Oil Exporters Are Unable To Keep Up With Demand

[robertpaulsen]

Oil Exporters Are Unable
To Keep Up With Demand
Domestic Needs,
Sluggish Investment
Crimp Shipments
By NEIL KING JR. and SPENCER SWARTZ
May 29, 2008; Page A8

The world's top oil producers are proving unable to put more barrels on thirsty world markets despite sky-high prices, a shift that defies traditional market logic and looks set to continue.

Fresh data from the U.S. Department of Energy show the amount of petroleum products shipped by the world's top oil exporters fell 2.5% last year, despite a 57% increase in prices, a trend that appears to be holding true this year as well.

snip

For all the attention paid to China's increasing energy thirst, rising energy demand in the Middle East may pose the greater challenge. Last year, the region's six largest petroleum exporters -- Saudi Arabia, United Arab Emirates, Iran, Kuwait, Iraq and Qatar -- curbed their output by 544,000 barrels a day. At the same time, their domestic demand increased by 318,000 barrels a day, leading to a loss in net exports of 862,000 barrels a day, according to the U.S. Energy Information Administration.

Demand in the Middle East is a major factor right now, said Adam Robinson, an oil analyst at Lehman Brothers in New York. Mr. Robinson predicts the region will constitute more than 40% of increased demand next year.

http://online.wsj.com/article/SB121200725158327151.html?mod=hps_us_whats_news

[Mountainman]

1. Sure, it's all sitting in tankers off shore waiting for speculators to give the word to ship.

[Speck Tater]

4. All that oil sitting offshore...

is heavy sour crude, not light sweet crude. (And it's offshore of Iran, not offshore of the U.S) American refineries cannot handle heavy sour crude. There's too much sulfur in it, and it produces too little in the way of condensates (diesel and heating oil). U.S. refineries are built to handle only light sweet crude, which is in very short supply. Nobody wants heavy sour because it's too hard to refine. That's why the Saudis are pouring billions into a new refinery to handle heavy sour crude.

[Mountainman]

5. There was a report that tankers were sitting off shore of Houston.

UPDATE 2-Ships moving again on Houston Channel -Coast Guard
Tue Apr 22, 2008 5:32pm BST Email | Print | Share| Single Page| Recommend (0) <-> Text <+>
Market News
ReneSola files to sell American depositary shares
Foreigners in Kenya Safaricom IPO get 2 bln shares
Russia Onexim wants to buy 6.54 pct in Polyus Gold
More Business & Investing News... (Updates with ships moving)

HOUSTON, April 22 (Reuters) - Ships resumed moving through the Houston Ship Channel on Tuesday morning, after the waterway was closed for 4-1/2 hours by dense fog, the U.S. Coast Guard said.

Ship pilots began boarding vessels at about 10:30 a.m. (1530 GMT), the Coast Guard said.

Pilots had halted ship traffic at about 6 a.m. when visibility fell to unsafe levels along the 53-mile (85-kilometer) waterway to the busiest U.S. petrochemical port.

A total of eight ships were waiting to enter the Houston channel on Tuesday morning due to the fog delay, according to the Coast Guard.

The Houston Ship Channel serves eight refineries in Houston and Texas City, Texas, which account for 13.5 percent of U.S. refining capacity. (Reporting by Erwin Seba; Editing by Walter Bagley)

[Speck Tater]

8. "Fog delay?" That's hardly sitting offshore not being sold. NT

[SlicerDicer-]

16. Yep and the US Coast Guard

responded to that saying there was no fog.

http://in.reuters.com/article/oilRpt/idINN2929207020080529

Enjoy :/ Lies abound thats for sure..

http://ap.google.com/article/ALeqM5i5TtajgUpSm7KY5jf-lCJGHBB-tAD90VE5980

[Delphinus]

23. Why don't our oil companies

pour money into refineries that will handle heavy sour crude?

[NickB79]

17. How does oil in tankers cause global output to fall 2.5% in one year?

Or do you believe there wasn't a decline, and it's all stored in tankers?

Because 2.5% of world oil production for one year is 775 MILLION barrels.

A supertanker can hold 2 million barrels of oil, per Wikipedia.

Are there 380+ extra supertankers sitting offshore right now around the world with their holds full of oil?

[DJ13]

2. What a surprise

Just a day after the price fell by over $4 due to an announced government investigation into manipulations by speculators, now theres a "just by coincidence" shortage?

[robertpaulsen]

6. Actually, this is an example of MSM arriving late to the truth.

Jerome a Paris has been doing a good job following the oil situation at Daily Kos:

who still thinks oil prices are driven by speculation?
http://www.dailykos.com/storyonly/2008/5/29/162351/081/780/525027

[amandabeech]

12. Jerome a Paris also posts at the oil drum website.

I highly recommend it for anyone interested in energy issues.

[Speck Tater]

3. "Traditional market logic" is the problem.

"Traditional Market Logic" means simply that demand creates supply. If the demand for widgets goes up, more widget factories are built because companies realize there is lots of profit to be made in widgets.

In the past, that logic has worked with oil because there was spare capacity, and any incr4ease in demand could be met by an increase in production. That is no longer the case. Supply is finite. Traditional market logic assumes, without question, that potential supply is infinite. There is nothing in economics that addresses the issue of real, absolute, physical limits on levels of production. Peak oil simply means that traditional economics is out the window. The reason so many economists are denying peak oil is that they don't yet realize that their infinite growth model doesn't work any more.

The world is changing. Cheap oil is gone. Forever. The brief taste of Camelot that was petro-civilization is drawing to a close. Time to apprentice ourselves to the Amish.

[kristopher]

7. That isn't true

You wrote: "There is nothing in economics that addresses the issue of real, absolute, physical limits on levels of production. Peak oil simply means that traditional economics is out the window. The reason so many economists are denying peak oil is that they don't yet realize that their infinite growth model doesn't work any more."

Not sure where you got your knowledge of economics but you couldn't be more wrong in this assertion. Natural resource economics deals with extraction of natural resources, both finite and renewable; animal, mineral and vegetable.

With petroleum we are dealing with a finite resource that has inflexible demand and supply curves - in other words, both supply and demand require large investments to effect change. Bringing more capacity online requires lots of corporate cash and lead time, reducing consumption requires lots family cash and dealing with premature loss of value in existing vehicles.

As to producers not being willing to make the investments to up production, that is explainable by a number of things besides depletion of the resource: Current and near term (5 years ahead) capacity actually is matched accurately to demand and they don't want to invest more because it will result in overcapacity and lower prices; producer nations are pissed at the US for our imperial aggressiveness; carbon strategies mandated under the Kyoto Protocol are starting to come into force in 2008 and will be phasing in over the next 4 years so bringing more capacity online might not be a good business decision because it will result in overcapacity and lower prices; they see electric drive vehicles powered by new generation lithium ion batteries as a viable alternative for personal transportation and increasing production isn't a good business decision because it will result in overcapacity and lower prices.

All of these and more are supported by a great deal of evidence that is widely known. On the other hand, peak oil as you are presenting it is a bunch of reactionary bullshit with absolutely no valid evidence to support the assertion that present price increases are dictated by geologic constraints on production. And that, my friend, is a much more likely reason that "so many economists are denying" it.

[Speck Tater]

9. Good luck with that. Time will tell. :) nt

[GliderGuider]

10. "capacity actually is matched accurately to demand"

Are you saying that if enough additional oil was produced to drive the price down to, say, $80/bbl that there would be no demand for that extra production? Because that's what you appear to be saying. If you mean "capacity actually is matched accurately to demand at the current price" that's nothing but a question-begging tautology.

[kristopher]

11. You've got it bass ackwards

There is no shortage of fuel in the gas tanks of automobiles.
There is no shortage of fuel in the pipeline at the refineries.
There is no shortage of fuel in the tankers or transportation pipelines.
There is no shortage of fuel at point of production.

If supply were not matched to demand, the above would not be true. Crude is being pumped, refined and consumed without significant excess that has no place to go.

The price reflects that reality.

[Dead_Parrot]

13. Unfortunatley, you are completely wrong

As of August last year, 26 countries had rationing and/or shortages. A lot of others are raiding thier piggy-banks to try and get through, although how long that will last is an interesting question. So yes, there's a huge a problem: Just because MSN have never even heard of Malawi doesn't mean the people there don't suffer.

Unless, of course, you hold the view that the US is the country that really matters and everybody else can fuck off, in which there's no problem at all.

[kristopher]

14. I have it right.

That some aren't able to afford oil doesn't mean that supply isn't efficiently aligned with demand; that's like saying since the right side of the economic bell curve can easily afford to pay more, the price is too low. Neither one addresses the issue of economic efficiency in the production and distribution of petroleum.

What you are talking about is a values discussion; who should benefit from the surplus value made available by achieving efficiency. I tend to agree with what I think is your point. Energy related natural resources do belong to everyone. The trouble is how do we distribute those benefits most 'fairly'? I don't think we are currently doing it 'fairly' and don't expect the current energy infrastructure to be able to ever provide such 'fairness'.

However, I do think that if battery technology lives up to the promise it is showing us, that it might serve to revolutionize a lot more than the transportation sector in the US. There are significant global implications. Such high density storage is what makes wind and solar viable for everyone, not just here in the US. This has long been known; I mean, that is what the hoopla about H and fuel cells has been about. For some reason, the fact that we are finding the solution in batteries instead of H seems to cause some people disorientation.

[Dead_Parrot]

15. Ah, right.

So production is going down, prices are going up, people are being forced to go without, but it's definatley not peak oil. Just something that happens to look exactly like it, happening at exactly the right time.

I can't argue with that.

[kristopher]

18. right.

Something that looks like it. You need to decide which argument you want to use. You posit one thing, it is answered, instead of acknowledgment you then slither on to another tack, when it is answered you again slide back to the first as if it had never been uttered before. Just like any other fundie arguing from faith instead of facts...

There is no shortage of fuel in the gas tanks of automobiles.
There is no shortage of fuel in the pipeline at the refineries.
There is no shortage of fuel in the tankers or transportation pipelines.
There is no shortage of fuel at point of production.

If supply were not matched to demand, the above would not be true. Crude is being pumped, refined and consumed without significant excess that has no place to go.

The price reflects that reality.

And -

That some aren't able to afford oil doesn't mean that supply isn't efficiently aligned with demand; that's like saying since the right side of the economic bell curve can easily afford to pay more, the price is too low. Neither one addresses the issue of economic efficiency in the production and distribution of petroleum.

What you are talking about is a values discussion; who should benefit from the surplus value made available by achieving efficiency. I tend to agree with what I think is your point. Energy related natural resources do belong to everyone. The trouble is how do we distribute those benefits most 'fairly'? I don't think we are currently doing it 'fairly' and don't expect the current energy infrastructure to be able to ever provide such 'fairness'.

However, I do think that if battery technology lives up to the promise it is showing us, that it might serve to revolutionize a lot more than the transportation sector in the US. There are significant global implications. Such high density storage is what makes wind and solar viable for everyone, not just here in the US. This has long been known; I mean, that is what the hoopla about H and fuel cells has been about. For some reason, the fact that we are finding the solution in batteries instead of H seems to cause some people disorientation.

[Dead_Parrot]

19. Err, no. I haven't changed tack at all.

I was attempting to correct your endless "There is no shortage of fuel ..." by pointing out that yes, actually, there are a few hundred million people who are suffering from a shortage of fuel. But since on the other thread kicking around you seem to think peak oil means an "imminent termination of supply", I really don't see any point in wasting more time on this.

[kristopher]

20. Peak oil

Peak oil seems to be defined by convenience. When someone posts another "look who's talking about peak oil" post, the inevitable snowball of peaker posts starts with a guaranteed "I told you so" and runs through "the bastards will see soon" to the myriad final visions of the apocalypse that is ready to begin.

However, when confronted with reality the standard reply is "you don't know what peak oil means"; even though I'm simply holding up a mirror for you.

[Terry in Austin]

21. What peak oil means

Okay, one more time:

Peak oil means that oil production has stopped increasing, because there isn't enough of it left.

It will never again increase.

Oil production is in permanent decline.

Peaked.

Jumped the shark.

Going, going, gone.

Any questions?

[kristopher]

25. Yes

Did you take any science courses in high school?

If so, you probably learned that correlation does not equal causation. You posit that current oil production trends CAN ONLY be explained by geologic constraints that physically forbid raising production.

The known evidence says that is false. There are a variety of explanations available, all of them supported by much more evidence than the theories spouted by peak oil dim-bulbs.

Any questions?

[Speck Tater]

22. Peak oil simply means this...

In every year since Titusville, PA started pumping, the amount of oil pumped out of the ground kept increasing, year after year.

In May 2005 oil production reached a bit over 85 million barrels per day.

That's when it stopped growing. The amount of oil pumped out of the ground has remained about the same for the last 3 years.

It has stopped growing. We have reached the point where are pumping as fast as we possibly can. We have reached the peak, the pinnacle, the maximum volume of production. That is peak oil. Nothing more, nothing less.

Meanwhile, demand keeps right on growing. The only other thing that keeps growing is the shortfall.

The facts are a matter of public record. You make feel free to define peak oil "by convenience", but the rest of the world defines it one, and only one way.

To be brutally blunt about it, peak oil deniers fall into the same class as creationists, global warming deniers, and flat-earthers. They have their deeply held beliefs, which they are entitled to, but they just aren't paying attention to reality.

--quote--
PARIS (AP) — A leading global energy monitor fears there may not be enough oil to slake the world's thirst — and is preparing a landmark forecast that could reverberate through the global economy even as major companies announce fuel-related cutbacks.

more at: http://ap.google.com/article/ALeqM5gSwXIiXcU8GJ5OYYVjZ7Zd96b7wQD90QSMJ00

Also,

Mexican oil production falls 9 percent in first four months of year
Russia worried as oil production slides
Unable to meet it's own demand, Indonesia mulls leaving OPEC
Supply-demand imbalance boosts oil prices
Oil firms are weeks away from bankruptcy (on supply shortages in India)
Oil is expensive because oil is scarce (Telegraph UK)
Fuel shortage forces UN to halt food handouts in Gaza
In oil-rich Alaska, an energy crunch (Shortages in Alaska)

[kristopher]

24. I'm very familiar as to what "peak oil" means and how it is being used

The proof of my assertions about apocalyptic prognostications being part and parcel of "peak oil" is recorded in hundreds of threads at DU alone.

The idea that you are able to pinpoint peak oil with the techniques being used is absurd. You are deriving causation from your preconceptions, not the available data. I'd listed aa number of alternate causes for production trends that have absolutely nothing to do with the inability to pump more; instead, all of them center around the unwillingness to pump more based on economic and ecological considerations. There is a very large body of evidence supporting what I believe to be true, and there is nothing except invalid extrapolations from production trends to support what you believe.

To be brutally honest about it, the peak oil doomers fall into the same class as creationists, global warming deniers, and flat-earthers. They have their deeply held beliefs, which they are entitled to, but they just aren't paying attention to reality.

[depakid]

26. More cornucopain projection and neoclassical irrationality

My suggestion:

Read the literature of the collapse of complex societies.

Joseph Tainter and Jared Diamond would be two good places to start, but there are also other books by well respected authors and tons of articles in scholarly journals that a critical thinker might find illuminating.

[kristopher]

28. Again you say I'm wrong with no basis for your claim.

I have read the literature, and I prefer Harris.

It would be much more productive if you made an actual argument once in a while.

[depakid]

30. As others have noted, there's not much sense in that anymore

since you deny out of hand or via sophistry every piece of the overwhelming evidence that's been provided to you....

[kristopher]

31. No evidence has been provided except current production trends.

That post is just more of your bullshit.

[depakid]

32. Again, no sense in engaging counterfactuals

except to note that tons of evidence and analysis can be found here and elsewhere on any given day.

Indeed, we just attended a workshop at VBC 8 this week with John Kaufmann, a senior analyst from the Oregon Department of Energy, who provided a nice summary of much of the "bullshit" I've adduced on various threads with you.

Peak Oil

John Kaufmann from the Oregon Department of Energy will be speaking about the latest data regarding the peaking of world oil supplies. John Kaufmann is Senior Policy Analyst in the Conservation Division of Oregon Department of Energy, and served as staff for the City of Portland’s Peak Oil Taskforce. Mr. Kaufman took the lead in getting Oregon to adopt the most energy efficient building codes in the U.S. and managed Oregon’s Business and Residential Tax Credit Programs, and Building Technologies program for 10 years.

http://cityrepair.org/wiki.php/projects/vbc8/workshops

Here's an earlier version of his slideshow in PDF format:

http://www.energy.state.or.us/jk/Peak_Oil_Overview.pdf

as well as a report from another senior policy analyst at the Oregon Department of Energy, from 2005:

http://www.portlandpeakoil.org/resources/Stephensslideshow.ppt

Enjoy!

[kristopher]

33. Ok, now what?

I've downloaded the 2005 presentation and flipped through it. I see nothing new, and certainly nothing that would validate the claims being made here by the "Apocalypse Now" crowd. It is a rehash of the importance of oil to our culture and the same reliance on unexplained production trends. I say unexplained because offering only 'peak oil' as an explanation of the trends is as clear a case of begging the question as I've ever seen.

It is, IMO, more of the same Bush-League science that populates the internet circle jerk supporting the true believers in your cult.

If there is some specific point you think is persuasive, please share it.

It is interesting how much credence you place on a presentation sandwiched between
Making a simple Bamboo Bow
Ever since you were a kid you knew the value of it. Making something AWESOME from nothing! Also, you want to be like Lagolas in Lord of the Rings. Make simple yet elegant 40 lb bow out of a plank of bamboo. Learn the basic concepts of being a bowyer while starting out simply. Leave with the finished product.

and

Sheet Mulching

Sheet Mulching is a technique for using large pieces of waste materials (such as cardboard, newspaper, clothing, burlap, etc) to shade out the grass and prepare the ground for planting an intentional garden. Please join us for the second project in our series of workshops as we create a food forest corridor near Mount Tabor Park.

Now don't get me wrong, I grow bamboo for a hobby and I'm sure I'd have been fascinated by both presentations, but your source isn't exactly coming from the center of of the scientific community. Or even in the neighborhood of the center...

[depakid]

36. The Oregon Department of Energy engages people from all persuasions

at gatherings like this (that attract people from all over North America- and evem internationally). Seems to me, it's something to be applauded- not derided.

That's the point of outreach, don't you think?

Last week, Kaufmann addressed the Leaugue of Women Voters- another cultish set of folks interested in state and local issues.

Bottom line: some will listen and accept the science- and some will act on what they hear- and others won't.

That's always the way it's been.

[kristopher]

37. I admit that was a cheap shot.

but the material is the same as is posted on the circle jerk websites, and that's a fact. You claim to have some expertise in analysis, so I can't fathom why you'd endorse such rubbish. It is, literally, a perfect example of begging the question.

I mean, there is no discussion whatsoever of other variables that could be playing a part in production trends. Since the exercise is one trying to isolate a trend among these many variables, doesn't it strike you as odd (to the point of fatality for the analysis) that they are NEVER addressed? If it doesn't, you don't have the background you imply.

[Speck Tater]

27. I smile condescendingly in your general direction. NT

[kristopher]

29. Vacuous smiles fit with what I've read from you.

[Terry in Austin]

34. "a very large body of evidence..."

...supporting what I believe to be true."

And yet you don't actually point us to any sources for this evidence. All we have is assertions of your belief. That's not good enough.

Show us the facts, pal. Let's see the support. Make an actual case. Frankly, the fact that you have to do so much dissing makes it sound like you're a little nervous about it.

85 million barrels per day -- it's going to have to come from somewhere. So tell us where. Tell us about projects that are in development, the estimated time for their coming on line, the projected production rates. Tell us the projections for existing fields. And tell us how those are all going to add up to be enough to meet demand. You're interested in this stuff, right? You're well-read enough, right? So show us what you've got.

How many barrels will come from what sources, and when? That's all you need to show. Let's have the reality you speak of. If you say there's going to be enough oil, then that's how you make the case. You make the claim, you deliver the evidence.

Until then, well, it's just a matter of a guy with a belief.

[kristopher]

35. That isn't what's required.

The fact is that virtually every oil industry, financial industry and mainstream energy analyst say exactly the same thing: Oil production is constrained not by lack of raw resource, but by lack of investment in discovery and extraction.

Unless you have evidence that contradicts this (and meaningless extrapolation of production trends isn't that evidence) then the default interpretation is the one offered by the recognized experts. That's the way it works - you are making an extraordinary claim, and extraordinary claims require extraordinary evidence.

I'm curious, do you really not understand WHY production trends aren't the evidence you need? Let me offer a comment. Although identifying peak oil will be by production numbers, since there are so many extraneous variables, those numbers will only be valid when looking at past long term production statistics. In the current world circumstances, that point may not be identified for centuries because IF we are to handle global warming, we MUST leave that oil in the ground. Period. Since the only way to find the bottom of nature's barrel is to pump the oil out, hopefully that means this will be a question that is never answered.

[GliderGuider]

38. Return on investment for oil is creeping up

Using reported investment numbers from the IEA along with production and average spot price numbers from the BP Statistical Review of World Energy 2007 I calculated that in the years 2001 to 2003 investments in oil production averaged just over 30% of the global gross oil revenue. During 2005 and 2006, this ratio dropped to 19% due entirely to rising prices. This amounts to an increase in gross ROI from 3:1 to over 5:1 -- an increase of 67% in ROI over 5 years.

The investment climate in the oil sector would seem to be very attractive - relatively modest investments should be able to produce a handsome payback. One has to ask what would have changed the incentive to invest so dramatically in such a short time. Geopolitics of course makes a difference (that period encompasses the Iraq war), and rapidly rising costs mean you get less physical return for each dollar invested. I wonder though whether there has really been such a revolutionary perception shift on the part of producers or investors as you imply, regarding oil's ultimately finite nature or the threat of climate change. Those factors were pretty well understood by sophisticated producers and investors well before 2001.

[kristopher]

39. Global warming nt