Oil Prices Could Get Even Worse

[UpInArms]

http://www.businessweek.com/bwdaily/dnflash/aug2004/nf2004086_1412_db039.htm

When will the world get a break from oil prices that seemed unimaginable a few years ago? Not anytime soon, analysts believe. If anything, the upward march seems to be gaining momentum, with U.S. oil prices breaking through $44 a barrel on the New York Mercantile Exchange this week. Paul Horsnell, head of Energy Research at Barclays Capital in London, now says: "The question is not whether $50 will be breached," but whether there will be any pause before the half-century mark is topped.

<snip>

A WORLD OF WOE. Indeed, the spurt in demand from China, the U.S., India, and elsewhere has caught just about everyone unawares. Governments, most notably the U.S., have done little to encourage conservation.The entire industry -- from OPEC to the international oil companies -- have failed to invest sufficiently in production capacity. Such investments will gradually increase, but it will be years before the effect is felt. As a result, spare production capacity is only about 1 million barrels per day, vs. 6 million barrels per day two years ago, Horsnell reckons. That razor-thin margin has the markets worried about the possibility of a severe crunch, especially when seasonal demand picks up. With the system already under strain, a cold winter in North America could have severe consequences.

<snip>

MORE RESERVES. Another factor: Hedge funds have discovered the oil markets as a volatile asset class that isn't correlated with other securities markets. The presence of these financial investors may add to volatility and accelerate momentum in price runups (see BW Online, 8/6/04, "Hedge Funds Are Everyone's Problem").

Finally, it doesn't help that the Bush Administration lacks an energy policy worthy of the name. In fact, analysts question why the U.S. government will continue adding to the strategic petroleum reserve when the markets are so tight. The Interior Dept. announced on Aug. 6 that it will be adding 100,000 barrels a day for six months, starting Oct. 1.

...more...

[physioex]

1. I am a strong believe in conservation and living within our means...

But I tend not to read into these analysis. There is simply no way anyone can predict the future, and I (we) can deal with the situation as it happens....

[Gman]

2. So when does Saudi Arabia raise output for the election

as they promised Bush they would do?

[shraby]

3. Like you say, the Saudis are making

the price go through the roof so we will all be sooo very grateful to Bush when he yells at them to bring the price down and they do...just like Prince Bandar promised he would. They want some good profits first.

[Strelnikov_]

8. No Can Do

Worldwide oil production (including Saudi Arabia) is at capacity.

This is what happens when demand exceeds supply. The problem is, there is no way to increase supply in response to higher prices. Only demand can adjust in any future equation. Therefore prices will probably keep climbing rapidly in the short term.

[section321]

10. Its possible to expand supply in the long run, unless...

we really are approaching peak oil. In which case we're all f*cked.

[Strelnikov_]

20. I Think Peak Oil Is Here

Considering that:

- Most estimates I remember seeing is that peak oil would occur in 2010-2020 range, and
- It appears that this estimate was based on reserves that have been overstated (as is consistent with human/business nature, see posts 15 and 16 regarding problems with the Saudi reserve estimates), and
- We are seeing numerous reports that worldwide production is at capacity.

It is beginning to appear that even if Venezuela/Iraq get back up capacity, this will be offset by the depletion of other sources.

[krkaufman]

29. Right.

Saudi Arabia just announced they'd boost supply by a million barrels a day -- but that may be a drop in the ocean considering the rapidly expanding demand. Just heard on Lou Dobbs today that China's usage is up 40% in July, year-to-year.

[4dsc]

13. I believe the Saudi's are pumping

at their maximum capsity right now.. Or at least that's what the news stated the other day..

[gulliver]

4. Bush's record trade deficit hard at work.

China takes the manufacturing jobs, India the service jobs. And of course they need cars, so they are now competing with us for gasoline. Nice job Bush!

[nolabels]

7. "Dollar Dips as Market Adjusts Rate Hopes"

Probably isn't going to get any better anytime soon

Dollar Dips as Market Adjusts Rate Hopes

Sun Aug 8, 2004 09:10 PM ET
By David McMahon

TOKYO (Reuters) - The dollar slipped on Monday, extending heavy losses made after a far-weaker-than-expected U.S. employment report cast doubt over the health of the economy and the pace at which the Federal Reserve would raise interest rates.

U.S. non-farm payrolls added only 32,000 jobs in July, according to data released on Friday, while the Labor Department cut its tally of job growth for May and June by 61,000.

Markets had expected 228,000 new jobs in July, according to a Reuters poll.

"The data are going to hang over the dollar until the next payrolls numbers, and we're probably going to see some more weakness," said Jake Moore, forex strategist at Barclay's Bank
(snip)
http://www.reuters.com/financeNewsArticle.jhtml?type=businessNews&storyID=5905524

[bpilgrim]

5. they report Venezuel as a STRIKE when it was actually a LOCK OUT by the RW

"If the spare capacity were greater, none of these situations would seem so threatening. But a repeat of last year's oil workers' strike in Venezuela, for instance, would be a disaster. Even a relatively routine occurrence -- a quickly extinguished fire that shut down a BP (BP ) refinery in Texas -- helped send prices up more than $1 a barrel on Aug. 6."

source...
http://www.businessweek.com/bwdaily/dnflash/aug2004/nf2004086_1412_db039.htm

<hr>

Friday, January 17th, 2003
Venezuelan President Hugo Chavez Meets with UN Sec. Gen. Kofi Annan

...

In recent weeks, a business lockout and work stoppage led by right-wing groups aiming to bring down the government has devastated the petroleum industry." - according to chavez

more...
http://www.democracynow.org/article.pl?sid=03/04/07/0317204

but who's gonna notice, eh? since they still haven't mentioned or noticed :shrug: PEAK OIL PRODUCTION looming and certainly having an IMPACT as well.

WHORES

peace

[daleo]

6. I wonder what Iraq's real oil production is?

The fact that oil prices are skyrocketing at the same time that the oilfields and pipelines of Iraq are under constant attack by the resistance seems like more than a coincidence.

[Massacure]

14. 2 million barrels, If I recall.

Not sure how much of that they export though.

[daleo]

19. I just wonder if they can be believed

There certainly are plenty of reasons to lie on the part of the new Iraqi puppet government and the U.S. Bush administration:

1. Claim low but produce more than you claim - various corrupt governments and corporations can then pocket the difference.

2. Claim higher than you produce - basically a political motivation on the part of Allawi (to claim things are under control) and Bush (to claim rising cost of oil has nothing to do with his invasion blunder).

Since we can't even trust casualty figures, I doubt we can trust oil production figures.

[JimHarper3]

28. Remember that this is the man who ran failed oil companies

...and his father and the Saudis had to haul him out of his (dry) holes. Now, he has been given the reins of one of the largest economic entities on earth, and he is running the US into the ground just like all the other things he has run. No one can bail him out of this one, though. Don't we wish we were all oil barons and could at least profit under his protective wing. "Take the money and run" --the Enron motto.

[Gloria]

9. HIGH OIL PRICES REVEAL OPEC’S FRAGILITY/Daily Star, Lebanon 8/9

From the new World Media Watch....

4//The Daily Star, Lebanon Monday, August 09, 2004

http://www.dailystar.com.lb/article.asp?edition_id=10&categ_id=3&article_id=7072



HIGH OIL PRICES REVEAL OPEC’S FRAGILITY

Cartel's ability to stabilize the market in doubt

Traders fear that prices could still rise further, to $50 a barrel



By Amelie Herenstein, Agence France Press



PARIS: The latest rumblings in the Yukos affair this week have raised more questions about OPEC's ability to control oil prices and further strengthened a widely-held view that a $50 barrel might not be too far in the future.

(SNIP),,,much detail about the actions of Saudi Arabia....

OPEC, which has in the past been known to keep a tighter ship, has recently issued a string of contradictory statements which bring into question its ability to react to the current ructions.





Analysts said there was little sign of any real let-up for several months given the imbalance between supply and demand.



Indeed, demand looks set to grow sharply in the months ahead (an increase of 3.2 percent to 81.4 million barrels a day), nudged on by the recovery of the world economy and by rapid growth in India and China. Supply, on the other hand, already virtually at a standstill, will almost certainly not keep up.



Experts rule out another major oil crisis, even though many now accept that the $50 a barrel price is on the cards. Adjusted to take account of inflation, rates remain well below the level they reached in the 1970s.



(MORE)

[quaoar]

11. This will just be cited

As another lame excuse by Cheney about how we need to let ExxonMobil run amuk in the Arctic National Wildlife Refuge.

[dbt]

12. No problem. Just invade the oil-producing countries!

There is now precedent for doing so, thanks to bu$hco. China should easily be able to mount enough forces to invade, say, Saudi Arabia. India could certainly conscript enough draftees to march on Kuwait. Hell, they've both got nukes, so it should be a cakewalk.

Problem solved.

:evilgrin:
dbt

[jmcgowanjm]

15. The USOil Plan: Control Every Oil Field Possible and Squeeze

The only proof we have that Saudi Arabia has the outlook that
the world is counting on is what I would call ‘trust me.’ That
was probably a great concept when we had fresh oil supply,
but we’re too close to the edge.

They (the Saudis w/ Ghawar) were doing secondary and
primary at the same time, and that created the illusion that
this high productivity would go on forever, but at some
point, totally unannounced (because it’s always
come unannounced; there’s no kind of early warning system
that happens) the reservoir pressures on each of those
fields will end. And when those reservoir pressures end,
it’s unfortunately very similar to the human body as you
finally start really going into very old age. When you slow
down, the concept of ‘well, I’ll get better next week’ doesn’t
ever happen. You just continue to slow
down.

It turns out that Saudi Arabia is listed as the 4th largest holder
of proved-gas reserves in the world. About 4 years ago there
was all this big excitement about the gas initiative - $25 to $
30 billion dollars and the first time in 30 years major
oil companies are going to come back into Saudi Arabia,
and then the thing just kind of fell apart. It was kind of
falling apart a year ago in February, when I was there, and once
I started reading the SPE papers about gas, I said, “Well, I
know why this is falling apart. Their reserves are
awful.”

http://www.globalpublicmedia.com/TRANSCRIPTS/index.php?name=MATT.SIMMONS&origin=/&transcript=2004/07/Simmons.2004-07-09

$50/bbl oil by September.

[jmcgowanjm]

16. USOilPlan:Control Every Oil Field Possible and Squeeze

“Your best people at Aramco thought that Ghawar had 61-billion barrels and it has now produced 55-billion barrels, but the Saudis claim that Ghawar has another 125-billion barrels that it can recover; 126 plus 60 is 180, could you have missed Ghawar by 3-fold?” And it's the first time I’ve ever seen this gentleman not in a jovial mood. He said, “Those are real numbers, you know. We couldn’t have missed by over 20 percent - that's impossible.”

http://www.globalpublicmedia.com/TRANSCRIPTS/index.php?name=MATT.SIMMONS&origin=/&transcript=2004/07/Simmons.2004-07-09

What OPEC seemed to be saying, without coming out
and stating it, was this: Saudi Arabia, the world's last
"swing" producer, is pumping at 100 percent full bore.
Meaning, they have no spare capacity. Meaning, the world has
no spare capacity (since they were the last ones with
spare capacity). Why does such a dry fact have such
ominous overtones? Because it implies that nobody has
any spare oil production capacity, meaning the world has
arrived at the fateful collective production peak. We will
never again in world history produce as much oil as we can
now.
      Well, you could also translate that to mean:
industrial economies will no longer
grow.
      Since our economy at any given moment consists of
sixty million people driving to Walmart to buy stuff made
by people 12,000 miles away, on credit (that is, the
expectation that they will have money in the future) the
markets have reason to worry.

http://www.kunstler.com/mags_diary11.html

$50/bbl oil by Labor Day

[Barkley]

21. Great Analysis!

Thanks for sharing your ideas.

[jmcgowanjm]

25. You're welcome, Barkley.

Thanx for the feedback.

[Nimrod]

17. Or even better...

...if you're an oil baron.

[lil-petunia]

18. weak dollar, weaker economic news, + humvies

add up to disaster.

50 per barrel is likely by the end of the summer. All it takes is more strife in Nigeria, Yukos nationalization, and an uprising in the House of Saud - and we won't even wince at 65 a barrel.

'Cause, Nigeria is collapsing. Yukos WILL be nationalized within a month, and Saud politics are dirtier than Chicago's. Well, almost.

[Barkley]

22. What about the Venuzuela Recall Election?

What impact if any do you think that might have oil prices.

[lil-petunia]

23. silly lil

I missed that. Of COURSE that has a huge potential impact.

Since Senior Bush was going to be sooooo close to central & south america, you'd think at least there we'd have some support. Unfortunately for owners of huge SUVs, the pols in those countries are smarter than that, and have identified shrub for what he really is. Pathetic.

Plus, his efforts to de-stabilize that country even more - just how mindless can one man's policies be?

If we lose Ven-oil, 65 won't be a spot price, it will be the norm.

[Massacure]

26. Yukos nationalization just means that the government owns it and not

the private sector. They will still produce oil, right?

[Barkley]

24. Are the Iraqis still paying 5 cents a gallon?

Iraqis "pay just five cents for a gallon - thanks to hundreds of millions of dollars in U.S. taxpayer subsidies. Since Iraq has little capacity to refine its own gasoline, the U.S. government pays about $1.50 a gallon to purchase fuel in neighboring countries and deliver it to Iraqi filling stations. A three-month supply costs American taxpayers more than $500 million, not including the cost of military escorts.”

- AP News

http://www.military.com/NewsContent/0,13319,FL_gas_0605...

[Halliburton]

27. You can thank Mr. Allawi...

That puppet has no control over his country.