RE: Energy article from BBC news

"Glenn Morton" wrote:

[snip]

I think I mentioned earlier that we only have according to some
accounts, 600,000 bbl/d spare capacity in the world on a production rate
of 82.5 million bbl/d. That is, only .6 excess capacity on 82.5.
Demand for oil is expected to rise 1.8 million bbl/d next year. The
crisis I have been predicting for 5 years is almost here. Just another
couple of years and demand will far outstrip supply. God help our
children and grandchildren.

AK: What I found interesting recently was the continuous buying of oil
by the US to fill the Strategic Petroleum Reserves (SPR) even when the
prices were above $30 a barrel. This caused great consternation among
many of the economists and politicians, who thought we should stop
buying oil for the SPR or even
open up the SPR to drain the oil from it, rather than import the oil.
But the administration emphatically shot them down. It says to me that
the Administration thinks that oil prices will not drop below the $30
per barrel and that we need a full SPR because of questionable supplies
in the future.

 I have also read that China is now buying up any extra oil as the
startup for their own SPR. You would think that somebody like Japan
might also see the handwriting on the wall and that they might start
using all the US dollars they have in their treasury to buy some extra
oil for themselves as well. The point will reached in the near future
when enough nations will recognize that oil is becoming "scarce" and
anything that the oil exporting nations want to sell will be immediately
scarfed up.

I think that the article in the Oil and Gas Journal that you referred to
in your post was written by a Merrill Lynch analyst indicating that more
and more of the scientists and investment people are recognizing the
problem, even if many economists and politicians have not gotten on
board. The following article just appeared on the MSN Money site as
well, summarizing Matthew Simmons' views. I think it agrees closely
with what you have written previously about Saudi Arabia. I think it is
pretty good summary of where we are.

[Here is the first part; I guess the entire article is too long since my
email rejects it.]

http://beta.moneycentral.msn.com/content/P87339.asp

Is Saudi Arabia running out of oil?

 The Saudis claim to have plenty of reserves, but a top energy expert
disputes
 that. Without any independent data, the world is dangerously in the
dark, he
 says.

 By Jon D. Markman

 When oil prices have doubled to $80 and a second great depression
threatens
 global political stability, the president of the United States will
impanel a
 Sept. 11-style commission to explain the intelligence and policy
failures that
 led to the crisis. The verdict will be familiar: The stunning blow to
the world
 economy brought about by the sudden, unexpected depletion of fossil
fuel
 should've been anticipated and prevented.

 When that day comes -- in five years or perhaps 20, who knows -- many
of the key
 exhibits will have been penned by Matthew Simmons, a Houston energy
analyst and
 banker at Simmons & Co. International.

 Simmons is now shouting from the rooftops -- writing think-tank white
papers,
 giving speeches and finishing a book set for publication next year --
that the
 world is fast running out of affordable oil and gas, and that no amount
of
 Middle Eastern pumping can bail us out.

 While much of the so-called "peak oil" story is well known, what's news
is
 Simmons' startling claim, based on personal analysis, that Saudi
Arabia's
 pumping capacity is in decline.

 Aramco, the company in charge of Saudi oil operations, disputes
Simmons'
 assertion and has debated him in public policy forums. But Simmons
isn't easily
 dismissed, as he's no anti-establishment crank. In addition to his role
as chief
 executive of a major energy-focused investment bank, which counts
Halliburton
 (HAL, news, msgs) and the World Bank among its clients, he's a member
of the
 Council on Foreign Relations and was an advisor to President Bush's
election
 campaign and Vice President Dick Cheney's infamous energy task force.

 A pervasive, regressive tax

 Simmons' point of view is especially relevant today because the price
of oil
 appears persistently stuck at $35-plus despite Saudi officials' vows to
help
 push it down by increasing supply. Higher energy prices act like a
pervasive,
 regressive tax, robbing consumers of money that would otherwise go to
buy
 discretionary goods such as cars, clothes and computers. The role of
higher
 energy prices so far seems lost as a culprit in the failure of the
stock market
 to advance this year, and yet it could be considered a root cause.

 In a nutshell, peak-oil advocates note that U.S. oil production -- once
the
 highest in the world -- topped out in 1970, while natural gas
production topped
 in 1973. Both are now in decline. With world consumption of oil at
about 1
 billion barrels every 12 days, oil companies have pressed hard to find
oil and
 gas in other parts of the globe. Indonesia's fields are old and
declining, as
 are Russia's and Canada's. Simmons and others say that most of the
world's
 easily obtained large oil reserves have already been located in remote
areas
 such as Arctic Alaska, the deep-water Gulf of Mexico, deep-water West
Africa and
 the North Sea, and that new reserves being brought on line offer only
marginal
 amounts.

 As an example, ExxonMobil (XOM, news, msgs), ChevronTexaco (CVX, news,
msgs) and
 Petronas of Malaysia have teamed with the World Bank to develop the
Doba oil
 fields in the landlocked northern African country of Chad at a cost of
$1.5
 billion, and to build a shipping facility on the coast of neighboring
Cameroon
 at a cost of $2.2 billion. Yet Chad has only an estimated 900 million
barrels of
 reserves, and the field will pump just 50,000 barrels a day, an amount
that
 would boost the local economy tremendously but barely make a dent in
world
 production.

 Technology will help make many old fields more productive, but the
amounts again
 are relatively tiny. New field production worldwide is moreover limited
by
 safety concerns. U.S. environmentalists have blocked the exploitation
of the
 Arctic National Wildlife Refuge, a 19-million-acre section of northeast
Alaska
 sometimes described as America's Serengeti, and shut down exploration
off the
 Pacific, Atlantic and Florida Gulf coasts. Supporters, including
Simmons, argue
 that modern drilling techniques will minimize the environmental impact
on the
 Arctic's coastal plain, but even if it's exploited, he notes that it
would
 generate only 300,000 to 1.5 million barrels of oil a day and natural
gas for 10
 to 20 years before depleting.
Received on Thu Jul 29 15:21:30 2004