With Bush Leaving Town, Pity Poor Hugo and King Abdullah
With Bush leaving town, the air is going out of the price of oil.
When back in Texas, Bush will be hailed as the President who brought the oil patch $147 barrel oil through the willful sponsorship of policies conducive to high oil prices ranging from the mismanagement of the Strategic Petroleum Reserve, cozying up to Saudi Arabia and OPEC, encouraging the Iraqi government to rejoin OPEC. By turning a blind eye to speculation and manipulation of oil trading on the commodities markets until Congress finally interceded. By permitting OPEC to collude in threatening to veto the NOPEC bill that would have passed in Congress. By doing virtually nothing in eight years to inhibit the use of fossil fuels other than a token minimum MPG mandate for Detroit and a lame allocation over those eight years dedicating some $20 billion to develop alternative energy sources, not even a sum approaching the $29 billion made available to save Bear Stearns over one weekend. So much for the outgoing administration's convoluted priorities.
And with prices collapsing, woe unto President Hugo Chavez of Venezuela. After spending the better part of the last eight years making life miserable for those oil companies that invested in Venezuela, nationalizing oil fields and subjecting them to tax extortion and imposing confiscatory royalty increases, his factotums have begun soliciting the likes of Total, Chevron and Shell in the hope of getting them to invest in Venezuela again. Good luck! The grand alliances trumpeted with his pals in Moscow for joint ventures in oil production and tar sands development seem to have gone by the wayside as well in that Russia's economy is being equally devastated by the collapse of oil prices. Things have gotten so out of hand that Hugo is limiting his fellow citizens to buying no more than US$2500 when traveling abroad at the official exchange rate. What they do on the "parallel" market where the rate is twice as high, is another story.
And the oil companies must be having a difficult time paying their oil industry flacks. How little we have heard recently about upheavals in Nigeria, fog on the Houston Ship Channel, hurricanes off Trinidad, exploding consumption in China and India, production constraints at the sadly overworked oil fields of OPEC, declining reserves in Mexico, peak oil poppycock and on.
And then of course there is King Abdullah publicly declaring that $75 oil would be reasonable, and his ever loyal and quotable oil minister Ali Naimi doing his best to be quoted by anyone who will listen, "We are working very hard to bring the market back to balance ...We will do what it takes to bring the market back to balance" he was quoted in the FT this week. This while announcing that Saudi Arabia had unilaterally cut oil production by more than the agreed OPEC limit. Really? Think about it. Mr. Ali al-Naimi is, has been notorious in putting things in the best light, supportive of oil prices and rationalizing extortionary price levels with such self-serving proclamations ranging from "build more refineries," to its all about "the falling value of the dollar" to such vacuous mumblings as "we too are afraid of high oil prices," this when oil prices were heading toward $50/bbl, before the ascent to $147, with the Saudis willfully cutting their output all the way. Could it be, could it just be, that with virtually all land storage filled to overflow and over 80 million barrels of oil sitting in storage at sea all over the world in VLCC cargo tankers, and millions more in loaded vessels proceeding purposely at snails pace speed ahead because there is nowhere to offload at destination, that the Saudis have not purposefully cut production, but that there has been little call for offtake of their oil with fewer ships coming to Saudi Arabia to lift cargo?
Whatever the price of oil is now ($36/bbl WTI as of this writing) we must never forget where the oil industry, its friends in government, Hugo and his gang, Ali al Naimi and his cohorts at OPEC would take us again if they could. Happily, and lecturing us all along the way to $147/bbl and beyond. Let us hope that with our new President the era of fossil fuel's domination of our lives will come to an end. That our dependence on oil be such that Mr. Ali al- Naimi can cut production to his heart's content, and we wouldn't care a drop.
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First off, we need to get the heck out of OPEC. We should have NEVER allowed past presidents to put us in such a dependent position with these clowns.
Second, Obama put corporate taxes in place for ANY American oil company that deals with Chavez.
We are not "in" OPEC. The latest API nos I saw showed us importing 30% (of the 60% we import) from OPEC, so we import 18% of the crude used in the US from OPEC. Our largest non-OPEC suppliers are Canada and Mexico. Mexico is almost to the point where they will not have any capacity above their domestics needs to export, projections I have seen give them 2 more years as an exporter. In the meantime, our domestic industry is laying down an estimated 800 drilling rigs and layoffs are starting in the oil patch because at current prices, most projects are uneconomical. We did not "allow" past presidents to put us in the current situation we are in. It was caused by inaction by politicians, opposition by envioronmental groups to drilling and exploration and apathy by the american public. Now the chickens are coming home to roost. A postive step forward will be when the Obama administration begins to address the issue by improving access for exploration and embracing the Pickens plan. Another positive will be when Mr. Learsy accepts the fact that George Bush is gone and he begins to scrutinise and critique Mr. Obama's energy policies and acumen (or lack thereof). But then again this is HuffPo, I may be waiting for that a long time.
do you really htink its a good idea for the price of oil to remain below the price that makes it worthwhile to find more of it? low enough so that the financial rewards of alt fuels make them unattractive as alternatives? low enough to bankrupt enough oil dependent economies to take down the rest of the world? low enough so that petro dollars the usa economy is dependent upon for the reinvestment that supports the economy dry up? oil needs to be at about 70 dollars/barrel just maintain to the world oil economy and be in balance with the cost of alt fuels. otherwise alt fuels make no sense without high taxes to artificially make a price for oil that makes alt fuels economically attractive.
Demand for petroleum is always going to be there, no matter what the price. Interest in finding new sources of it is never going to diminish. Also, once a source is found it takes many years to develop it. Today's prices, therefore, make very little impact.
What I personally want to see is ... "think outside the box." Factory farms are surrounded by lake-sized ponds of ... ahem. One of our biggest consumers of oil and oil-products just happens to be "agriculture." So, exactly why is that huge resource of hydrocarbons just sitting out there, stinking to high heaven in the sunlight, when an already(!) cost-effective(!) process already exists(!) that can convert it to something that will help offset the energy-consumption of that farm?
Today, we think of energy only in terms of "centralized utilities." We think of oil as something we buy at a gas-pump or bring in on a trailer-truck, only from a source that was laid down millions of years ago. We think of electricity only as something that comes in through a meter and a wire. We consider "alternative energy" options only if they still fit into that same model.
For years, I spent not one thin dime for hot water. "Plenty of rooftops still available..." and the out-of-pocket cost to me was only a couple thousand bucks.
How did everyone survive when oil was $ 10 a barrel and gas was 99 cents forever?
It never seizes to amaze me that all of a sudden, everyone wants to get rich quick. Take a deep
breath and remember how it used to be and if we could go back to those times without having
to worry about a war in Gaza disrupting the oil supply!!!
A lot of the fields that produced cheap oil during the last 40-50 years are drying up.
And new ones tend to be in inaccessable or insecure places. For a deep sea field you are talking a 5-10 year period from initial exploration to production. And the technology needed to extract it is expensive as well.
Then you have the second factor that what most want is the easy to refine light crude oil that we are seeing less and less of. New fiends mainly have a more tarlike oil that cost more to refine , the candadian tar sands is a nice example.
The funny thing is that one of the tricks to maximising output from a field is extracting it slowly. Too fast and you will be lucky to get 30-40% out of the field. With a slow extraction that allows the pressure to be maintained more effectivly you can double the extraction rate.
However since oil has often been in short supply and a lot of companies and goverments have gone for fast profits there are very few fields that have been extracted in an efficient way(read slowly).
Unconventional energy conversion systems are under development that may prove to be tapping a never previously commercialized, renewable, abundant source of energy. These revolutionary new energy conversion devices are inherently cost-competitive. They can make practical cars, trucks and buses that need no engines, banks of batteries, or any variety of conventional fuel or recharge.
Advanced designs are capable of producing electricity on a self-sustaining basis. Some devices without moving parts are comparable to an inexhaustible battery. One Proof-of-Concept prototype is analogous to the early work on the transistor, which eventually led to a Nobel Prize and the creation of Silicon Valley.
A generator we are developing is expected to generate sufficient power to demonstrate replacement of the plug needed by a plug-in hybrid car. This will be a harbinger of automobiles that need no conventional fuel. With normal progress, a prototype new energy conversion system is anticipated to replace an automobile engine within three years. That goal might be achieved more rapidly if development involves four teams of engineers and technicians working on a 24/7 basis. The prototype will open a path to mass production of an entirely new variety of automotive power plant.
Electric vehicles powered by these technologies will never require conventional fuel or recharge.
See: http://www.renewableenergyworld.com/rea/partner/story?id=54361&cid=7763
Clinton. (Oil Per Barrel) 1998 11.61
Obama?
I don't want to care what the price of oil is. I do not want to buy oil with money borrowed from China to pollute America so we can move around cargo of unchecked, uncontrolled, polluted, dangerous, below grade stuff made in China or in Far e doign ast sweatshops.
Nations and nationhood and protectionism are NOT intrinsically bad. Never in the history of mankind the means to live in a country depended so much on another. This has to end. Nations and borders that define us, what we are, what we believe in, what makes an Italian different from a Lithuanian, are seen by the republicans, the big corporations as an impediment to their easy money making. Multinationals do not care about Americans or French or Mongolians, they care about shareholders (the real ones not us with crappy investor shares in a mutual fund for a pension with no vice on anything). Oil is the perfect tool to demonstrate the stupidity of the system of voracious stupid capitalism of sclerotic ways of doing business. A consumerism without oil is a better consumerism but they can't even see that in their marketing ploys: all has to remain the same. Obama is one person, we have to support energy independence for every single nation in the planet, then will be a new dawn for humanity
Agreed. Big oil and their lackeys in our gov't are the reason why many of our cities don't have mass transit. They could care less about the future, they could care less if America devolves into a third world country, they just wanna make as much money as they can while they can. Remember the70's, when suddenly everyone was concerned about MPG? And then it was suddenly forgotten. Why? Because that was when they realized that their product would eventually run out, and they had to keep us using as for as long as possible so they could make as much money as they could. Then when it runs out (or we don't need it anymore) they can buy an island and retire.
It would be the ultimate irony, and poetic justice, if when they retire to their islands they are slaughtered by the starving out of work local population because of policies they promoted, namely, glovbalization
Oil is basically worth about 30 a barrel. Sixty on the market after markup is reasonable but still high. Oil should be selling for about 45 to be worthy of further investment. That being said no one cares about Abdullah, nor do many people know who he is or what he does. The names that count are Obama, Obama and Obama in regard to what is goinng to happen. The past is the past. Chavez will do well after the dust settles, but the investors in the US who are responsible for the last oil bubble should suffer accordingly. Haha!
One barrel of oil replaces the muscle power contained in a strong man's manual labor for a whole year.
Do you really think a man is not worth more than eight or nine cents a day?
Excellent description!! Agrees closely with the following analysis, based on data from various places on Wikipedia:
[1] Energy content of 1 gallon of diesel: 40 kilowatt hours.
[2] Energy production by a human (very high estimate): 200 watts (about 1/4 horsepower)
[3] Do that for 8 hours: 1.6 kilowatt hours
[4] Efficiency (peak) of a diesel engine: 37%
[5] number of gallons in a barrel: 42
[6] work days in a barrel of oil: 42 * (40 / 1.6) * .37 = 388 days, about a year
Actually the price is fully dependant on consumption.
Lower consumption means the need to extract oil from the borderline fields that are so much more expensive than the ones that are operative today is not needed yet and keeps the price down.
If consumption is at a level where current production can barely cope with it price will rise untill exploration and development of the more expensive fields become a necessity. To give some examples of that you have the canadian oil sands , deep water oil off brazil and the same in the north sea where estimated exploration and production cost means that oil prices should be close to $90 a barrel to make them profitable.
Then there is various african fields where the security situation increase production cost meaning they also need high prices to stay profitable.
So my basic point is as long as consumption can be kept low , its a buyers market and prices will stay low.
Actually, all this craziness of Hugo was just for the uneducated of Venezuela to believe in. The Venezuelan oil is not a top quality oil like the oil benchmark we see quoted all the time, which is West Texas sweet. This low-quality oil of Venezuela requires a form of refining which is virtually unknown except in the United States. It requires a coker unit, and there is only one located outside the United States, in Trinidad perhaps? That means that Venezuela has to sell its' oil to the United States and Chavez just likes to mouth off for the population which doesn't understand this.
My son is in the oil business, and he reports that many countries and oil companies have huge tankers tied up at docks, filled with excess production, and they are paid just to store the stuff, rather than to transport it. This was taking place even while we were hearing all this stuff about PEAK oil during the last year. This oil increase was due to speculation by Goldman Sachs, JPMorgan Chase, Barclay's and soverign funds such as the ones of Saudi Arabia, Qatar, Kuwait, and others, including Russia. Goldman Sachs and the others had moved on from the housing bubble, having helped create it, and then on to commodities, including oil, wheat, corn and soy beans, to give those greedy little executives their huge bonuses and their greedy, large investors more loot.
If your son is in the oil business and he does not understand what peak oil is and what it does I would suggest you read up on how to collect unemployment insurance. He will need you to tell him one day.
:-)
Because you have so much credibility on this issue. How did your bet that oil would never go down and be $200 by December 31, 2009 work out for you?
"My son is in the oil business, and he reports that many countries and oil companies have huge tankers tied up at docks, filled with excess production, and they are paid just to store the stuff, rather than to transport it."
I was wondering about that!
At the port in Oakland, they can't find enough space to store all the cars from overseas - no market for them, and they had already shipped....
No doubt a lot of the price run up was caused by speculators which is certainly not a new concept with commodities. Demand also played a role in the run up just like it has in the price drop. The oil business is cylical, always has been, always will be. High prices spur activity, when people drill oil and gas wells they tend to find oil and gas, supplies increase prices fo down, not a new or had concept to understand. What is hard to understand is the congressional hearings, investigations and political grandstanding about windfall profits, collusion among oil companies, etc. Now the industry is laying down rigs, laying off people and the Obama adminsistration is delaying the 5 year plan for exploration in the OCS, the administration has not given the Pickens Plan even lip service and a perfect storm continues to brew. I have to keep telling myself that those of us in the oil patch (ie those of us still with jobs) tend to thrive under Democratic administrations because they make such a mess of our domestic energy policy. Good luck to your son and good luck to the american consumer.
"Bbbbbaby, you AIN'T seen nuthin' yet..."
This will make the Teapot Dome Scandal and Enron look like trial runs and truly quaint.
Stinkin' Chickens will come home to roost.
Here's a good primer:
http://www.amazon.com/Thy-Will-Done-Rockefeller-Evangelism/dp/0060927232/ref=sr_1_1?ie=UTF8&s=books&qid=1232227681&sr=1-1
If 19 of the hijackers on 9/11 had been Iraqis, Bush would have repeated it non-stop.
The Coward Bush did not mention the Saudi connection a single time -- in all his speeches -- during the 7 years following the 9/11 attacks.
His silence speaks volumes and is his legacy.
I guess this means that there will be no more hand holding in Crawford.
Sounds like vampires to me.
Drug dealers.
Or maybe the better analogy is organized crime during prohibition at the turn of the last century. Price fixing, elimination of competition, violence, organized crime (in this case, OPEC).
Then, when prohibition ended, things settled back down to reality.
We've got to remember $5/gal gas so we don't repeat Reagan's mistake post-Carter. We need to be free of the Saudi (etc.) gangsters and pushers once and for all.
College fraternity presidents during the 1960's were instrumental in procuring party drugs and buying in excess to remarket a portion so that their consumption was actually free. Does anyone come to mind?
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