Oil Breaks A New Record

[Admiral Valdemar]

Over stressing refineries before a major driving period is not a good plan, especially when it results in events like what occurred in Texas this week. To quote Mr. Tyrell:

"The candle that burns twice as brightly burns half as long. And you have burned so very brightly, Roy."

Just a short note on US Crude Oil Production.

I track and chart the weekly US production data posted each week by the EIA. I thought it interesting to note that the ten week moving average of US oil production has dropped more than 250 thousand barrels per day since hitting a post Katrina in February of 2007, one year ago.

The ten week average high ending Feb 2 of 2007 at 5,324,000 barrels per day and the ten week moving average this past week was 5,050,000, a drop of 274,000 thousand barrels per day in one year.

My point is, I do not believe the EIA's Short Term Energy Outlook which predicts that US production will increase by just over half a million barrels per day by 2009. They are basing this prediction on new projects such as Atlantis and Thunder Horse. But Atlantis came on line last year and will ramp up to full production later this year. But US production is still going down due to depletion.

The EIA predicts that we will climb the down escalator faster than the escalator goes down. At present that is not happening, depletion is dropping production faster than new fields are increasing it.

Ron Patterson

Additionally, the report from Lehman Brothers Holdings, Inc. casts doubts on future projects being able to alleviate such prices now, especially since the ceiling of $100/bbl. has been broken and such barriers once surpassed can be broken again relatively easily.

Refinery utilisation is also depending a lot on imported oil stock feed which is increasing annually with even near record high prices during an off-peak driving period not dampening demand. In fact, demand is 0.5% over the same period last year with no signs of stopping in the US. This summer could see a make or break event whereby the US, and by extension the First World, is unable to import the crude or refined products it needs without repercussions. If not this summer, then most certainly next year without unforeseen situations forming.

The IEA is also urging OPEC to maintain current production despite OPEC stating cuts may be in the works. If OPEC cuts back, it could be signs of involuntary cuts given past actions indicating their usual MO of trying to cool off high prices when called on it. They were considering cutting to maintain the $80 floor, but that seems a tad redundant given we're hovering around $100 presently. OPEC exports are predicted to fall in March also, according to Oil Movements. Petrologistics also seems to believe KSA was boosting output in 4Q07 by redirecting its own stock into the market. If that is so, this isn't good news at all. Drawing down OECD stocks is one thing, but OPEC nations who brag about being able to reach 15 Mbpd and then seemingly indicate using their own SPR to sate demand is another kettle of fish.

I also see BP and Shell casting some bad light on renewables this week.

Despite recessionary fears, there is still high demand for all major commodities and energy which is keeping prices high.

[Admiral Valdemar]

PEMEX states Cantarell is nosediving at 23% year-on-year. That's far more than even the most pessimistic scenarios. Mexico is going to implode in the not-too-distant future.

No wonder so many are coming out suddenly concerned about oil supplies. Any talk of a shallow, controlled global decline seems to be firmly under scrutiny.

[J]

PEMEX states Cantarell is nosediving at 23% year-on-year. That's far more than even the most pessimistic scenarios. Mexico is going to implode in the not-too-distant future.

Pffft, we both know the shills will just claim that all it needs is the joy of high technology and private free enterprise to reverse the trend and hit 5 million barrels a day for the next 50 years.

[Winston Blake]

Thiswas on The 7:30 Report last night. It's the first time I've seen the issue of serious oil trouble appear in the mainstream media.

Transcript
KERRY O'BRIEN: The global dependence on traditional fossil fuels continues and the news this week that crude oil prices peaked at $105 a barrel on international markets sent a shiver through Wall Street and in Australia, meant more bad news for motorists and the transport industry in particular.

At the same time, local oil fields are rapidly declining, prompting both the new Government and oil industry representatives to declare that the search for a major new oil field in this country has now become a national priority.

The insatiable demands of the emerging giants China and India for global oil supplies have now unquestionably peaked have simply added to the urgency. All sides seem to agree the implications of Australia's trade deficit and international competitiveness are serious.

Greg Hoy reports.

MARTIN FERGUSON, RESOURCES MINISTER: Australia's got a huge challenge. We've got huge problems on the trade front, but also importantly, a real problem in terms of energy security and our economic future by 2015.

GREG HOY: With Australia now consuming around a million barrels of oil a day and rising in production less than half that and falling, the search for oil is on in earnest.

BELINDA ROBINSON, PETROLEUM PRODUCTION & EXPLORATION ASSOCIATION: Oil production in Australia is rapidly declining. We are unlikely to be able to sustain our current production of oil levels unless we find a major new oil province.

MARTIN FERGUSON: We've got to find another Bass Strait, because if we don't by 2015 we will go from importing about 20 per cent of our needs in the 1990s to actually importing 80 per cent of our oil and related product needs, effectively contributing to a $27 billion per year trade deficit.

GREG HOY: Indeed, this graph charts the disconcerting rise in Australia's total imports in petroleum and associated products since the year 2000. A clear trend that's triggered the dire forecast for Australia's trade deficit. Just as the demand for oil imports from emerging nations surges, and global production also begins to wane. All ominous signs for the already high price oil.

JIM BUCKEE, FORMER CHIEF EXECUTIVE, TALISMAN ENERGY: In the crudest terms, the world consumes total liquids of 84 million barrels a day and predominantly black oil, and finds are seven, eight, nine, small proportion. The only time consumption's actually fallen was in the '79 to '80 period during the oil shocks and part of the reason that consumption fell then was because it was a shock. And now this is more like slow death than a shock.

GREG HOY: Led by explorers like Santos, the South Australian and Northern Territory oil search company, the major oil discoveries were made in Australia in the 1960s and '70s. Discoveries since have been far smaller, so the search is straying further offshore into deeper waters.

Led by the team advising Government, Geoscience Australia, backed up by others including the Australian Institute of Marine Science, researches are combing the sea floor in an ever-increasing radius now 1.6 times Australia's land mass, searching for tell tale signs of black gold submerged under the sea bed.

CLINTON FOSTER, GEOSCIENCE AUSTRALIA: We're looking across the whole southern margin of Australia. We use the synthetic radar from space where we look at oil slicks and the most modern sampling techniques and indeed seismic techniques to image the sub-surface.

GREG HOY: Revealing the ocean floor right round the Australian mainland and beyond, including canyons off South Australia twice the height of Mount Kosciuszko. The Petroleum Producers and Explorers Association will tomorrow publish a new report focusing on the growing urgency of oil exploration, calling for an increase in geoscience data by Federal and state governments in the hope of attracting oil exploration companies from overseas.

BELINDA ROBINSON: If governments consider this to be an important issue, increasing the amount of, I guess the revenue that's collected from the industry back into geo-scientific information collection is something very concrete and for a very small investment could produce very substantial outcomes.

GREG HOY: But the Rudd Government says it won't be increasing funding, though it has launched an energy security assessment and is considering introducing a Canadian style Flow Through Share Scheme, where high exploration costs are made tax deductible for investors.

It's this, coupled with an application to extend Australian territorial waters past the continental shelf by an area equal to 45 per cent of mainland Australia, that is fuelling optimism for a big strike.

BELINDA ROBINSON: In Australia, we have around 50 sedimentary basins and only 12 of those are producing oil and gas. That leaves a lot of territory that's been either under explored or unexplored and it's territory that the geoscientists believe have every possibility of holding the secret of a new oil province.

GREG HOY: But there are those who remain unexcited, including the recently retired CEO and president of Canada's largest oil and gas producer Talisman Energy, Australian expatriate Dr Jim Buckee.

JIM BUCKEE: In my mind, not very excited, because as a broad overview, we have tended to see Australia as a gassy place, so big gas, small oil. The bigger fields tend to be found earlier, but there may be surprises. But the particular sedimentary basins, the particular charge mechanisms I would think are not prone to large oil discoveries.

GREG HOY: So what if he's right and we don't strike it lucky? How great would be the impact on the lucky country, and how else might that be averted?

MARTIN FERGUSON: Just think about the competitive difficulties at the moment confronting Australian industry and the ordinary motorists given the price of oil. If we don't actually come to terms with investing in our future, then this is going to raise serious questions about our competitive position internationally in a tough global market in a very short period.

GREG HOY: According to the Minister, the best hope may lie in applying a new technology to Australia's vast reserves of natural gas and coal to create a new fuel for Australia's motorists and transport fleet.

EXCERPT FROM A CORPORATE VIDEO: At a time of opportunity for a new source of energy.

GREG HOY: Crucial trials at Queensland's Link Energy will begin before the end of the month, where a coal seem at Chinchilla, north-west of Brisbane, will be ignited underground like so, with compressed air forced through the seem to form a synthetic gas of steam and carbon, which as it exits will be converted from gas to a clear liquid diesel, with enormous production potential, the same technology we are told, can be applied to natural gas reserves.

EXCERPT FROM A CORPORATE VIDEO: Cost effective and very profitable.

MARTIN FERGUSON: So it's about exploration, plus encouraging investment in downstream processing in Australia on gas liquids and coal liquids and thereby creating synthetic alternative fuels.

GREG HOY: Once again, the sceptics do not share the Government's optimism that a solution to Australia's oil crisis is at hand.

JIM BUCKEE: The conversion of coal and gas, gas to liquids, for example, are quite energy expensive of themselves.

MARTIN FERGUSON: These industries are going to become more attractive because of need. But I might also say that is an absolute priority to the Government to secure our economic future.

JIM BUCKEE: The implications of higher oil prices feed rapidly into higher food prices and pretty soon into higher mining prices.

BELINDA ROBINSON: Whichever way we look at it, and despite our very best efforts and despite all the best will in the world, we're still going to be dependent on fossil fuels and hydro-carbons for many decades to come.

GREG HOY: And then we come back to global warming.

Summary:

• - Australia is desperate for a new big oilfield.
  
  - President of Canada's largest oil and gas producer Talisman Energy, Dr Jim Buckee, is calling the current oil situation a 'more like slow death than a shock'.
  
  - He states that higher food prices follow higher oil prices.
  
  - Australia is applying to expand our territorial waters by 45% the area of the mainland, in the hope of hitting an oilfield.

[Zablorg]

The whole thing about lack of oil leading to higher food prices, does it flow into the whole peak fertilizer thing, or is that a different thing entirely?

[Admiral Valdemar]

Diesel needed for farming goes up and the farmers pass that on to consumers. We are in no danger of running out of fertiliser, although it is certainly getting pricey for some to buy and demand is growing. Phosphate, for instance, is running out in terms of easy to extract natural deposits, which means we need to invest more time and energy in recycling. The likes of nitrogen are readily recycled using the Haber-Bosch process, provided you have the energy to run it competitively. It's price that is hurting right now, not physical shortages (unless you live in the Third World).

[Admiral Valdemar]

Bloomberg

Oil Rises Above $100 to Record Close After the Dollar Declines

By Mark Shenk

Feb. 26 (Bloomberg) -- Crude oil rose above $100 a barrel to a record close in New York as the weakening dollar prompted some traders to invest in commodities as a hedge against inflation.

Reports today showed that U.S. home prices tumbled, consumer confidence weakened and producer prices rose last month. Hedge- fund managers and other large speculators increased net-long positions, or bets on higher oil prices, in the week ended Feb. 19, a Commodity Futures Trading Commission report showed.

``The market is being driven by speculation, fear and psychology,'' said Stephen Schork, principal of the trading firm The Schork Group Inc. in Villanova, Pennsylvania. ``There were some investors who shorted oil when we reached $100 last week, for whatever reason, and they panicked today.'' Shorts are bets that prices will decline.

Crude oil for April delivery rose $1.63, or 1.6 percent, to $100.86 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures surged 12 percent in the month before touching $101.32 a barrel on Feb. 20, the highest since trading began in 1983. Prices are up 64 percent from a year ago.

[J]

I like how they keep blaming speculators for driving up oil prices...when they're not blaming hurricanes, violence in Nigeria, Hugo Chavez or Ahmadinejad running their mouths, refineries going down or blowing up, cold weather in the US, hot weather in the US, fog in Galveston, oil sands projects getting taxed more, Russia refusing to let western oil companies in, Lindsay Lohan getting a DUI and everything else except the real reason; Peak Oil.

[J]

Reuters

FACTBOX: Oil hits inflation-adjusted record high
Thu Feb 28, 2008 2:41pm EST

(Reuters) - U.S. oil surged to a new inflation-adjusted record high on Thursday, surpassing the previous record of $102.53 set in 1980, according to the International Energy Agency.

The following table from the BP Statistical Review of Energy picks out key moments in oil market history. It gives average annual dollar-denominated oil prices in money of the day and the equivalent price in 2006 money. Prices are in dollars a barrel:

Year Money of Inflation

the day adjusted

1876 - Russian oil exports start 2.56 48.64

1948 - Rebuilding post World War Two 1.99 16.74

1974 - Arab oil embargo 11.58 47.54

1979 - Iranian revolution 31.61 88.13

1980 - Iran-Iraq war starts 36.83 90.46

1990 - Iraq's invasion of Kuwait 23.73 36.76

1998 - Asian economic crisis 12.72 16.22

2003 - China 2nd biggest oil consumer 38.27 40.83 *2008 average 93.90 93.90

NOTE:

1861-1944 - U.S. average

1945-1983 - Arabian Light posted at Ras Tanura

1984-present day - Brent dated

*2008 U.S. crude

Source: BP Statistical Review of World Energy June 2007

Not just record highs in dollar amounts, record highs in inflation adjusted dollars.

[Admiral Valdemar]

I'm still wary of that given how under-reported inflation is meant to be. However, it is clear that one of two things are happening: either the dollar is finally dying a death, or oil is hitting huge price spikes before we've even had any supply issues in the West. That is a major concern for anyone who thinks we can invest our way out of this crisis.

[Darth Wong]

I like how they keep blaming speculators for driving up oil prices...when they're not blaming hurricanes, violence in Nigeria, Hugo Chavez or Ahmadinejad running their mouths, refineries going down or blowing up, cold weather in the US, hot weather in the US, fog in Galveston, oil sands projects getting taxed more, Russia refusing to let western oil companies in, Lindsay Lohan getting a DUI and everything else except the real reason; Peak Oil.

It was a mistake to give this phenomenon a catchy buzz-phrase. Right-wingers have spent years ridiculing it now, to the point that people are sick of hearing it and roll their eyes at the mention of it. You can talk to a person and tell him that there are "supply shortfalls", and he'll nod in agreement. You can say that oil prices are probably never going to go back down, and he'll nod in agreement. But you say the words "peak oil" and he'll just laugh off anything else you say.

[J]

I don't know if it's just me, but Bloomberg seems to have given up on explaining the movement of oil prices this year. Up until maybe a month or so ago they'd always have a blurb such as "Oil falls on inventory drop" or "Oil rises after OPEC meeting" on the sidebar of the energy prices page. Even if the explanation was completely off base it would still be there, in the last few weeks I don't recall seeing anything like that. They have similar blurbs for coal, natural gas, uranium, but not oil. Strange...

[Admiral Valdemar]

It was a mistake to give this phenomenon a catchy buzz-phrase. Right-wingers have spent years ridiculing it now, to the point that people are sick of hearing it and roll their eyes at the mention of it. You can talk to a person and tell him that there are "supply shortfalls", and he'll nod in agreement. You can say that oil prices are probably never going to go back down, and he'll nod in agreement. But you say the words "peak oil" and he'll just laugh off anything else you say.

It's pretty funny that many high ranking executives in the industry, governments agencies and international organisations have essentially said what those words means, without using them. They seem to tip-toe around a term that has long been fringe and though it makes sense to many rational people, would make for a bad day should some investors consider good things do come to an end.

[J]

Up up and away!

NEW YORK — Oil prices surged to a record high Monday as the dollar weakened to another low against the euro.

Light, sweet crude for April delivery was trading up $1.93 to $103.77 on the New York Mercantile Exchange after earlier rising as high as $103.95. That's higher than the $103.76 many analysts say would have been the price of oil in 1980, if it was adjusted for inflation into 2008 dollars.

It looks more & more likely that $100/barrel is the new price floor for oil.
I wonder what OPEC will do in their upcoming meeting...

[MKSheppard]

Pffft, we both know the shills will just claim that all it needs is the joy of high technology and private free enterprise to reverse the trend and hit 5 million barrels a day for the next 50 years.

You're wrong. It will take the power of the mighty atom to reverse the decline.

I hereby claim all of Canada as my experimental testing ground for oil shale reclaimation via the power of kiloton level nuclear explosives.

We'll also boost production of existing wells via Gasbuggy style shots.

[J]

You're wrong. It will take the power of the mighty atom to reverse the decline.

I hereby claim all of Canada as my experimental testing ground for oil shale reclaimation via the power of kiloton level nuclear explosives.

We'll also boost production of existing wells via Gasbuggy style shots.

The last time I checked, you guys have all the oil shale while we have all the tar sands. Sorry Sheppy-pooh, you'll have to do your nuclear testing in your own backyard.

[J]

Bloomberg link

Bodman Says High Oil Price Caused by Low Supply (Update2)

By Michael McKee and Deirdre Bolton

March 5 (Bloomberg) -- Tight world oil supplies, not speculators, are driving up the price of oil to record levels, U.S. Energy Secretary Samuel Bodman said in an interview on Bloomberg Television today.

Bodman said the U.S. and the Organization of Petroleum Exporting Countries have different views on speculation.

``They see speculation in the market, I see a decline in global inventories,'' Bodman said.

Crude oil futures traded in New York rose to a record $104.56 a barrel today, the highest since trading began in 1983. Crude-oil supplies fell 3.06 million barrels to 305.4 million in the week ended Feb. 29, according to the Energy Department today.

Crude oil climbed above $104 a barrel after OPEC gave no indication it will increase production. OPEC agreed to maintain production targets at a meeting today in Vienna.

Exxon Mobil Corp., which recorded the biggest profit for a U.S. company last year, said today it will increase capital spending this year on exploration and other production activities by 21 percent to more than $25 billion. Exxon Mobil is the world's largest oil company.

Bodman also said that increasing ethanol output to alleviate fuel supply constraints justifies higher hog and chicken feed prices. Rising feed prices are ``nowhere near as important as trying to relieve pressure'' on supplies, he said.

Earlier today Bodman said in an interview on CNBC the escalating oil price should be expected.

``I don't think this is a big surprise that we've had a jump in price when there has been a decrease in crude inventories,'' he said.

To contact the reporters on this story: Michael McKee in New York at 1834; or mmckee@bloomberg.net; or Deirdre Bolton in New York dbolton@bloomberg.net

Last Updated: March 5, 2008 13:45 EST

When the US Energy Secretary says high prices are indeed caused by tightness (read as "shortages") in the world oil supply, and then goes on to state that escalating oil prices are to be expected, it's not exactly what one would call good news. BTW, another record high today.

[aerius]

Oil at over $107, currently trading at just under 107.50. Move the decimal point to the left a couple places and that's the price per litre of gasoline in my area. Our "buy a home" fund is now complete, time to start working on our retirement funds...