Gordon Brown `wrong` over anti-OPEC comments

Adam Porter · Post by **Adam Porter** » 14 Sep 2005, 11:25

This might be of interest
best
adam

http://www.resourceinvestor.com/pebble.asp?relid=12786

rs · Post by rs » 14 Sep 2005, 11:31

"He is surely wrong, definitely," said Dr. Muhammad-Ali Zainy from the Centre for Global Energy Studies in London.

"The problem is not one that belongs to OPEC, it is a structural one for the whole industry. It's true that OPEC has no spare capacity due to high world demand. But in the meantime there is definite restraint on refining capacity. It is this that is putting pressure on prices, it is as a result of these structural pressures that the International Energy Agency (IEA) have had to release supplies onto the market. But the world needs more refining capacity," he added.

The return volley.

So now it is down to the West to build more refineries. Helps OPEC keep its doors closed a little longer until those refineries are built and there is not enough raw product to drive those refineries at full capacity.

Gordon Brown - 0 OPEC - 1

RogerCO · Post by **RogerCO** » 14 Sep 2005, 11:52

Dr. Muhammad-Ali Zainy wrote:... . It's true that OPEC has no spare capacity due to high world demand. ...

err - what exactly has he just admitted here ?

fishertrop · Post by **fishertrop** » 14 Sep 2005, 12:42

But hasn't this been the IEA's strategy all along - to say "yes, everything will be fine so long as X, Y and Z invest the required money and delivery the required projects", and make a clear and strong point that if the various bodies don't do what the IEA says they need to do then there will be trouble ahead ?

As far as I can tell this has been their plain and clear startegy for as long as I've known about PO.

In many respects it's not an unreasonable position on the part of the IEA, if they are not able to voice controversial opinions for political reasons then taking the line "ok, the oil producers say there are no problems, lets take them at their word, lets say 'you will need to produce XXmbd by year YY' and since they say they can then we will hold them to that".

Sure it's not sensible in the long run - what will happen if the producers fail to deliver? Shortage.

But given the structure the IEA operate in it's probably as good as strategy as we could have hoped for.

There are many under-publicised papers from the IEA that suggest they are very well aware of PO and what will happen if the producers fail to deliver.

What's this got to do with GordonB? He's taking the exact same line as the IEA (which advise him and actualy work for him, indirectly..) - ask the producers to pump more, if they say that they cannot deliver (and you'll hear the bells tolling all over the world if they do) then that not only brings the crisis to a head in a politically viable way but it gives Gordon someone to blame, which is essential in western politics.

With a bit of luck, this bit of nonsense will actually be the tip of the real iceberg coming to the surface.

skeptik · Post by **skeptik** » 14 Sep 2005, 13:02

RogerCO wrote:
Dr. Muhammad-Ali Zainy wrote:... . It's true that OPEC has no spare capacity due to high world demand. ...
err - what exactly has he just admitted here ?

That all the taps are turned wide open. I think various sources in or associated to OPEC have been saying this for some time.

Developing currently undeveloped reserves - drilling the production wells and building associated infrastructure doesnt happen overnight, nomatter how much Gordon B would like that to be the case. The lead time is measured in years. So what he's saying is theres nothing OPEC can do to help in the short term. As demand from the industrialised keeps going ever up and up, the weaker economies that cannot afford $60+ oil will drop out of the market. Which in effect means 3rd world countries going back to oxes, donkeys and bicycles for transport in the short term and possibly(?) experiencing famine in the medium to long term.

The more important question is whether the output of new projects is going to exceed the decline in mature fields. And if not, when will that happen? I.e. Peak Oil.

fishertrop · Post by **fishertrop** » 14 Sep 2005, 13:13

"You get these idiots like [President] Bush and other politicians saying we need more oil, we don't. What we need is more refined product. Until these fools get it into their thick heads then the problem is going to remain. It's all very well the French and the Germans and the Brits sending over tankers full of refined product for America but that only delays the problem. After all that extra product shipped to America is going to have to be replaced, and it has to come from somewhere. With reactions like this I can easily see a scenario where high prices remain for much longer than is expected," said Evers.

That's a little short sighted don't you think?

Today's problem might be lack of refining but saying "we don't need more oil" is misleading at best.

We need refined product today but more crude tomorrow.

I guess tho, it's not like economists to be extremely short sighted nor to miss the train-a-coming....

peaky · Post by **peaky** » 14 Sep 2005, 14:04

fishertrop wrote:but saying "we don't need more oil" is misleading at best.

We need refined product today but more crude tomorrow.

I really feel we need to get our heads cleared of this idea. When we had unlimited cheap energy (oil) what did we do? We trashed the planet. What would we do if we had unlimited cheap renewable energy? We would trash the planet

What's needed, IMHO, is a change of heart and mind and for the human race to use much less energy of all kinds to create a genuinely sustainable future for all life on the planet.

fishertrop · Post by **fishertrop** » 14 Sep 2005, 15:37

peaky wrote:What's needed, IMHO, is a change of heart and mind and for the human race to use much less energy of all kinds to create a genuinely sustainable future for all life on the planet.

I couldn't agree with you more.

fishertrop · Post by **fishertrop** » 14 Sep 2005, 16:59

IEA chief urges OPEC to raise oil output

http://www.middle-east-online.com/english/?id=14535

Claude Mandril wrote: He said: "What would be really very useful would be that OPEC says clearly how much future new capacity it will put into production and makes commitments in terms of volume and the timing, while specifying the amount of light crude."

Something like this might actually bring the situation to a head.

If OPEC don't raise their quota at the next meeting I think there will be a strong negative reaction from OECD leaders, judging from all the talk so far.

So if they do raise it AND they provide the specific that Mandril asks for then they have put a marker down, something in black and white - I don't recall them ever doing this before.

So either they will deliver or they won't, but this time everyone will be looking, and if they don't deliver then the west will assume it's for one of two reasons (or at least this is what they say on tv):
1) They are profiteering by restricting supply, making them the bad guys
2) They can't deliver because they CANNOT SUPPLY ANY MORE THAN THEY ARE DOING, in which case at least the cat will be publicly half out-of-the-bag

AndrewH · Post by **AndrewH** » 14 Sep 2005, 17:38

Hi there, new person here...

I'm interested to know whether people think it's fair to charge the amount of tax we do? I'm not (yet) a driver, but it seems to me that it's too much. So, it struck me that Mr.Brown is hiding behind two things:

1) Our ignorance of OPEC and the oil industry generally
2) Environmentalists shouting loudly about needing to cut down fuel use (which is of course, perfectly valid).

I'm fully on board for living more sanely and sustainably, and I realise it's going to be pretty hard work. But I also can't stand seeing a politician slither their way through an issue, and making everyone out to be fools.

Opinions please!

RevdTess · Post by **RevdTess** » 14 Sep 2005, 17:52

I find myself wondering what would the WTI price look like if OPEC had 10mb/d spare capacity instead of 0.5-1mb/d?

Perhaps it would be back at $20-30/bbl instead of $60-70 - in which case the price of gasoline (even with a $15-20/bbl crack premium and no additional refineries) would be far cheaper than today. I think this is probably the mindset of people like Gordon Brown.

Most market analysts on the other hand ask 'what is the fair value for gasoline and heating oil?' and if a lack of refineries restricts the production of these commodities then this is what drives the market, irrespective of crude oversupply or otherwise.

Personally I see both factors having an impact. Outright crude supply is not hugely significant at the moment, but OPEC spare capacity IS. On top of this base, we have a lack of heavy sour crude upgrading capacity which means crack prices are soaring soaring soaring even relative to the high crude price.

Would investment in upstream (crude) or downstream (products) have the greatest impact on the retail fuel price we pay right now? I think that's a difficult call, and requires some very deep (and accurate) analysis.

peaky · Post by **peaky** » 14 Sep 2005, 21:32

AndrewH wrote:Hi there, new person here...

Welcome aboard the good ship PowerSwitch, Andrew

I think duty can stay just where it is - the last thing we need is to encourage people to drive more. His budget plans for a certain revenue and if he gets less from fuel then he'll have to get more from elsewhere.

It also helps (and we need all the help we can get) to get people out of their cars and into other forms of transport.

skeptik · Post by **skeptik** » 14 Sep 2005, 21:58

AndrewH wrote:Hi there, new person here...

I'm interested to know whether people think it's fair to charge the amount of tax we do? I'm not (yet) a driver, but it seems to me that it's too much.

I can see the truckers point. As we are part of the EU, truckers from France, Spain Germany etc. can operate in the UK unhindered. Tax on Diesel is high in the UK compared to other Eu countries (I think). So no doubt they fill up on the other side of the channel before doing a run through the UK.

I havent thought it through but at first glance there does seem to be a case for a uniform EU wide tax on Diesel. 'level the playingfield'

If theres some factor or argument that I havent thought of, please jump in and point it out. I'd be interested to know what it is.

AndrewH · Post by **AndrewH** » 14 Sep 2005, 22:00

peaky wrote:
AndrewH wrote:Hi there, new person here...
Welcome aboard the good ship PowerSwitch, Andrew

Thanks a lot!

peaky wrote: I think duty can stay just where it is - the last thing we need is to encourage people to drive more. His budget plans for a certain revenue and if he gets less from fuel then he'll have to get more from elsewhere.

It also helps (and we need all the help we can get) to get people out of their cars and into other forms of transport.

Yes I see your point. It's funny to see people react to a challenge to their supposed 'right' to drive, but on the other hand I do think people are genuinely anxious about being able to simply get to work, among other things. So I guess it's never simply a case of the 'stupid herd', although it's certainly tempting. (I know you weren't saying that, I'm just thinking aloud!)

As we know, the way our landscape has been laid out this last however-many years, having a car is almost a necessity for people, at this present time. Perhaps if we had honest admissions from central government regarding oil/fuel, we could make moves to increase investment in public transport, and make it a more attractive option. I do understand though that this is difficult without causing panic.

Seeing the way our dear HMG handles most things, I can only hope that this problem is dealt with in as rational and fair a way as possible, without leaving people to essentially fend for themselves. I can see the already quite touchy state of our society get even more precarious - if the have-nots increase too much it will be hard to stop people taking their anguish out on whoever they perceive to have it better off than themselves. In London, and many other parts of the UK, this is already a problem.

As for getting money from elsewhere, how about all that money we spend on absolute crap? Consultants, weapons, changes of headed paper...oh, and did I mention consultants!?

Ballard · Post by **Ballard** » 14 Sep 2005, 22:06

I think that we really have to stop thinking of 'business as usual' with a few tweaks.

In a sane world Gordon B would be gradually raising tax on fuel, and spending the money on renewable technologies, whilst explaining to everyone that the reason for these tax hikes was to prepare for a post peak world.

The benefits would be that the UK would be forced to make the preparations it so desperately needs to get underway, and the government would have the cash to fund it.

We should bend the hell out of our current economy rather than watch it break entirely in the near future.