maximax

Whither Canada's Tar Sands?

regarding Woolsey's allegation - there may be some truth in it historically, but i find it rather cynical for an American to claim that KSA wanted the price to crash. They only increased output to late July levels very reluctantly, after heavy international political pressure and a Bush visit.

Analyst: Oil Prices Inflated by 50%

don't know what the price was when that interview was made but cannot agree to the 50% statement base on, say, a $100/bbl price. oil production cost inflation and opec countries' budget inflation as well as expensive tar sands and to some extent biofuels becoming an important supply source have brought up the cost floor to not much lower than we are right now, say $80-90, below that, KSA and tar sands output will react quite significantly.

Should We Listen to Boone Pickens on Oil?

opec lost its ability to keep the oil price within a target range, actually it only had this ability for a short while earlier this decade. however opec can still act to define a loose floor to the price as long as spare capacity is so low and nearly all in opec hands. look at the national budgets of the opec countries, if they are at risk going into the red due to a low oil price then (at the very latest) opec members will decrease quotas.

Oil: Does Supply and Demand Still Apply?

have to agree with the direction of the comments above. advise the author to take a look at the IEA medium term oil outlook 2008 and review his analysis.

Oil Headlines

Just a hick, hope my response is not too late.

Russia still has a long way to go, but I doubt the political will to max out their production/go beyond 10 Mnb/d, not even getting to the Russians' abilities. So their oil might not run out in a long time, but I don't think they will be doing as much as until recently to cover the incremental demand. There are few places left to find another Ghawar, while it still may be possible, the probability is low enough so that one should not bank on it. Also, new non-Opec discoveries will be a lot more expensive to bring to market than older ones due to rampant cost inflation in the up&downstream sectors. Also, drill ships are booked out for another five years or so, and as a rule of thumb it takes ~10yrs from first oil to exportable production. Consumption in exporting countries is rising rapidly, see e.g. KSA's decision to stop fuel oil exports which will increase demand for heavy crudes as refineries elsewhere will produce more of that stuff.

I cannot comment much about the Pickens plan in terms of viability etc as I am not in power gen, but some diversification of energy sources should not harm, and diversifying energy sources/lowering the US dependence on oil will improve matters for the majority, especially as China is not actually that far ahead of the US in terms of incremental oil demand over the past five years. Beyond that I have no interest in weighing into politically motivated analysis/discussions, other than to expose such contributions here on SA which pretend to deliver sound analysis when they are most likely spam from the political think tanks or the like.

As to abiogenic petroleum, well this is just as with the global warming thing, no, actually opposite. The former has no credible proponents that I know of, the latter has pretty much no credible opponents left (more or less citing the Economist which is not exactly tree hugger's publication). John Egan is not the only one who has to admit that he made a detour to the pits of Oil is Mastery site, from what I remember the cited science there was published in the 19th(!) century. Not that abiogenic petroleum does not exist at all, it is just that the huge quantities of oil man extracts from earth on a daily basis cannot really come from a replenishable source. Ok so let's say oil is infinite... how come we bother about OPEC? Start wars for oil? Is this "oil is limited" thing is just a conspiracy driving up prices? It is not. So why are you worrying about declines in existing fields if oil is unlimited anyway? I quite like this article: www.monthlyreview.org/... - reminds me of that old Greg Palast article on the Iraq war. It may also be just another conspiracy theory, but unfortunately the most credible I have seen. As to sub-$100 oil, I don't want to tie myself too much to oil price f/c, so just my loose expectation: oil will continue to decline near term, say H2 08, but rise in mid term. Bottom? 100 well likely, but not below 80. the quicker prices now fall, the less demand destruction, which will fuel the next ascend.

Oil Headlines

"I think people are starting to realize that the supply is infinite" - lmao, dude you have posted some ridiculous comments here in the energy section, but this one tops them all on the funny scale. what a start to my day... i think i'd be out in no time if i told our clients that oil supply is infinite. keep on rolling, make my day.

Confirmatory Bias and Oil Investing

one particular comment on the IEA cuts demand comment - if you are familiar with the IEA reports you will have noticed the serial correlation of their demand revisions. Their demand forecasts have been ridiculously bullish for a while and people with a professional interest in oil demand foreacsts, well those I know and myself, have doubted the growth rates for a long time, so a downward revision of IEA numbers will probably not be a shock to the market, but rather something that had been seem coming. The standard explanation is that the IEA publishes overly bullish demand numbers to exert pressure on OPEC to open the tabs.

Introduction to a Long Lecture on Oil

fireball - wrong. what a daydream. the US army is the biggest oil consuming entity worldwide. google for some articles by Sohbet Karbuz, he has researched US army oil use.

b pursley - not sure why i still react to your ramblings. not knowing you or m damon personally, i would still put him way above you in terms of ideas and insight, given that he is ex-harvard and roles like mr ripley simply couldnt have been played by a dumbass. but then his quotes relate to his movie character, not him personally.

IEA's Oil Market Outlook: Off the Mark

Karl F - I don't think you got that right with your 2nd point, and I think that the IEA is spot on here. Have a look at the Argus Global Markets newsletters of the recent months, the IEA is hardly alone with this view. Refinery margins for middle distillates are high, but not for the rest, especially fuel oil. But due to a lack of upgrading & conversion capacity refiners cannot produce more middle distillates without processing more crude, thus increasing surpluses of fuel oil etc. The net refining margin is thus under pressure, and refiners need to rely on distillate rich crudes (light sweet), which tightens the WTI-type market, while heavy sour stuff (eg Iranian crudes) are in oversupply. And refinery capacity (=crude distillation capacity) is one thing, but refiners normally only refine if they can do so at a profit. And that is a problem these days, although more complex refineries are having an advantage.

Hey, Congress, Speculators May Not Be the Bad Guys

jcrash - unlikely, given cost inflation in the upstream sector.

3 Aspects to Pricing Oil

nah smokey, most posters here have an agenda, but no clue. Eichler's first two points are spot on, and actually nothing new if you had been reading industry journals like Argus/OMI etc instead of just dwelling on this site. I am ambiguous on the third point, the relationship between the spot and the futures market is very complicated, and academics are not in unison on what is happening here. Is the additional liquidity by speculators required for this market? Anyway, they risk their own money, all those gov't interventions called for risk taxpayer's money. And to all those supply-demand/Hubbert comments above - Eichler is not even contradicting them! In fact his points are based on S/D, and he calls them "aspects" not the whole picture! Indeed, economics is no more just about S vs D, they are now about truly understanding the microfoundations of a market, as well as the agent's incentives etc... not just foolishly applying two-dimensional textbook-like S-D curves like some of the above posters seem to try.

So smokey... (1) reserve estimates of the US offshore fields are old and vague, but do not expect to find another Ghahar/Cantarell etc that can keep up current US consumption ad infinitum. It will buy you time, but will not affect the price much (the US cannot use domestic fields to isolate itself from world markets), but it won't buy you very much time. (2) is much more important - solve the demand side, get yourself off the stuff. The main obstacle to progress here has been the present US gov't, which has happily invaded Iraq on behalf of its oil majors, but has been blocking climate and other progressive treaties. Political will is paramount, as energy efficiency is riddled with market failures. But many interest groups and voters are against it due to the negative short term implications...

Energy Subsidies and Levels of Demand

chinas crude oil imports amounted to something like 7.5-8.2% of total global crude oil imports in 2007, depending on your preferred data source, but the author underestimates the impact of China's subsidies on the crude marker prices which are light sweet grades. This is exactly what China's refineries need due to low plant complexities, and this is what is in short supply. The additional Saudi stuff is heavy stuff, not suitable for refining into middle distillates which is what the market currently craves, both in China and in the Western world. Also, traders think it matters so it does matter, for right or wrong. After the Chinese announcement the WTI front month contract dropped the most in a while, this cannot be said from the Saudi announcement to produce 200-500kb/d more in due course.

How Much Will Drilling in ANWR Affect Oil Prices?

This congress-bashing reminds me of the typical small shareholder rants... very shortsighted, always the management's fault. The congress already told its citizens that the problem cannot be drilled away. And with a new president the US may as well develop the ability to develop an energy policy that is good for more than just enriching the Texas cronies by any possible means. Also, without Guantanamo Bay etc such claims like keeping the money in the US rather than giving it to a oil rich human rights abusing dictatorships will regain some moral credibility. Until then, why not just use less of the black stuff while investing in new energy generating technologies. Just bridge the time this all takes to kick in with upgrading more US refineries to be able to take the Canadian tar sands and shifting the fuel mix back towards more gasoline. And I certainly won't be spending my holidays in the US if its coast as well as quite a few states (Montana, North Dakota, Utah, Colorado etc) are dotted with rigs/extraction sites. It would remind me of work.

Oil's Supply and Demand

highly simplistic analysis, nothing new. for those who really want to know about the oil markets, get hold of the argus or energy intelligence newsletters.

Oil Hits $140: What Could Trigger a Reverse?

wouldnt compare coastal drilling to shale extraction either, but drilling is not beneficial for the environment. and it will not solve america's oil problem, it will only buy time. if it starts soon, then it will largely matter from 2020 onwards, so it should not matter in this presidential campaign. this politicising on this site is getting on my nerves.