TEQs & Peak Oil : Peak Price for Energy ? $200 Barrel ?

[RGR]

[quote="jo"]

[jo]

The issue for me is that there is no choice for the OPEC countries but to reduce production.

1. They will not be able to keep up with demand if they continue to supply at a high rate, given that their wells are starting to deplete.

2. In order to protect their wealth into the future, they need to conserve what oil they have left. After all, if there are no goods left to sell, no profits can be made.

There is no clear evidence that what you see as "demand destruction" is in fact permanent. We have a Winter to get through just now.

If the economies "recover", then demand will continue to rise. The only way to avoid a demand/supply crunch is to start moving to alternative energy sources as soon as possible.

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http://omrpublic.iea.org

World oil demand is expected to average 86.5 mb/d in 2008 (+0.5% or +0.4 mb/d vs. 2007) and 87.2 mb/d in 2009 (+0.8% or +0.7 mb/d).

Global oil supply declined by 1.1 mb/d in September to 85.6 mb/d.

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http://www.wtrg.com/oil_graphs/PAPRPNT.gif

http://www.wtrg.com/oil_graphs/PAPRPOP.gif

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Economania & Energy : My predictions for Christmas
Posted by jo abbess (joabbess) on October 15, 2008, 1:37 am

In the best time-honoured tradition of non-experts predicting the future, I shall attempt a cast for Christmas 2008 :-

1. Global Crude Oil supplies down to 84.2 million barrels per day. Follow the news on :-

http://omrpublic.iea.org

2. Global Crude Oil demand up to 85.7 million barrels per day. Follow the news on :-

http://omrpublic.iea.org

3. Crude Oil prices to be somewhere between 128 and 138 US Dollars per barrel. Follow the news on :-

http://www.oil-price.net
http://www.wtrg.com

4. Global average temperature for October, November and December to be higher than for 2007. Follow the data here :-

http://data.giss.nasa.gov/gistemp/graphs

5. Central England temperature average for the whole of 2008 to be a little less than 2007. Follow the data here :-

http://hadobs.metoffice.com/hadcet

6. Two new major Hurricanes to have made landfall in the United States and Mexico. Follow the charts here :-

http://www.nhc.noaa.gov

7. The price of Carbon to be less than E10 (ten Euro) by 25th December 2008. Follow the data here :-

http://www.europeanclimateexchange.com/ ... _flash.asp

8. Barack Obama to have been elected the next President of the United States with a lead of 15%.

9. The Labour Government to have a poll advantage of 10 points.

10. China to predict Recession for 2009.

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[RGR]

[quote="jo"]

[jo]

"The issue for me is that there is no choice for the OPEC countries but to reduce production." When I say this, I mean they have no physical choice. In other words, production is falling away, regardless of how much in terms of resources they throw at it.

It's got nothing to do with the price of the product. Note : they're discussing cutting production, but the price is still slipping. Conclusion : cutting production is not a deliberate move to jack up prices.

I think you are perpetuating a myth to assert that OPEC are cutting production because they want to jack the prices up. Although all the newspapers and websites report this, it is not the real reason the supplies are going to wither away.

OPEC oil has started to dry up. No, it hasn't come to a dead end. It's just that the high volumes of trade can no longer be supported. They will have to beat a diplomatic retreat and move to lower and lower volumes of trade.

[RGR]

[quote="jo"]

[RevdTess]

"The issue for me is that there is no choice for the OPEC countries but to reduce production." When I say this, I mean they have no physical choice. In other words, production is falling away, regardless of how much in terms of resources they throw at it.

It's got nothing to do with the price of the product. Note : they're discussing cutting production, but the price is still slipping. Conclusion : cutting production is not a deliberate move to jack up prices.

An oil price reaction to an OPEC cut always takes several months to appear. It's likely they will feel obliged to make further cuts (in Dec or Jan) before the first has a significant impact.

For a start, the OPEC cut only takes effect from November, which means that importer countries wont see a first impact on their imports from OPEC (and thereby inventories) until near the end of November. Secondly, global refinery margins are heading negative, which means refineries will start to process less crude and be able to continue to build inventories despite lower imports. Both these factors will delay the moment when prices are forced higher.

In late 2006, OPEC last cut their supply. In early 2007 the price fell sharply and in the US, storage tanks were so full of crude that by February 07, WTI was trading at a huge prompt discount versus other global benchmarks such as Brent. Nevertheless, by June 2007 the situation was entirely reversed, leading the way towards the huge price rally we saw in 2008.

It remains to be seen whether current OPEC cuts will be enough to outweigh falling demand, or whether further cuts will be needed in the next few months. It may take a while, but so far in my experience OPEC have always managed to reduce global inventories of crude enough to support oil prices eventually, though it could take 6 months to a year to fully play out.

Every time OPEC cut supply there are these accusations that it's because they simply can't keep up production. It's a completely bogus argument and devalues and humiliates the peak oil agenda, as RGR will no doubt testify.

Your logic that "they're discussing cutting production, but the price is still slipping. Conclusion : cutting production is not a deliberate move to jack up prices." is deeply flawed by a lack of understanding of the oil markets. Please don't succumb to this nonsense.

[RevdTess]

I see....well...I disagree completely then. OPEC ( which I view as primarily Saudi Arabia nowadays ) does have a physical choice and have been demonstrating it since 2005 when the likes of Simmons claimed that they couldn't ever maintain their current rate. Which they then proceeded to do for 3 years, and could probably sustain for some period of time yet ( measured in years ).

I don't consider it a myth, that OPEC is happy with a floor price, and will defend it. Strikes me as being completely reasonable in an economic context, almost by definition. The floor price is, of course, different now, then it was a few years ago. Again, OPEC primarily being an expression of Saudi policy more than anyone else.

Well, you can say this I suppose, but being familiar with some of the Middle Eastern assets which aren't booked, Saudi production practices over the past few decades, and the amount of incremental recovery factor yet to be utilized in general, limitations inherent in their capital investment schemes, etc etc, I disagree completely.

Completely agree with you on this one.

[jo]

@RGR
You said : "I see....well...I disagree completely then. OPEC ( which I view as primarily Saudi Arabia nowadays ) does have a physical choice and have been demonstrating it since 2005 when the likes of Simmons claimed that they couldn't ever maintain their current rate. Which they then proceeded to do for 3 years, and could probably sustain for some period of time yet ( measured in years )."

The OPEC club has changed membership over the last few years, as the wells dry up in some countries or come onstream in others.

OPEC is clearly struggling to maintain output collectively, despite your apparently dismissive generalisations.

The IEA and other research bodies predict that OPEC will not be physically able to continue to pump at the rates we are seeing at the moment.

Sooner or later, the fact that Saudi is running dry will become apparent at the "interface" with the trading public. Telling OPEC to keep production up as the general Press and Gordon Brown continues to do, is a stressor we don't need.

If there's no cake left in the cake shop, there's no cake left to eat, period.

The talk about "OPEC deciding to cut its output" is a face-saving way of saying that the cake is running out and that they can't do anything about it.

I believe that even with the best will in the world, and the application of large amounts of labour and machines, OPEC cannot keep supplies of crude at the height they are now.

The situation may drag on a bit. A currently productive non-OPEC nation may join OPEC, a new well may make up some capacity, but in the end, the curves are on the way down.

Russia is making moves to form a Natural Gas version of OPEC : hints that Peak Natural Gas is on the way, boys and girls, and you'd better be ready for this rollercoaster, too.

It's couched in terms of "controlling the gas price", but the reality is that they've seen the pressure dropping away at their outgassing plant.

What really matters at the end of the day is not the PRICE of liquid and gaseous hydrocarbon fuel, but the FLOW RATE, and that's going down.

[RevdTess]

The talk about "OPEC deciding to cut its output" is a face-saving way of saying that the cake is running out and that they can't do anything about it.

Just total rubbish jo. OPEC is cutting to defend the oil price and their own national budgets. Yes some of them may have peaked but the current OPEC cuts are by no means a response to that, just as they weren't in 2006, the last time this claim was made.

You're just making a fool of the peak oil argument and justifying RGR's attacks on the wider peak oil community. Please desist.

[RGR]

[quote="jo"]

[jo]

@RGR
@Tess

I detect some hurt and a touch of anger.

For the record, I don't do propaganda and I don't do myth.

Enough with words. Data please.

Here's my opening shot :-

http://rutledge.caltech.edu

[jo]

Is the debate over in reality ?

I see from the oil price ticker at the bottom of the page that oil prices are on the way up again...

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http://www.energybulletin.net/node/47087

Industry Taskforce Sounds Alarm on Peak Oil
http://europe.theoildrum.com/node/4724

Chris Vernon, The Oil Drum: Europe

On Wednesday 29th October 2008 I attended a press conference at the London Stock Exchange. The meeting was convened by the "Industry Taskforce on Peak Oil & Energy Security" (www.peakoiltaskforce.net) to introduce a new report: The Oil Crunch, securing the UK’s energy future.

September last year, former US Energy Secretary Dr James Schlesinger addressed the ASPO6 conference in Cork, Ireland with these words:

http://www.aspo-ireland.org/index.cfm/page/aspo6

"The peakists have won ... to the peakists I say, you can declare victory. You are no longer the beleaguered small minority of voices crying in the wilderness. You are now mainstream. You must learn to take yes for an answer and be gracious in victory."

...

So *this* is what Peak Oil looks like
http://blog.seattlepi.nwsource.com/envi ... 153125.asp

Robert McClure, Seattle Post-Intelligencer

Just remember that you heard it here first: Look for gas prices to go up after the election.

OK, savvy readers may have actually got that news first from the Financial Times, which obtained a leaked International Energy Agency report saying that output from oilfields is declining faster than previously understood -- a rate of 9 percent a year.

http://www.ft.com/cms/s/0/0830883c-a55b ... ck_check=1

It's not as if this prediction of Peak Oil is a first -- but coming from the IEA, it has a lot more weight. The conclusion appears to be that world oil production peaked in July of this year.

IEA, btw, says the report the Times obtained is out of date, and so is the depletion figure cited in it. But still -- if oil production is going down anywhere near 9 percent per year, we have dug ourselves a very deep hole.

... It's also possible that the current economic slowdown could buffer the price hikes, by reducing demand. In that case it could take several years for gas prices to rise, the report indicates.

We actually learned of this from our friends at Energy Bulletin. Some interesting commentary is here.

http://postcarbon.org/nine_percent

(3 November 2008)

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[RGR]

[quote="jo"]

[RGR]

[quote="jo"]

[jo]

@RGR

Like you, I don't make a habit of getting on the back of a camel and riding out into the dust in a Middle Eastern country, stopping at an oil well and pulling out my trusty dipstick to test the remaining depth (joke).

All of us rely on sources who are not ourselves to get data and make sense of the world. I doubt you do measurements yourself. Generally, neither do I. I do measure the relative weight of various opinion offerings, commentary and publications, however. That's where personal judgement comes into play for me.

It's pointless to try to assert that the world will continue to increase it's use of Carbon Energy, when the Peaks of each source are within view (even if they're a bit off by a couple of years). This has extremely severe implications for the viability of our current Economic system, the success of which is predicated on Growth, and it would be best to start adjusting now, rather than later. There is no room for Growth in the Carbon Energy sphere, since the Peak is on the horizon.

I'm interested to see that you are negatively critical about David Rutledge's work. I think it's highly pertinent that one of the conclusions of his work is that the combined Peak Coal/Gas/Oil will be in the year 2019. Doesn't that say something to you ? Even if some of the figures are a bit off, or the methodology is a bit skew, that's a big claim : Peak Global Carbon Energy by 2019 !