MarketWatch.com columnist.



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#130 Mind

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Posted 14 May 2004 - 11:05 PM

But the odds seem overwhelming that none of this (conservation & new energy sources) will happen in time to head off an energy crisis that will dwarf anything we have ever experienced.


I have to disagree with this statement. Changes are already occurring, and oil has only hit 41 dollars a barrel. SUV sales are down. Interest in hybrids is surging. Solar research is making great strides (see the wonderful threads maintained by chubtoad). Will there be economic pain during the transition? Sure. Will it end civilization as we know it, certainly not.

#131 kevin

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Posted 14 May 2004 - 11:43 PM

I tend to agree with you Mind... and I'm beginning to have a little more hope that the worst case scenarios will remain hypothetical... but we're not out of the woods yet.. We still have the possibility of an 'energy war' to contend with. I only hope that the same and perhaps greater common sense that arose in regards to nuclear disarmament may also prevail under these conditions. Our political systems really need a kick in the...

"There's plenty a slip twixt the cup and the lip" as my grandpappy used to say..

#132 advancedatheist

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Posted 15 May 2004 - 01:15 AM

http://news.moneycen...0514&ID=3704277

Oil at 21-Year High on Supply Strains

May 14, 2004 4:51:00 PM ET

By Andrew Mitchell

NEW YORK (Reuters) - Oil prices vaulted to a 21-year high on Friday on fears that supplies, already stretched by world economic expansion, could be hit by an attack on Middle East oil facilities.

U.S. light crude (CLc1) settled up 30 cents at $41.38 a barrel after peaking at $41.56 to set an all-time high in the 21-year history of the New York Mercantile Exchange contract.

London Brent (LCOc1) stood 31 cents higher at $38.80 a barrel.

Warnings from a senior Russian official that deliveries from the world's second biggest oil exporter have hit a ceiling after many years of growth underlined the strain on global supply.

``Realistically, the capacity of suppliers does not today meet growing demand in places such as China or India. And you have to take into account the state of affairs in Iraq,'' Semyon Vainshtok, head of Russia's oil pipeline monopoly, told Reuters.

Economic expansion in China, bolstered by renewed U.S. growth, has placed world supplies under increasing strain, leaving OPEC, except for its top producer Saudi Arabia, pumping almost flat out to meet demand.



#133 advancedatheist

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Posted 15 May 2004 - 10:05 PM

http://www.nytimes.c...print&position=

May 16, 2004

Tight Oil Supply Will Not Ease Soon

By NEELA BANERJEE

Two dollars for a gallon of gas? Get used to it. High fuel prices are here to stay, at least for the near future, because no relief is in sight for tight oil supplies.

Most oil-producing countries and the major oil companies already produce all they can. Smaller companies and wildcatters are reopening some mothballed wells, but their combined output is not nearly enough to affect the global supply. What little spare capacity there is is almost entirely in Saudi Arabia, which is willing to pump more — but the extra oil it could produce quickly is too heavy in sulfur for the main consuming nations.

The world economy has learned to roll with oil price spikes, so long as they are short-lived. But sustained high fuel costs will strain its ability to cope, experts say, and the current run-up is already starting to bite.

Wal-Mart Stores, for example, said last week that higher gasoline prices in the United States had taken an average of $7 a week out of the pockets of its customers, leaving them less to spend on other goods. Sales of some of the largest and most gas-hungry sport utility vehicles were down last month, compared with a year earlier. The nation's trade deficit widened to $46 billion in March, largely because of oil imports. And in Britain, the government is making contingency plans in case of mass protests against high fuel prices, the trade journal Platts Oilgram News reported Friday.

The oil industry is constantly looking for new supplies, and with crude oil closing at a record high of $41.38 a barrel in New York on Friday, producers have plenty of economic incentive to step up output. But developing a new oil field takes time, and energy companies can do little to rush projects, industry experts said.



#134 advancedatheist

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Posted 18 May 2004 - 12:37 AM

From,

http://quote.bloombe...SGWU&refer=home

Dollar, Stocks Fall After Crude Surges, Iraqi Leader Is Killed


May 17 (Bloomberg)

....

Saudi Arabia, the world's biggest oil exporter, has called on the Organization of Petroleum Exporting Countries to raise its output quota by 1.5 million barrels a day to stem prices.

OPEC, which is already exceeding its quota by more than 1.5 million barrels a day, is producing almost as much as it can, Qatari Oil Minister Abdullah bin Hamad al-Attiyah said Saturday.



#135 advancedatheist

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Posted 18 May 2004 - 12:39 AM

http://ogj.pennnet.c...TICLE_ID=204831

Westwood: Oil shock to thrust gas, alternate energy forward

By OGJ editors

HOUSTON, May 17 -- Predicting another oil shock, analysts John Westwood Ltd., Canterbury, England, said depleting oil reserves, coupled with growing energy demand, will result in sustained oil price increases, greater capital investment in natural gas production, drastic conservation regulations, and fevered development of renewable energy substitutes funded by "windfall" profits.

The current $40 oil prices likely will begin sustained rises soon, requiring the massive development of natural gas and renewable energy resources, said the firm's John Westwood.



#136 advancedatheist

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Posted 21 May 2004 - 03:16 AM

http://news.bbc.co.u...ess/3732369.stm

Last Updated: Thursday, 20 May, 2004, 13:38 GMT 14:38 UK

China's energy supply 'dwindling'

China's energy chiefs have defended their efforts to ensure supplies amid mounting criticism over power shortages
Coals stocks at major power plants could run out in one or two days,the China Daily newspaper has reported, suggesting more blackouts are likely.

But the National Development Reform Committee's (NDRC) Energy Bureau said it was working on increasing supply....

In an interview with China Central Television, NDRC officials admitted that an electricity crisis was looming as a result of dwindling thermal coal supplies .



#137 advancedatheist

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Posted 21 May 2004 - 03:21 AM

http://www.theherald...589-print.shtml

Oil prices gushing out of our control, says Opec

DOUGLAS HAMILTON and MICHAEL SETTLE May 21 2004

THE producers' cartel that governs world oil supplies last night admitted it had lost control of the latest price rise as oil bubbled back up to near-record highs.

US light crude gained 15 cents to $41.65 a barrel, just shy of last Friday's all-time high of $41.85, while on the London market, North Sea Brent jumped by 18 cents to $38.08 a barrel.

Markets again fell as nerves continued to jangle over the soaring oil prices, which dealers fear could lead to interest rate rises in order to curb inflationary pressures. The FTSE 100 index closed down 43.1 points, or 1%, at 4428.7. US, European and Asian markets also fell.

Struggling to cope with growth in fuel demand fired by world economic growth, Opec, producing about half of the world's crude oil output, admitted it could do little to douse prices, now up more than 25% so far this year.



#138 advancedatheist

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Posted 21 May 2004 - 03:26 AM

http://news.ft.com/s...d=1084907725925

China's voracious appetite for energy is eating into global capacity and sending prices skywards

By Kevin Morrison
Published: May 21 2004 5:00 | Last Updated: May 21 2004 5:00

Nowhere is China's dramatic effect on globalcommodity prices over the past two years more visible than on the oil price, which recently jumped to more than $40 a barrel, stirring concerns of higher inflation and lower world economic growth.


Although India's fast-growing economy has also boosted energy consumption, it is the scale of China's demand that has helped propel energy prices, including crude oil, coal, diesel and jet fuel, to record highs this year. The mainland's increasing affluence has stoked a surge in car sales, road haulage and air travel, while the country's rapid industrialisation is straining the limits of China's power generation capacity.

China has invested in energy-intensive industries, such as steel and aluminium production, and plastics, which use naphtha, a product derived from crude oil. The combination of heavy industrial expansion and rapidly-growing car usage has doubled Chinese oil consumption over the past 10 years to around 6m barrels a day, , causing the country to leapfrog Japan to become the second-largest oil consumer behind the US. Having become a net importer of oil only in 1994, China now imports half its daily oil requirements.

Goran Trapp, a managing director at Morgan Stanley, says the additional 3m b/d of oil China now consumes compared with 10 years ago does not sound like much. But when global production capacity has not risen much over the same period, the increase represents a significant narrowing of global spare capacity.



#139 Lazarus Long

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Posted 23 May 2004 - 11:37 PM

I have been cross linking relevant topic threads like this one to specifically related discussion groups elsewhere in the web. It is becoming quite a repository of important information though still not enough people are engaged in serious discussion on this topic even when it is at the heart of much of global politics at the moment and maybe for much of the next few decades. Nevertheless Good Job Marc! [thumb]

LL

Posted Image
Tight Oil Supply Won't Ease Soon
By NEELA BANERJEE
Published: May 16, 2004

Two dollars for a gallon of gas? Get used to it. High fuel prices are here to stay, at least for the near future, because no relief is in sight for tight oil supplies.

Most oil-producing countries and the major oil companies already produce all they can. Smaller companies and wildcatters are reopening some mothballed wells, but their combined output is not nearly enough to affect the global supply. What little spare capacity there is is almost entirely in Saudi Arabia, which is willing to pump more — but the extra oil it could produce quickly is too heavy in sulfur for the main consuming nations.

The world economy has learned to roll with oil price spikes, so long as they are short-lived. But sustained high fuel costs will strain its ability to cope, experts say, and the current run-up is already starting to bite.

Wal-Mart Stores, for example, said last week that higher gasoline prices in the United States had taken an average of $7 a week out of the pockets of its customers, leaving them less to spend on other goods. Sales of some of the largest and most gas-hungry sport utility vehicles were down last month, compared with a year earlier. The nation's trade deficit widened to $46 billion in March, largely because of oil imports. And in Britain, the government is making contingency plans in case of mass protests against high fuel prices, the trade journal Platts Oilgram News reported Friday.

The oil industry is constantly looking for new supplies, and with crude oil closing at a record high of $41.38 a barrel in New York on Friday, producers have plenty of economic incentive to step up output. But developing a new oil field takes time, and energy companies can do little to rush projects, industry experts said.


Marathon Oil, a large independent company based in Houston, is pumping its fields flat out — the equivalent of 365,000 barrels a day, counting crude oil and natural gas. That includes new fields in Russia that produce 15,000 barrels a day. Those fields have the potential to yield an additional 45,000 barrels, but only after five more years of investment and work, said Paul Weeditz, a company spokesman. Marathon's new projects in West Africa will take even longer.

"Companies are always under pressure to grow production, so they are always trying to bring new wells on," Mr Weeditz said. "Many people may think it's a matter of turning the tap on and off, and that there's excess capacity, but that's just not the case."

Major oil producing areas like the North Sea and Nigeria, which produce the most desirable type of oil, known as light sweet crude for its low sulfur content, are operating at capacity. So are many of the refineries that turn the oil into usable fuels.

United States refineries were running at 96 percent of maximum output in April, the Energy Department said. As a result, wholesale gasprices reached record highs last week, and those prices are quickly passed along to consumers at the pump.

"The worrying part is that no end is in sight for the oil price rally," said Jan Stuart, director of energy research at Fimat USA, the brokerage unit of Société Générale. "Whatever is driving this upward, those factors are not changing: high demand, lower inventories, supply that is constrained, and only in part by OPEC decisions, and turmoil in the Middle East."


Those price records are not adjusted for inflation. Several times in the 1970's and 1980's, prices hit what would be higher levels if converted into today's money. But those spikes occurred when supplies were disrupted by the Arab oil embargo and the Iran-Iraq war. With world demand so strong today and spare capacity so slim, the oil market is highly vulnerable to any new supply disruptions.

Many oil traders worry that terrorists may sabotage oil facilities, sending prices to new highs that could throttle the economic recovery. Since the situation in Iraq flared up last month, oil has become a prime target there. Suicide bombers tried to attack an offshore Iraqi oil terminal in late April, then blew up a major pipeline near Basra last week. Even more troubling, industry experts say, was the killing of foreign and Saudi oil workers at the Yanbu oil hub in Saudi Arabia.

"This is the only spare capacity you have in the world," said Fareed Mohamedi, chief economist for PFC Energy, a Washington consulting firm, referring to the Saudi oil industry. "So you're going to be nervous if there is any hint of disruption."

Oil traders estimate that unrest in the Middle East has added a "risk premium" to the price of oil of $4 to $8 a barrel. Yet even without that turbulence, the price of oil would probably still be higher now than it has been in years, given global demand, industry experts said.

The unexpectedly sharp rise, to more than $40 a barrel today from less than $30 a barrel just 18 months ago, has not noticeably slowed the economic recovery in the developed world. Most industries over the last two decades have found ways to improve efficiency, producing far more goods with the same amount of energy, and the United States has had a major shift from energy-intensive industries toward the service sector.

Even so, the world's appetite for oil is growing at its fastest rate in 16 years, according to the International Energy Agency, which tracks oil markets and stockpiles for industrialized countries. It forecast that the world would consume two million more barrels a day this year than in 2003, or 80.6 million barrels a day in all. China's great economic growth is behind much of that increase, and few analysts foresaw that either China's boom or America's recovery would be quite so robust, said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation in New York.

That roaring demand has eaten deeply into oil supplies. Despite lower official quotas, nearly all the members of the Organization of the Petroleum Exporting Countries are producing as much oil as possible to cash in on the high prices, and most major non-OPEC producers are doing the same. Russia, which is not an OPEC member, is something of an exception, but it is constrained by how much oil it can export through its pipelines and railways, all of them running at or near their limits. Venezuela, an OPEC member, is theoretically able to produce more oil, but its state oil company was crippled last year by a strike and an unsuccessful attempt to oust the country's president, and it has not recovered fully.

Analysts say that at most 2 million to 2.5 million barrels a day of spare capacity could sustain production for any length of time. Nearly all of it is in Saudi Arabia; the rest is mainly in Kuwait and the United Arab Emirates.


For years, whatever the markets needed to stay on an even keel, the Kingdom of Saud provided. But since the late 1990's, the country has started to pursue a more independent oil policy. To increase its oil revenue and support a growing population and a generous welfare state, Saudi Arabia has chosen to hold back some production and let the price of oil rise, said Leonidas F. Drollas, chief economist with the Center for Global Energy Studies, a London consulting business. OPEC as a whole, led by Saudi Arabia, tried to cut output and make it hard for refineries to build oil stocks, driving prices higher.

But with the price of oil at $40 a barrel and more, the Saudis are clearly unnerved. Mr. Goldstein said they are trying to sell more oil now, but have found few takers, because of the high sulfur content of their crude. Instead, refineries in China and the United States are competing for the more limited pool of low-sulfur oil. "There is no sweet crude spare capacity anywhere in the world," Mr. Goldstein said. "There is no cushion for the next surprise."

Major oil companies are not bringing on new wells now to take advantage of high prices, said Ann-Louise Hittle, head of macro oils at Wood Mackenzie, a consulting firm in Edinburgh. Burned in the past by price spikes that proved ephemeral, the oil industry has become extremely reluctant to invest in wells that would be unprofitable at low prices, so it has none to reopen now.

Increasingly, the best prospects for new oil have proved to be in places that are off limits to major foreign oil companies, said Edward D. Porter, research manager for the American Petroleum Institute, a lobbying group in Washington.

While production is declining in areas like the North Sea and the lower 48 states, many of the most promising fields are in the Middle East. Oil companies have shelved hopes of even looking around Iraq soon because of the violence there and uncertainty about the future. Elsewhere in the region, most notably Saudi Arabia, domestic political infighting about foreign involvement in the national oil patrimony has kept out major Western companies.

The oil companies will keep hunting, but a significant easing of tight supplies may be several years away, industry experts say.

"You can't change this overnight," Mr. Goldstein said. "We need investment in sweet crude production or in refineries to process high sulfur crude, but there's a gestation period. Oil producers didn't think high prices were sustainable, but now they are coming to think they are."


#140 advancedatheist

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Posted 25 May 2004 - 12:45 AM

http://www.reuters.c...section=finance

Shell cuts oil reserves again

Mon 24 May, 2004 15:38

By Sudip Kar-Gupta

LONDON (Reuters) - Royal Dutch/Shell has cut its oil reserves for the fourth time this year as a booking scandal that has wiped more than a fifth from the oil giant's reserves rumbled on.

But the world's third largest oil firm said on Monday it hoped the latest restatement had now drawn a line under the debacle.

The Anglo-Dutch group said it was slicing 4.47 billion barrels of oil equivalent from its 2002 reserves, up from a figure of 4.35 billion in April, with the additional cut coming after Shell removed certain Canadian assets.

The recounts have cost three top executives their jobs, lost Shell its cherished "AAA" top-grade credit rating and shaken investor confidence.



#141 advancedatheist

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Posted 25 May 2004 - 12:50 AM

The NIMBY philosophy is interfering with a practical, urgently needed solution to North America's natural gas crisis:

http://story.news.ya...uralgassupplies

Boost natural gas supplies

Mon May 24, 7:33 AM ET  Add Op/Ed - USATODAY.com to My Yahoo!

A quarter-century ago, the nation began shifting energy usage to natural gas to escape the very kind of oil-supply squeezes and price spikes consumers are enduring today because of our dependence on foreign oil. Natural gas is cleaner and cheaper, and domestic supplies are more plentiful.

The switch has been so successful, however, that the growth in demand has outstripped new production, causing prices to shoot up. To rectify this imbalance until major gas fields in Alaska, Canada and elsewhere are tapped, and to prevent price spikes during periods of peak demand, electric and gas utilities want to import more gas in liquefied form by special tankers.

For the nation, and certainly for homeowners struggling with rising energy costs, the idea makes sense. But coastal communities say no, and so far, what they say goes.

Citing safety and environmental concerns, communities from New England to Southern California are blocking plans to build more liquefied natural gas (LNG) port terminals to supplement the few that already are operating at capacity. But creating new LNG terminals is a national imperative and needs to be overseen from a national perspective.



#142 advancedatheist

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Posted 25 May 2004 - 01:53 AM

Despite all the propaganda to the contrary, Saudi Arabia can't make high oil prices go away by turning on the tap:

http://quote.bloombe...Sf_U&refer=home

Oil, Gasoline Reach Record as Saudi Output Boost May Lag Demand

May 24 (Bloomberg) -- Crude oil and gasoline futures in New York surged to a record on concern Saudi Arabia's promised production rise and any increase in OPEC quotas at a meeting next week won't satisfy expanding demand.



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#143 Mind

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Posted 25 May 2004 - 02:35 PM

Also, Andvanced Atheist, per previous articles and estimates, Saudi Arabia really doesn't have a whole lot more "tap" to turn on. The Gwahar field is getting more expensive to pump. I wonder where this new cheap supply is going to come from?

#144 advancedatheist

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Posted 25 May 2004 - 07:42 PM

Also, Andvanced Atheist, per previous articles and estimates, Saudi Arabia really doesn't have a whole lot more "tap" to turn on. The Gwahar field is getting more expensive to pump. I wonder where this new cheap supply is going to come from?


Energy investment banker Matthew Simmons recently embarrassed the Saudis by bringing up this very point:

Houston analyst upsets Saudis in squabble over oil reservoirs

Matthew Simmons has really riled up the Saudi Arabians.
 
The Houston oil analyst and consultant touched off the feud at a Washington, D.C. conference earlier this year when he proclaimed that Saudi Arabia -- the world's major oil supplier for more than 50 years -- is running out of oil.

Simmons says the Saudi's rosy forecasts of continuing oil production are based on past performance and not to be trusted. This is because Saudi Arabia's five major oil fields, like many in the United States and elsewhere, are getting old and depleted and will require massive investments in technology to continue producing oil.

Simmons drew his conclusions from an in-depth study he conducted after becoming concerned about sketchy and conflicting data on Saudi oil reserves.



#145 advancedatheist

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Posted 28 May 2004 - 12:33 AM

In addition to yielding a low energy returned on energy invested, Albertan oil sands as a source of oil won't be sustainable because of declining natural gas supplies:

http://www.forbes.co...rtr1387307.html

Gas demand to soar for Canada's oil sands - report

Reuters, 05.27.04, 3:39 PM ET

CALGARY, Alberta (Reuters) - Natural gas volumes needed to help the oil industry unlock Canada's vast oil sands are expected to nearly triple in the next decade, just as production is waning and prices are surging, the country's energy regulator said Thursday.



#146 advancedatheist

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Posted 28 May 2004 - 02:43 AM

http://www.nytimes.c...print&position=

May 28, 2004

If Oil Supplies Were Disrupted, Then ...

By SIMON ROMERO

HOUSTON, May 27 - With demand high, supplies squeezed, prices climbing and refineries already running flat out, what if something really went wrong? Something like a terror attack on crucial oil installations in Saudi Arabia or in the United States, or something less sinister but just as disruptive, like a fire or accident at a major refinery or port or a flare-up of civil or labor turmoil in Nigeria or Venezuela?

Industry experts say that the drum-tight American fuel market has become unusually vulnerable to any such nasty surprises, because there is little spare capacity available and because traders, executives and policy makers are nervous about terrorism and other threats - to the point that crude oil now carries a "risk premium" of 12 to 25 percent, analysts estimate.



#147 advancedatheist

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Posted 28 May 2004 - 02:47 AM

Posted Image

http://www.economist...tory_id=2705562

What if?

May 27th 2004
From The Economist print edition

Terrorists are now targeting Saudi Arabia's oil infrastructure. How bad could things get?

NOT SO long ago, a certain well-known international figure penned a heart-felt speech he called his “Letter to the American People”. In it, he said: “You steal our wealth and oil at paltry prices because of your international influence and military threats. This theft is indeed the biggest theft ever witnessed by mankind in the history of the world.” The author was Osama bin Laden.

The impact of those chilling words is still being felt in today's chaotic energy markets. Oil prices have recently been above $40 a barrel. Politicians in oil-consuming economies are up in arms. Saudi Arabia, the head of the Organisation of Petroleum Exporting Countries (OPEC), has promised relief. It is trying to persuade reluctant cartel members to increase production when they meet on June 3rd in Beirut.

Typically, a decision by OPEC to increase quotas cools prices. This time may be different. A soaring world economy has sucked global inventories dry. Nearly every OPEC producer, save Saudi Arabia, is already producing about as much oil as it can. That means that any new OPEC promise of oil will have to come chiefly from the Saudis themselves—and that is not good news.

The main reason for worry is the so-called “terror premium”. Oil traders report that fears of terrorist attacks that might disrupt Middle-Eastern oil exports may account for as much as $8 of the current per-barrel price. That may be because what was once unthinkable now seems possible, perhaps even inevitable: a major terrorist attack, or series of attacks, on oil facilities within Saudi Arabia.



#148 advancedatheist

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Posted 29 May 2004 - 04:10 PM

http://www.starbanne...8/APF/405280734

Indonesia Urged to Quit OPEC

Published May 28. 2004 10:14AM

The Associated Press


Indonesia's status as Asia's only member of the Organization of Petroleum Exporting Countries is under question following reports that it now imports more crude oil than it exports.

A former energy minister, Ginandjar Kartasasmita, said Indonesia might as well drop out of the cartel "if we can't boost our crude oil production."



#149 Lazarus Long

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Posted 29 May 2004 - 04:31 PM

I have been trying unsuccessfully to locate the audio for this last Tuesday's Michio Kaku show. He focused on Peak Oil and interviewed the author that presented the Hubbert's Peak hypothesis. It was a very good interview if someone can locate the audio tis worth being archived here.

Found it.

Show archives 5/25

05-25-2004
David Goodstein, author of Out of Gas: The End of the Age of Oil. Also: Putin agrees to sign Kyoto Protocols; The Dust Bowl: Can it Happen Again? New computer program says Yes;

audio
http://www.kpfa.org/...525-Tue1400.mp3

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#150 advancedatheist

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Posted 29 May 2004 - 05:54 PM

I have been trying unsuccessfully to locate the audio for this last Tuesday's Michio Kaku show.  He focused on Peak Oil and interviewed the author that presented the Hubble's Peak hypothesis. It was a very good interview if someone can locate the audio tis worth being archived here.

Found it.

Show archives 5/25

05-25-2004
David Goodstein, author of Out of Gas: The End of the Age of Oil. Also: Putin agrees to sign Kyoto Protocols; The Dust Bowl: Can it Happen Again? New computer program says Yes;

audio
http://www.kpfa.org/...525-Tue1400.mp3


Once you mentally edit out Kaku's analysis of science news in the front end of that show, and the KPFA fundraising appeals on the back end, Goodstein's interview is actually quite good. As Kaku points out several times, nobody with any real authority is planning for the consequences of declining oil production. Instead we keep hearing all sorts of terror-management scenarios about energy from oil sands (pseudoscientific because it doesn't work thermodynamically), solar power satellites (which absolutely no one is in the process of building -- when is the launch date for the first component?) and other fantasies that aren't connecting to tangible realiy.




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