^As our #4 oil supplier, we need their oil as long as we don't make other arrangements-- like rebuilding our rail system, expanding mass transit, and halting automobile-centric development patterns. 

 

I'm no fan of Chavez-- just go to humanrightswatch.org and look him up, but the anti-American sentiment that took hold in Venezuela and has since been spreading throughout Central and South America has its roots in how the US government has treated the region over the past several decades.  Our CIA carried out assassinations of democratically elected leaders in Central and South America (Torrijos in Panama and Jaime Roldos of Ecuador are two that come to mind), overthrown other democratically elected governments... such as Arbenz in Guatemala in 1954 (because he dared to try to get a fair deal from American banana growers who were taking advantage of his country and its people).  Our CIA overthrew the democratically elected Salvador Allende in Chile and installed the dictator Pinochet during the Nixon Admin (Henry Kissinger said about this that these issues were "too important for the Chilean people to decide for themselves").  In other words, what we're seeing via Chavez is blowback whether we like it or not.  American power is on the wane worldwide and we've only our own government to blame for it-- democrats and republicans alike as this stuff goes back at least 55 years. 

 

Back to the topic at hand:  don't get used to "low" oil prices.  This recent drop is temporary. Global consumption has not dropped by much and overall depletion in global oil production can set in at any time now, but no one knows exactly when.  Some apparently argued at the recent ASPO-USA meeting in Sacramento that depletion could begin in 2009.  I'm not placing any bets on who's right or wrong, just saying that we shouldn't get complacent. 

 

 

 

We may see oil supplies drop and prices rise very soon and not because of depleting reserves. Rather we may see this happen because access to credit has dried up to permit investing in and exploiting costly new production projects, and because the low oil price doesn't support such investments even if credit was flowing.

 

It's going to take a bit of time for the lack of investment to show up in oil inventories. But one of the first places it will show up is with the Canadian oil sands which require high oil prices and new investments to stay productive. First you will hear about layoffs there and then reduced production. Then increased slightly increased prices. Then increased imports from other parts of the world. Then further decreases in net exports from the Middle East as their economies use more of their own oil. Then reduced oil inventories in the U.S. Then watch prices skyrocket.

 

How long could all this take? I'm not smart enough to make that kind of prediction, but it could be a year. Could be six months. Could be two years.

 

But read the news and look for those early signs. You know I will, and I'll post them here!

http://www.denverpost.com/headlines/ci_10738789

 

guest commentary

Bewildered by peak oil economics

By W. Jackson Davis

Article Launched: 10/17/2008 12:30:00 AM MDT

 

 

A stunning aspect of the current economic crisis is that most economists didn't see it coming and remain bewildered by its causes. Treasury Secretary Paulson said just over a year ago that the business environment was the best of his career.

 

Paul Greenstein wrote recently that the crisis struck with little forewarning, as if unleashed by a "secret signal" sent out in 2007 that slammed the economy with soaring energy and food costs, and the free-fall of housing prices.

.....

For a major oil company to admit this is pretty darn huge......

 

http://www.easybourse.com/bourse-actualite/bp/update-oil-cos-ability-to-tap-new-sources-may-have-peaked-bp-GB0007980591-543649

 

UPDATE: Oil Cos Ability To Tap New Sources May Have Peaked-BP

Friday October 17th, 2008 / 11h06

 

 

LONDON -(Dow Jones)- Oil companies' ability to tap hydrocarbon resources may have peaked because new reserves are found in more challenging environments and the industry is losing skills and know-how as a generation of experienced workers approaches retirement, said BP PLC's (BP) head of exploration and production Andy Inglis.

 

In a speech delivered at Rice University in Texas on Wednesday and posted on BP's Web site Friday, Inglis said: "I think it's true to say that we may have reached a period of peak capability, at least in the short term."

 

He said this peaking in the capability of companies to extract oil bears a far closer relation to the facts than peak oil, the theory that the amount of oil the earth is capable of yielding has peaked.

 

Inglis said there are enough proven oil reserves for 40 years of consumption and .....

http://punditkitchen.files.wordpress.com/2008/10/political-pictures-align-baby-catchy-drill-cleaner-longer.jpg

I've seen around (but can't find a link) that Cuba just found a crap load of oil in their portion of the Gulf of Mexico. That doesn't change the meta-narrative, but it is interesting.

Here's the link (courtesy of KJP):  http://wwwguardian.co.uk/world/2008/oct/18/cuban-oil

 

The article says there "may be more than 20 bbl".  Be wary.  As I have explained before in this thread, governments and the press like to publish the most optimistic estimates when it comes to oil fields-- usually the P10 estimate-- which means that there is a 10% probability that the field contains X amount.  I would want to know what the P90 and P50 estimates are.    The real amount will be somewhere between the P50 and P90 and it will be less than 20 billion barrels, perhaps almost half that.  Also, this is deep water oil and there is a significant global shortage of drilling rigs.  The embargo and choking down of global credit will also slow things down. 

 

My guess is that we will soon abandon the embargo because we'll want to buy their oil and our government will want American oil companies to get a piece of the pie.

 

 

Yep. Principles mean nothing to the U.S. when money and oil (OK, they're the same thing) are involved.

Of course, it would be a pretty obvious, shallow, shameless act.  But, junkies don't care as long as they get their fix...

My guess is that we will soon abandon the embargo because we'll want to buy their oil and our government will want American oil companies to get a piece of the pie.

 

Maybe we could foment an internal rebellion that would overthrow the Castro-brothers regime and install a more-friendly Cuban government.

 

Oh. Wait.

I've also read intimations that the Cubans might be sticking their straw in our 'waters' as it were.

You make it sound so naughty.

Peak credit?

 

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aookyGgmOAts

 

Credit Crunch May Block 20% of Deep Oil Rigs, Slow Petrobras

 

By David Wethe

 

Oct. 28 (Bloomberg) -- As many as 20 of the 100 deepwater oil rigs on order worldwide may be delayed or canceled as loan availability erodes, possibly slowing developments including the biggest petroleum discovery in the Americas in three decades.

 

About half of the 20 rigs in question are rented for when they're completed in two to three years -- no longer enough to ensure financing for units that can cost $800 million to build, said Brian Uhlmer, an analyst at Pritchard Capital Partners in Houston. The drillers building those rigs are mostly fledgling contractors and may lack enough cash to satisfy lenders amid a global credit crunch, he said.

 

.......

http://www.rigzone.com/news/article.asp?a_id=68514

 

Oil-Price Rebound Could Be Severe     

  by  Guy Chazan

  Dow Jones Newswires

 

LONDON (WALL STREET JOURNAL via Dow Jones Newswires), October 29, 2008

 

The slump in oil prices has spread relief among consumers and fuel-reliant industries, but also is squeezing the companies who could invest in new sources of oil -- spurring concerns that prices will prompt them to shelve investments.

 

Industry executives warn that could mean the world will face a dramatic ramping up of prices as soon as the global economy, and demand, begins to rebound.

 

"Low oil prices are very dangerous for the world economy," said Mohamed Bin Dhaen Al Hamli, the United Arab Emirates' energy minister, speaking Tuesday at an oil-industry conference in London. "We need an adequate and reasonable oil price that will continue to stimulate investment." With prices now languishing, he said, "a lot of projects that are in the pipeline are going to be reassessed."

 

.......

That's a depressing article.  To think that investment in alternative fuels should be based off short term prices fluctuations....  I know there is even talk here in the U.S. for creating a floor for gas prices.  Basically, it's been high so long, they want to make the floor around $3.00-3.50.  I cannot see how the majority of U.S. citizens will be in support of that.  Although I remain indifferent.  I'd hope our leaders would not be so shortsighted.

 

So I filled up today at $2.15

 

Shocked because I have a pickup truck and the pump stopped at $29.50

 

 

 

 

This is the problem with making any kind of decisions when prices are operating in 70 dollar range. This summer oil was headed to 200 dollars and a couple weeks ago it was going to test 30 dollars. I filled up at 1.63 (thanks Giant Eagle). We need to get to some sort of price stability and fast.

http://www.theglobeandmail.com/servlet/story/RTGAM.20081103.wrecession1103/BNStory/energy/home

 

Blame high oil prices for recession, CIBC says

 

HEATHER SCOFFIELD

 

Globe and Mail Update

 

November 3, 2008 at 10:27 AM EST

 

OTTAWA — Forget blaming the global recession on dubious mortgage practices in the United States - blame high oil instead, says Jeff Rubin, chief economist at CIBC World Markets.

 

“The recent spike in oil prices doesn't seem to get any credit for what's happening to the world economy now,” he says in an analysis released Monday. “That's odd, because it should.”

 

Blaming subprime mortgages for the crisis doesn't make sense, he argues, because those loans don't have the scale to topple Japan, Europe and much of the advanced global economy.

 

“How do falling property values in Cleveland create a recession in Japan, and the Euroland economies, before they even create a recession in the U.S. economy?” Mr. Rubin asks. “And if Cleveland and its ilk are really the epicenter of all the world economies' ills, why is the rest of the world buying greenbacks?”

 

.....

My father was management at US Steel Ohio Works in Youngstown.  He said that the plant was profitable up until the energy price hikes in the 1970s.  The company had not been investing in the plant to make it energy efficient.  Investment "just was not going to happen" with that old factory of open hearth furnaces.

 

In March 1980, USS closed the Ohio Works.  The ripple effect of this plant closing and other plant closings curtailed consumer spending and started a long recession.  The "Mahoning Valley recession" continued for a long time.

 

In any case, I am sure that high energy prices destroyed the profitiability of a lot of plants.  Steel was cheaper when produced by newer plants in Japan, Taiwan, and elsewhere.  The Japanese steel industry had wisely decided to invest in the energy-efficient continuous cast method of producing steel.  The Japanese had better management overall.

Boreal, check out this forum:

 

http://www.urbanohio.com/forum2/index.php/topic,17136.0.html

http://www.nytimes.com/2008/11/09/opinion/09gore.html

 

THE NEW YORK TIMES

Op-Ed Contributor

The Climate for Change

By AL GORE

Published: November 9, 2008

 

The inspiring and transformative choice by the American people to

elect Barack Obama as our 44th president lays the foundation for

another fateful choice that he -- and we -- must make this January to

begin an emergency rescue of human civilization from the imminent and

rapidly growing threat posed by the climate crisis.

 

The electrifying redemption of America's revolutionary declaration

that all human beings are born equal sets the stage for the renewal of

United States leadership in a world that desperately needs to protect

its primary endowment: the integrity and livability of the planet.

I noticed something today

 

Gas was $1.89

Diesel was $3.49

 

 

Not a signle mention of arguably the largest cause and contributor to the situation that we are in both environmentally and economically:  suburban sprawl.  I suppose plowing corn fields for cul de sacs, and polluting lakes and streams from the paved parking lagoons of Wal Mart is fine as long as the cars are plugged in.  These politicians are so afraid of taking the extra step of talking about changing the very basics of American life, and that is unfortunate.

I like sprawl, even with the unintended problems it has caused. :-o

I also liked partying every night, but it wasn't a healthy, productive use of my time and body. I was enjoying myself to death. Sprawl is no different.

What was the alternative? 

You mean you couldn't find where to live in Cleveland or elsewhere in the U.S. to live a low-mileage lifestyle? And you're more educated on urban lifestyles than most folks out there -- proof that people truly are sheep.

Though I want a cleaner environment and vibrant cities, I don't feel guilty for putting 15-17,000 miles a year on a car.  Still waiting for an oil free car.

Though I want a cleaner environment and vibrant cities, I don't feel guilty for putting 15-17,000 miles a year on a car. Still waiting for an oil free car.

 

that sure is some doublethink

Not really.  I'm just not of the thinking that my use of an automobile was/is selfish.  Nor do I think my move from Cleveland to Brooklyn to Lorain County was selfish either.  There seems to be some thinking in here that it was.

 

Even Mr. Peak Oil KJP drives to work because connecting once or twice is inconvenient.  We all have our thresholds.

Whether or not it's selfish is not what's relevant.  It's whether or not it's sustainable, and it's not.  I'd very much like to drive less, but there simply aren't other options for me to get to work without taking several hours more out of my day.  Eventually, I'll be forced to change my employment as much as I don't want to (I've explained before somewhere on UO that moving closer to my current office location isn't feasible as it will force me to drive a lot more outside of my commute). Unless the governor forces state offices to move to transit-accessible urban cores, I'm screwed for the long term. 

 

We'll get oil-free cars, but don't expect any combination of them to allow us to continue driving as much we do now.  We're all headed for less driving, like it or not. 

^Be careful with the phrase "oil-free cars".  Petroleum will be replaced as the primary fuel within the next 20-30 years (probably by electricity), but our cars will still require petroleum products for lubrication, brake fluid, power steering fluid, etc... 

 

But I agree with you that we're all headed for less driving simply because it will become a huge financial burden.  It will be interesting to see expansion / creation of mass transit in the US (specifically Ohio) over the next 40 years.

^don't forget tires (there's more oil in them than the fluids).  Lots of oil goes into the paint and painting process, and the plastic trim, and the upholstery, and all the plastic parts, etc. 

Even Mr. Peak Oil KJP drives to work because connecting once or twice is inconvenient. We all have our thresholds.

 

I was a transit rider to work when I had a one-seat ride before Nov. 9. I am looking for new employment now that I've lost that choice.

Falling oil prices making you complacent?  Think again...

 

Yemen 'faces crisis as oil ends'

By Martin Plaut

BBC News

 

Yemen is facing an economic and political crisis as the country's oil resources near exhaustion, a report by a London-based think-tank says.

 

The Royal Institute for International Affairs warns that instability there could expand a zone of lawlessness from northern Kenya to Saudi Arabia...

 

 

Story from BBC NEWS:

http://news.bbc.co.uk/go/pr/fr/-/2/hi/middle_east/7739402.stm

 

Published: 2008/11/20 11:36:35 GMT

Yemen hasn't been using its oil revenues to build for a post-oil future as the UAE has done, or as Kuwait is doing. When you see Saudi Arabia doing this, it's a signal that America needs to follow suit. If either country faces the future as Yemen has done, then SA and USA will be as screwed as Yemen. Oh, by the way.......

 

http://www.saudirailexpansion.com/SaudiRailExpansion/inner.aspx?parent=444&secserno=445

 

http://www.arabianbusiness.com/529144-saudi-arabia-rail-project-on-track-with-fleet-of-rollers

 

http://www.thaindian.com/newsportal/business/work-on-saudi-rail-project-to-start-by-2008-end_10031142.html

Dubai has supposedly decided to act as the go between for the Somali pirates. I guess that another way to plan for a post-oil as primary resource era.

http://www.theoildrum.com/files/credit-crunch_3858.jpg

 

http://www.theoildrum.com/node/4805

 

Impact of Credit Crisis on the Energy Industry - Where Are We Now?

Posted by Gail the Actuary on December 1, 2008 - 8:56am

 

I recently looked through news articles to see which energy sectors were being affected by the credit crisis. I was amazed at how widespread and how devastating the impact is.

 

There are really two closely related problems. One is reduced access to credit, making new borrowing difficult for nearly every business that requires debt. Prices for all commodities have been dropping as well. At least part of the reason for this price decline is the lack of availability of credit—many of the less credit-worth buyers drop out of the market. This leaves fewer buyers and almost the same number of sellers, so the price drops.

Good, balanced piece on "peak oil" from NPR this morning (Saturday):

 

http://www.npr.org/templates/story/story.php?storyId=98203926

^Just another meaningless prediction.  We've already hit the global oil peak IMO.  I can't say this for certain but I would guess that the increase in demand is beginning to outpace the increase in production... at least of conventional oil.  Things like tar sands, shale oil, ethanol, gas to liquids will probably make the global peak much flatter then the US peak in the 1970s.

 

Here's a graph that may help my point.  You can see production flattened in '06 and '07 while demand continued to rise.  I bet '08 brought the two lines closer though given the drop in demand and the continued (albeit slowing) increase in production.

 

http://perotcharts.com/images/energy/energy10.png

http://perotcharts.com/images/energy/energy10.png

True, "when" is less important than what we intend to do about it....

___________

 

 

Peak oil warning

(02:25) Report

Dec 16 - UK companies warn government against an impending oil supply crisis.

 

A recent report from the Industry Taskforce on Peak Oil and Energy Security warns that supplies of cheap, easily accessible oil will start to diminish by 2013.

 

The industry lobby group, which includes Virgin, Yahoo, Solarcentury and transport operator Stagecoach, wants the Government to dramatically increase investment in clean energy and renewables to avoid an energy crisis.

 

Michelle Carlile-Alkhouri reports.....

 

SEE NEWS VIDEO HERE:

 

http://uk.reuters.com/news/video?videoId=95566&videoChannel=78

http://www.financialsense.com/Market/allison/2008/1222.html

 

 

Today's Market Wrap Up

 

The Coming Oil Train Wreck

First stop: Mexico?

BY TONY ALLISON

 

Only a true contrarian can worry about high oil prices, shortages and global economic shockwaves when the price of oil has fallen from $147 to under $40 per barrel in less than six months and gasoline is now less than $2 a gallon! I should be singing "Happy (driving) days are here again," but I'm not. The facts speak otherwise, and the time for preparation and mitigation is growing short.

 

Aside from a few Paul Revere's such as Matt Simmons, there is precious little media alarm or urgency over an issue that is historic in nature and monumental in scope. The stark IEA (International Energy Agency) report released this fall was mostly ignored in the media, other than to highlight that 2009 will feature "demand destruction." Other headlines touted "Goodbye to the oil supercycle." The message sent to the public; lower oil prices ahead, problem solved. Unfortunately, the critical message of 9.1% global oil depletion was ignored.

 

........

That was intensely interesting. Unfortunately , I think partly because it is so scary. I apologize because what I am about to say has probably been addressed already, but, hybrid cars, and electric cars still need electricity that is generated by coal and oil. Not to mention (though I am not sure this statistic is entirely accurate) the mass production of the batteries in electric engines would need so much nickel, that the production on average of a single electric car would have a more negative impact on the environment than a standard vehicle. Can anyone confirm this?

That was intensely interesting. Unfortunately , I think partly because it is so scary. I apologize because what I am about to say has probably been addressed already, but, hybrid cars, and electric cars still need electricity that is generated by coal and oil. Not to mention (though I am not sure this statistic is entirely accurate) the mass production of the batteries in electric engines would need so much nickel, that the production on average of a single electric car would have a more negative impact on the environment than a standard vehicle. Can anyone confirm this?

 

There was a so-called "study" done a year or two ago that tried to say that hybrid cars needed more energy and resources to build than they would save, so it's ok to buy that SUV.  It was debunked.  Unfortunately, I cannot find the references...

 

What no one wants to say is that Americans have to prepare for a world of less driving.  There is really no way around it. 

 

Yeah, nobody wants to just come out and say it. But without a doubt there are people who will urge everyone to switch due to economic incentive which means someone will find a way to make a lot of profit from it, kind of like people profiting from this whole "green" revolution thing going on. (We care about the planet almost as much as making money!) Though we should be switches rails (ha pun) starting years ago, the impact of higher costs will certainly facilitate a fast change of peoples mindsets. I only hope that it will be in time. . .

Financial incentives are the only way to spurn large scale change in the United States and probably even the rest of the World.  It is my opinion that we will be ok.  The gears of change are already spinning and when the prices do increase again change should come pretty fast.

Just as the price of oil was kept high by the weak dollar and strong oil demand up until last summer, the price has crashed due to demand destruction. But I wasn't aware of this as a factor that's probably pushing oil prices down below what they might otherwise be.....

 

http://www.reuters.com/article/GCA-Oil/idUSTRE4BM1M720081223?sp=true

 

Oil looks cheap, but investors are wary

Tue Dec 23, 2008 5:00am EST

By Jane Merriman - Analysis

 

LONDON (Reuters) - A flight into cash during the credit crisis has helped drive oil and other commodity prices down so steeply that they are a potential "buy" for pension funds with a longer view.

 

But timing is everything.

 

"People are sitting on cash -- big lumps of it," said Mark Mathias, chief executive of commodity fund manager Quantum Asset Management. "Everyone is worried about when to go back in. Long-term, oil is cheap, but who knows where it goes in the short term."

 

.......

^Considering that Mexico may be done as an exporter of oil in  as little as 12 months, this may not be a bad investment move.

http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=10549895

 

Opinion

Gwynne Dyer: 'Peak oil' gloom probably just a load of horse manure

4:00AM Monday Dec 29, 2008

By Gwynne Dyer

 

Worried about "peak oil"? The International Energy Agency's annual report, The World Energy Outlook 2008, admits for the first time that "although global oil production in total is not expected to peak before 2030, production of conventional oil ... is projected to level off towards the end of the projection period".

 

When the Guardian's environmental columnist, George Monbiot, pressed IEA director Fatih Birol on that opaque phrase, the actual date turned out to be 2020.

 

.....

And if demand falls faster than supply, the price will also collapse.

 

And if the price of petroleum falls, demand for it will rise especially if the price is below alternatives. The production facilities for alternatives do not exist at the scale necessary to significantly affect oil demand and it will take a massive, time-consuming effort to ramp up production -- using oil inputs, no less. These issues are where Dyer's entire argument falls apart.

 

A high petroleum price is likely to be the primary motivator for a large-scale shift away from petroleum. That will come either from government taxes on petroleum or from petroleum supply not being able to meet demand for it.

 

 

I read Dyer's article and came away thinking the guy doesn't know his a** from a hole in the ground.