NationStates Jolt Archive

Are they cutting production because they want to support prices or are they cutting production because they have gone into aggressive decline and can't keep up production rates? Supporting prices doesn't make sense because if you cut too much you have less to sell at higher prices. Saudi Arabia has a history of cheating on the other side, selling more than it agrees to to take advantage of high prices. In this case they are cutting more than agreed to - maybe because they are running out of oil. If they are, hold onto your hats because we're in the shit now.

FUTURES MOVERS
Crude gains on report Saudis will cut output
Natural-gas rallies near a one-week high on bets for big supply decline
PrintE-mailDisable live quotesRSSDigg itDel.icio.usBy Myra P. Saefong & Ciara Linnane, MarketWatch
Last Update: 11:03 AM ET Jan 30, 2007


SAN FRANCISCO (MarketWatch) - Crude-oil futures rose Tuesday morning after a report said Saudi Arabia plans to cut output by 158,000 barrels a day starting Thursday, and that the kingdom has cut almost double the amount it agreed on previously.
At the same time, natural-gas futures rallied as much as 5% as the March contract recovered from the previous session's weakness to trade near a one-week high.
Crude for March delivery was trading up 89 cents at $54.90 a barrel on the New York Mercantile Exchange. On Monday, the contract lost 3% of its value as traders questioned OPEC's commitment to the agreed-upon output cuts.
February reformulated gasoline futures were up 2.9 cents at $1.47 a gallon and February heating oil futures rose 1.81 cents to $1.567 a gallon.
Crude prices moved higher Tuesday after the Wall Street Journal reported that Saudi Arabia, the world's biggest oil producer, has cut production by one million barrels a day in the last six months. The amount is almost double the amount Saudi Arabia had agreed to cut at meetings of the Organization of Petroleum Exporting Countries in October and December.
The Saudi cut is seen as an aggressive move to keep the price of the U.S. benchmark crude above $55 a barrel, the newspaper reported Tuesday in its online edition, quoting Roger Diwan, an analyst at PFC Energy, a Washington industry consultancy. See Wall Street Journal report (subscription required).
The report comes as traders try to figure out whether the other members of the cartel have actually cut production as agreed - OPEC members often produce more oil than they have pledged. The cartel's members, excluding Iraq, were producing 26.9 million barrels of oil per day in December, according to a U.S. Energy Department estimate. The total cuts they agreed to would reduce output to 25.8 million barrels, starting Feb. 1.
The Saudis have been saying that they "were happy with the price of oil and that $50 a barrel was good for consuming countries, and good for them as well," said Phil Flynn, a senior analyst at Alaron Trading, in e-mail commentary.
But "the production cuts the Saudis have already made, more than likely, will drive the price of oil higher than $50 a barrel," he said.
Meanwhile, news reports over the weekend suggested that Nigeria's oil exports will reach their highest level in 14 months in March, offsetting some of the tension raised by increased kidnappings of foreign oil industry workers in the oil-rich Niger Delta region.
Weather support
Cold temperatures across the U.S. are providing further support for oil prices. The National Weather Service is forecasting below-normal temperatures in the Northeast and Midwest for the next 10 days.
Traders will look to the release Wednesday of weekly data on supplies of oil and its products, for signs that cold temperatures are having an impact of inventories, which remain at above-average levels for this time of year.
"The cold weather we are having in the U.S. of late must be accompanied by some draws in inventories in order for this combination to have some impact on prices," said Edward Meir, analyst at Man Financial. "Although last week's market reaction failed miserably on this count when prices rose despite higher builds, we don't think bulls should test the market's forbearance in this respect two weeks in a row."
Analysts at Wachovia Corp. are expecting the Energy Department to report that crude supplies rose by 2 million barrels for the week ended Jan. 26, marking a third consecutive week of higher inventories.
The analysts also expect gasoline supplies to be up by 3 million barrels. But distillate inventories likely fell by 1 million barrels, they said.
Analysts at Fimat USA predict a climb of 280,000 barrels for crude supplies and a rise of 1.8 million barrels for gasoline inventories, but a decline of 2.5 million for distillates.
Natural-gas prices rally
Natural-gas futures rose sharply, recovering from Monday's contract expiration-related weakness.
March natural gas rose 4.7%, or 32.3 cents, to $7.26 per million British thermal units on its first full trading day as a front-month contract. It touched $7.33 earlier, its highest intraday level since Jan. 24.
The February contract expired at Monday's closing, down 3.6% for the session.
"There's no long-term concern there will be a shortage in heating season," said Michael Fitzpatrick, an analyst at Fimat. But "there is a pattern of intense cold over the Midwest and Northeast for the next 6 to 10 days, which will pull down storage."
"Cold to come is finite, and there should be sufficient material to cover it," he said.
Still, early forecasts for Thursday's Energy Department update on natural-gas supplies call for a draw of 200 billion to 210 billion cubic feet, he said. And next week "might see similar numbers ... so the market may take some support from this fact."
Memories in the market of "an early heat wave that ate up a particularly large surplus," should also be fresh, he said, and that's "starting to make us believe that $6 may be safe."
In equities, benchmarks tracking oil-related shares moved higher to reflect the strength in the energy futures. The Oil Service Index ($OSX : Philadelphia Oil Service Sector Index
News , chart, profile, more
Last: 192.07+3.88+2.06%

Myra P. Saefong is a reporter for MarketWatch in San Francisco.
Ciara Linnane is markets editor for MarketWatch in New York.


http://www.marketwatch.com/News/Story/Story.aspx?guid={86F52A6E-05E2-480F-AB7B-0F6513C32ED1}&siteid=mktw&dist=nbk

I'd say they are cutting production to bolster prices, but at the same time the data prior to the drop in prices during September didn't suggest that they were doing anything to particularly boost production. They were actually leveling out at about 9-9.1 million bpd and weren't going any higher.

That, of course, suggests that Saudi Arabia is maxing out its capacity, or is at least boosting production enough to compensate for declining production in other fields. My opinion is that they might be cutting production in order to prevent damaging any wells that they've been pushing hard to keep it at their quota levels.

I'd say they are cutting production to bolster prices, but at the same time the data prior to the drop in prices during September didn't suggest that they were doing anything to particularly boost production. They were actually leveling out at about 9-9.1 million bpd and weren't going any higher.

That, of course, suggests that Saudi Arabia is maxing out its capacity, or is at least boosting production enough to compensate for declining production in other fields. My opinion is that they might be cutting production in order to prevent damaging any wells that they've been pushing hard to keep it at their quota levels.

It doesn't look that way to me. When you look at this chart:

http://www.kci-com.com/ezine_images/reserves.jpg
One has to wonder where all that new oil that nearly doubled their reserves in the 80's came from and at an average of 8 million barrels/day for the last twenty years one has to wonder why their reserves haven't depleted. Everywhere else in the world reserves seem to drop, but in Saudi Arabia and the other Arab OPEC states there seems to be a sort of magical fearie who comes along at night and refills their oil fields.

They're lying. They're almost certainly going into production collapse and if that happens look for $200/barrle oil by the end of the year and $8 gasoline here in NA when it's available at all. So much for switch grass and cellulosic ethanol. Hope we're ready to produce 8 million barrels/day of it in the next four or five years and I hope you're all ready to go buy a new car.

I'd say they are cutting production to bolster prices, but at the same time the data prior to the drop in prices during September didn't suggest that they were doing anything to particularly boost production. They were actually leveling out at about 9-9.1 million bpd and weren't going any higher.

That, of course, suggests that Saudi Arabia is maxing out its capacity, or is at least boosting production enough to compensate for declining production in other fields. My opinion is that they might be cutting production in order to prevent damaging any wells that they've been pushing hard to keep it at their quota levels.

Check out the headline at Marketwatch:

http://www.marketwatch.com/?siteid=mktw

It doesn't look that way to me. When you look at this chart:

http://www.kci-com.com/ezine_images/reserves.jpg
One has to wonder where all that new oil that nearly doubled their reserves in the 80's came from and at an average of 8 million barrels/day for the last twenty years one has to wonder why their reserves haven't depleted. Everywhere else in the world reserves seem to drop, but in Saudi Arabia and the other Arab OPEC states there seems to be a sort of magical fearie who comes along at night and refills their oil fields.

And, of course, that's also the point where production was tied to reserves, giving them a huge incentive to overstate reserves in order to maintain dominance in OPEC. Either they were previously understating their reserves, they found a way to significantly boost them, or they're lying. Personally, I'd say the last one is most likely.

The question is, however, how badly the Saudis have damaged their fields in that timeframe.

They're lying. They're almost certainly going into production collapse and if that happens look for $200/barrle oil by the end of the year and $8 gasoline here in NA when it's available at all. So much for switch grass and cellulosic ethanol. Hope we're ready to produce 8 million barrels/day of it in the next four or five years and I hope you're all ready to go buy a new car.

I don't really know; the market's simply not showing that to be the case, although we really can't be sure at this point in time. I guess we'll just have to wait and see. Although chances are it we'd have some pretty clear signs ahead of time, especially if the Saudis stop making all of their deliveries and inventories begin to sink.

A loss of 8 million bpd would suck, there's no questioning it. Of course, what better way to wake people up than a massive, but nonlethal energy crunch?

Check out the headline at Marketwatch:

http://www.marketwatch.com/?siteid=mktw

Now that's a sign that something's up. A sudden 156,000 bpd cut sounds rather arbitrary to me; if anything, it sounds like that's the amount their production has dropped recently and they want to cover it up. Not to mention they've cut double the amount they said they would; there's something going on here, and it's not going to be good for the supply side.

Thursday or Friday should have the EIA report coming, and it should be interesting to see what the Saudis are producing.

And, of course, that's also the point where production was tied to reserves, giving them a huge incentive to overstate reserves in order to maintain dominance in OPEC. Either they were previously understating their reserves, they found a way to significantly boost them, or they're lying. Personally, I'd say the last one is most likely.Seeing as how the last independent audit of their fields in 1979 put their reserves at 117 billion barrels and not the 260 billion they've claimed ever since the mid 80s I think the answer is obvious.

The question is, however, how badly the Saudis have damaged their fields in that timeframe.Of course they have, but even if they haven't, even if they treated their fields with kid gloves, they will still peak and go into decline. Looks like it might be now.



I don't really know; the market's simply not showing that to be the case, although we really can't be sure at this point in time. I guess we'll just have to wait and see. Although chances are it we'd have some pretty clear signs ahead of time, especially if the Saudis stop making all of their deliveries and inventories begin to sink.Sure it is. Oil is 500% more expensive than it was 8 years ago. What more do you need?

A loss of 8 million bpd would suck, there's no questioning it. Of course, what better way to wake people up than a massive, but nonlethal energy crunch?

Unfortunately, we're not just talking about Saudi Arabia and 8 million barrels/day.

Daily output at Mexico's biggest oil field tumbled by half a million barrels last year, according to figures released Friday by the Mexican government. The ongoing decline at the Cantarell field could pressure prices on the global oil market, complicate U.S. efforts to diversify its oil imports away from the Middle East, and threaten Mexico's financial stability.


The virtual collapse at Cantarell -- the world's second-biggest oil field in terms of output at the start of last year -- is unfolding much faster than projections from Mexico's state-run oil giant Petroleos Mexicanos, or Pemex. Cantarell's daily output fell to 1.5 million barrels in December compared to 1.99 million barrels in January, according to figures from the Mexican Energy Ministry.
Mexico made up for some of the field's decline. Mexico's overall oil output fell to just below three million barrels a day in December, down from almost 3.4 million barrels at the start of the year. It marked Mexico's lowest rate of oil output since 2000.

Mexico's troubles at Cantarell mirror the larger problems in the global oil market. Many of the world's biggest fields are old and face decline, which can be sharp and sudden. Like other big producers, Mexico is struggling to make up the difference because new big fields are in harder-to-reach places like the deep waters of the Gulf of Mexico.

The field's decline is expected to continue, if not worsen, this year, according to most estimates. That will subtract valuable oil from the world market, which is under pressure from rising demand by growing economies like China and India. It also means less oil headed to the U.S. from Mexico, which has long relied on Mexico as one of its top-three oil suppliers.

"This is bad news for Mexico. The field is declining faster than even the government's pessimistic scenarios," says David Shields, an oil industry consultant in Mexico City who has been warning about Cantarell's collapse for the past two years.

The decline is especially worrisome for Mexico's new President Felipe Calderon, who won a narrow victory in last year's election that his main opponent didn't accept, causing brief political unrest. Any major decline in output or prices will force him to cut government spending, a politically unpopular move. Growth in Mexico's economy is already expected to slow this year thanks to a U.S. slowdown.

Mexico's declining production also will raise the pressure on Mr. Calderon to crack open the country's closed energy market to allow private investors to help Pemex find new oil deposits. But the former energy minister will have a tough time convincing an opposition-dominated Congress to rewrite Mexico's Constitution. The country's oil expropriation of 1938 is part of Mexico's self-image.

A year ago, The Wall Street Journal published an internal Pemex study that reviewed possible scenarios at Cantarell. The study's best-case scenario forecast Cantarell's production would fall to 1.54 million barrels a day by the end of last year -- almost exactly what happened.

At the time, top Pemex officials disputed the report and said the study's scenario represented a "do-nothing" or "worst-case" approach that didn't take into account maintenance at the field. Pemex predicted that Cantarell production would only drop to 1.87 million barrels a day by December and that overall output at the company would actually grow to 3.42 million barrels a day.

Since then, Pemex has said it can offset declines at Cantarell with new production from other fields.

Mexico's growing economy is demanding more fuel each year, which is expected to translate to even lower oil exports. Last year, Mexico's daily average oil exports fell to 1.79 million barrels a day from 1.82 million the previous year. Pemex says it expects daily exports to fall to an average 1.65 million barrels this year.

But some analysts say that is too optimistic. December's daily exports were a meager 1.53 million barrels. While that figure may have been affected by bad weather that closed some ports, it was already well below Pemex's estimates for this year.

Based on the state company's track record so far at Cantarell, including its current rates of recovering the oil that remains in the field, Mr. Shields expects the field's output to drop another 600,000 barrels a day by the end of this year. He says that Pemex will likely increase output by 200,000 barrels a day at other fields -- leaving the country with a net decline of 400,000 barrels a day by year's end and daily exports of less than 1.4 million barrels.

None of this is welcome news in a country that relies on oil exports for some 37% of government revenue. So far, relatively high oil prices have kept the country from feeling the effects of lower output. But prices could continue a recent drop, adding to Mexico's woes from a production shortfall. This year's Mexican budget is based on Pemex's official production targets as well as a relatively high oil price -- about $50 on the world market.
http://www.rigzone.com/news/article.asp?a_id=40538

and...

KUWAIT: It was an incredible revelation last week that the second largest oil field in the world is exhausted and past its peak output. Yet that is what the Kuwait Oil Company revealed about its Burgan field. The peak output of the Burgan oil field will now be around 1.7 million barrels per day, and not the two million barrels per day forecast for the rest of the field's 30 to 40 years of life, Chairman Farouk Al-Zanki told Bloomberg. He said that engineers had tried to maintain 1.9 million barrels per day but that 1.7 million is the optimum rate. Kuwait will now spend some $3 million a year for the next year to boost output and exports from other fields.

However, it is surely a landmark moment when the world's second largest oil field begins to run dry. For Burgan has been pumping oil for almost 60 years and accounts for more than half of Kuwait's proven oil reserves. This is also not what forecasters are currently assuming.
Last week the International Energy Agency's report said output from the Greater Burgan area will be 1.64 million barrels a day in 2020 and 1.53 million barrels per day in 2030. Is this now a realistic scenario?
The news about the Burgan oil field also lends credence to the controversial opinions of investment banker and geologist Matthew Simmons. His book 'Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy' claims that ageing Saudi oil fields also face serious production falls.
The implications for the global economy are indeed serious. If the world oil supply begins to run dry then the upward pressure on oil prices will be inexorable. For the oil producers this will come as a compensation for declining output, and cushion them against an economic collapse.
However, the oil consumers then face a major energy crisis. Industrialized economies are still far too dependent on oil. And the pricing mechanism of declining oil reserves will press them into further diversification of energy supplies, particularly nuclear, wind and solar power.
All this was foreshadowed in the energy crisis of the late 1970s when a serious inflection in oil supply by the year 2000 was clearly forecast. How ironic that those earlier forecasts now look correct, while more modern and recent forecasts begin to look over optimistic and out-of-date with geological reality.
Nobody can change the geology, and forces of nature that laid down reserves of oil and gas over millions and millions of years. Could it be that we have been blinded by technological advances into thinking that there is some way to beat nature?
The natural world has an uncanny ability to hit back at the arrogance of man, and perhaps a reassessment of reality at this point is called for, rather than a reliance on oil statistics that may owe more to political manoeuvring than geological facts. - AME Info FZ LLC.

http://www.kuwaittimes.net/localnews.asp?dismode=article&artid=37595069

But, hey, if you start growing some switchgrass maybe soon someone will figure out a way to make it into ethanol...

I don't look forward to switching to a more expensive hybrid car but for the good of the planet, my kids and grandkids future the Saudi's running out of oil will be good thing...

Seeing as how the last independent audit of their fields in 1979 put their reserves at 117 billion barrels and not the 260 billion they've claimed ever since the mid 80s I think the answer is obvious.

The only one of those three that is probably accurate is Iran (surprisingly); IIRC, they had some pretty big discoveries in the early 2000's.

Of course they have, but even if they haven't, even if they treated their fields with kid gloves, they will still peak and go into decline. Looks like it might be now.

Yeah, but that's really important in regard to how fast it happens. A field that's been water injected and ruined to hell is going to cave a lot faster than one that has been well maintained and not overworked.

I mean, Saudi Arabia losing production at 3% per year is going to be a lot less problematic than 10% per year.

Sure it is. Oil is 500% more expensive than it was 8 years ago. What more do you need?

But that was due to increased demand (and the reunification of OPEC); this would be a supply-side crunch rather than prices rising due to soaring demand.



Unfortunately, we're not just talking about Saudi Arabia and 8 million barrels/day.


http://www.rigzone.com/news/article.asp?a_id=40538

and...

http://www.kuwaittimes.net/localnews.asp?dismode=article&artid=37595069

But, hey, if you start growing some switchgrass maybe soon someone will figure out a way to make it into ethanol...

We're going to have to do something; cellulosic ethanol is going to be a big contributor to our energy needs, but even if it is that still leaves us half a decade of having to deal with falling production and no easy substitutes. In that case, the only options are going to be higher efficiency, conservation, and if necessary rationing.

My only hope in regard to that is that the Democratic congress makes the kinds of decisions that the Republican congress was not willing to; some of them have already been made, and they're going to help us in the future, but there's a lot of work to do. Although one good thing is that biofuels have caused oil demand to stagnate and decline, which is a step in the right direction when it comes to managing our energy needs post-peak.

The only one of those three that is probably accurate is Iran (surprisingly); IIRC, they had some pretty big discoveries in the early 2000's.According to who? According to Iran?



Yeah, but that's really important in regard to how fast it happens. A field that's been water injected and ruined to hell is going to cave a lot faster than one that has been well maintained and not overworked.the Saudis have been practicing massive sea water injection in all of their large fields since the 70s. Usually that's something that waits for after peak, but they were doing it long before. They've also had massive maximum contact well and horizontal well drilling over the last 15 years. Matt Simmons warns of a collapse, not a US style decline.

I mean, Saudi Arabia losing production at 3% per year is going to be a lot less problematic than 10% per year.1 million barrels/day in six months. Wanna go for 15%?



But that was due to increased demand (and the reunification of OPEC); this would be a supply-side crunch rather than prices rising due to soaring demand.No, it was due to increased demand and supply's inability to keep up. Prices are due to an interaction between bothe supply and demand, not one or the other.







We're going to have to do something; cellulosic ethanol is going to be a big contributor to our energy needs,How do you know? No one has ever made any yet.


but even if it is that still leaves us half a decade of having to deal with falling production and no easy substitutes. In that case, the only options are going to be higher efficiency, conservation, and if necessary rationing.Which, of course, will make it very difficult to do things like build commuter and freight rail, develope bio-energy resources, make plastic...

My only hope in regard to that is that the Democratic congress makes the kinds of decisions that the Republican congress was not willing to; some of them have already been made, and they're going to help us in the future, but there's a lot of work to do. Although one good thing is that biofuels have caused oil demand to stagnate and decline, which is a step in the right direction when it comes to managing our energy needs post-peak.

No they haven't. High prices have. Biofuels account for so little of our energy consumption that tey needen't be considered in any real market analysis regarding the price of oil.

According to who? According to Iran?

Wasn't there something like 38 Gb discovered near Bushehr in 2003?

the Saudis have been practicing massive sea water injection in all of their large fields since the 70s. Usually that's something that waits for after peak, but they were doing it long before. They've also had massive maximum contact well and horizontal well drilling over the last 15 years. Matt Simmons warns of a collapse, not a US style decline.

That was my concern. It hinges, of course, on how extensive the damage is, and nobody knows that because they don't talk about it. We'll have to see come summer when prices rise to levels that might motivate OPEC to raise production quotas.

1 million barrels/day in six months. Wanna go for 15%?

If it's that high, then that will hurt. For reference, Saudi oil production fell by 4.4% prior to the cuts in the fall; whether this rate will speed up or hold constant is still unknown. Still, 4.4% per year is 400,000 bpd or so; that's a lot of oil in a market like this.

No, it was due to increased demand and supply's inability to keep up. Prices are due to an interaction between bothe supply and demand, not one or the other

What I mean is that the primary reason why prices went up is because of demand; there was no fall in supply that caused it but rather the inability of supply to rise at a fast enough rate to keep prices constant.


How do you know? No one has ever made any yet.

Well, production is going to be implemented in the next few years at test sites, and from what I've read it is supposed to be a pretty energy-positive source, at least on the level of sugarcane ethanol.

The point is that it's still a while away regardless of when it's tested.

Which, of course, will make it very difficult to do things like build commuter and freight rail, develope bio-energy resources, make plastic...

But those are nothing compared to the amount we waste in cars and SUVs. I mean, 72% of US oil goes in to transportation, and of that some 85% is used in light-duty vehicles. If we reduce our consumption of oil in transportation, we'll have more than enough for everything else. Hell, the US's domestic production alone is almost enough to meet our agricultural and industrial needs.

No they haven't. High prices have. Biofuels account for so little of our energy consumption that tey needen't be considered in any real market analysis regarding the price of oil.

Biofuels production is over 350,000 bpd; that's equal to about 4% of our total gasoline consumption; that's pretty significant in terms of demand growth. Production is growing fast enough to keep demand in check, and that's what I'm mainly talking about.

Wasn't there something like 38 Gb discovered near Bushehr in 2003? According to who? Who went and told the world that 38 billion barrels of crude were discovered in Iran in 2000? Iran, BTW, is long past peak.

http://www.wtrg.com/oil_graphs/small/PAPRPIR.gif



That was my concern. It hinges, of course, on how extensive the damage is, and nobody knows that because they don't talk about it. We'll have to see come summer when prices rise to levels that might motivate OPEC to raise production quotas.



If it's that high, then that will hurt. For reference, Saudi oil production fell by 4.4% prior to the cuts in the fall; whether this rate will speed up or hold constant is still unknown. Still, 4.4% per year is 400,000 bpd or so; that's a lot of oil in a market like this.And that's just Saudi Arabia. As teh stories I posted pointed, Mexico and Kuwait are having similar problems and Iran is projected to runout entirely by 2015 unless they get more advanced production technology - which of course will only help them maintain some production but will never allow them to be a prolific producer again.



What I mean is that the primary reason why prices went up is because of demand; there was no fall in supply that caused it but rather the inability of supply to rise at a fast enough rate to keep prices constant.Which is a poignant sign of peak production...




Well, production is going to be implemented in the next few years at test sites, and from what I've read it is supposed to be a pretty energy-positive source, at least on the level of sugarcane ethanol.

The point is that it's still a while away regardless of when it's tested.If our eceonmy collapses in the meantime all bets are off.



But those are nothing compared to the amount we waste in cars and SUVs. I mean, 72% of US oil goes in to transportation, and of that some 85% is used in light-duty vehicles. If we reduce our consumption of oil in transportation, we'll have more than enough for everything else. Hell, the US's domestic production alone is almost enough to meet our agricultural and industrial needs.It doesn't matter how we're using it, the point is taht we have no means of adjusting in the short term which could very well doom us in the long term. Great, we have Toyota Prius's available. You got $30,000 grand to buy yours?



Biofuels production is over 350,000 bpd; that's equal to about 4% of our total gasoline consumption; that's pretty significant in terms of demand growth. Production is growing fast enough to keep demand in check, and that's what I'm mainly talking about.

It also is butting up against serious walls regarding price because of competition with food.

I thought they were doing this because the US wanted them to give Iran a run for their money? Like the Saudi's would be giving cheaper oil and they can afford to, but Iran doesn't have as much and they can't lower their prices like the Saudi's can.

I thought they were doing this because the US wanted them to give Iran a run for their money? Like the Saudi's would be giving cheaper oil and they can afford to, but Iran doesn't have as much and they can't lower their prices like the Saudi's can.

No the story there was that Saudi Arabia was allowing the price of oil to fall to starve Iran for cash.

Oil traders and others believe that the Saudi decision to let the price of oil tumble has more to do with Iran than economics.

Their belief has been reinforced in recent days as the Saudi oil minister has steadfastly refused calls for a special meeting of OPEC and announced that the nation is going to increase its production, which will send the price down even farther.In light of this it makes it even more suspect that Saudi Arabia has cut production. To hurt Iran they need to RAISE it to bring the price of oil down.

http://www.msnbc.msn.com/id/16772560/

No the story there was that Saudi Arabia was allowing the price of oil to fall to starve Iran for cash.

In light of this it makes it even more suspect that Saudi Arabia has cut production. To hurt Iran they need to RAISE it to bring the price of oil down.

http://www.msnbc.msn.com/id/16772560/

Ahhhh. So thats the fishiness of the whole deal. Interesting.

Ahhhh. So thats the fishiness of the whole deal. Interesting.

It's all fishy. Saudi Arabia agreed to cut it's production by 500,000 barrels/day but has cut it by 1 million barrels. This is the historical opposite of what they and every other OPEC country has done in the past. Usually they produce more than they said they would to make more money from higher prices.

Saudi Arabia and the rest of the Sunni Middle East are scared shitless of Shiite Iran's ascendence in the region. They have a vested interest in hurting Iran and the best way to do this is to keep the price of oil low by producing more oil. If they keep the price high it puts more money in Iran's hands, yet here's Saudi Arabia cutting prodution even further by a wierd number like 158,000 barrels per day by Thursday causing the price of oil to spike upwards today.

This all makes sense, however, if they having been lying all these years about how much oil they have and they have finally reached a ceiling in their production capacity and have started a production collapse.

According to who? Who went and told the world that 38 billion barrels of crude were discovered in Iran in 2000? Iran, BTW, is long past peak.

http://www.wtrg.com/oil_graphs/small/PAPRPIR.gif

I recall Iran making the announcement and drilling the test wells in 2003.

And that's just Saudi Arabia. As teh stories I posted pointed, Mexico and Kuwait are having similar problems and Iran is projected to runout entirely by 2015 unless they get more advanced production technology - which of course will only help them maintain some production but will never allow them to be a prolific producer again.

That's why the peak is going to be within the next 5-7 years (depending on a number of factors), most likely within the 2010 timeframe.

Which is a poignant sign of peak production...

Well, we're either at or very close to peak world production. Personally, I'd say by 2010 it's a given.

If our eceonmy collapses in the meantime all bets are off.

That's why the government is so important. In the event that we suffer a serious recession or depression, it's going to take massive government spending to build out these kinds of alternatives.

It doesn't matter how we're using it, the point is taht we have no means of adjusting in the short term which could very well doom us in the long term. Great, we have Toyota Prius's available. You got $30,000 grand to buy yours?

I'm in college. I walk everywhere. ;)

It also is butting up against serious walls regarding price because of competition with food.

Food-crop biofuels aren't going to last the decade; they're good for developing the infrastructure and technology but pretty much useless in terms of seriously making a dent in our oil needs. They have some capability to limit oil consumption, but nowhere near enough to actually reduce demand.

I recall Iran making the announcement and drilling the test wells in 2003.
;)


That's why the peak is going to be within the next 5-7 years (depending on a number of factors), most likely within the 2010 timeframe.2010 is three years from now not 5 - 7 and we still have not produced as much as we did Dec. 2005. I'll bet that goes down as the peak month.




That's why the government is so important. In the event that we suffer a serious recession or depression, it's going to take massive government spending to build out these kinds of alternatives.If the treasury is bankrupt because businesses and people are and don't have money for taxes and there's no one with money willing to spend it on government bonds then massive government spending will not be possible.



I'm in college. I walk everywhere. ;) What do the teachers and administrators who make your college possible drive and how far away do they live? Where does the food you eat at college come from? What do teh businesses in the vacinity that make your life there possible run on? Do the owners of those businesses live close to their sandwhich shops? Do they drive Hummers? How much is the cost of the food they sell going to go up?



Food-crop biofuels aren't going to last the decade; they're good for developing the infrastructure and technology but pretty much useless in terms of seriously making a dent in our oil needs.especially since they require oil to produce.

They have some capability to limit oil consumption, but nowhere near enough to actually reduce demand.Price will do that. Prerhaps quite brutaly.

bump

If the government was serious about converting the energy infrastructure it could easily do it, even in a depression.

It would mean some re-thinking of societies priorities of course. And some painful dislocations for a few groups of people. But if there is one thing the US goverment has to waste, it is cash.

Not with this massive deficit I think.

the demise of cheep oil is something cameroi/themnax, has looked forward to all our lives. needless to say, i am cautious of prematurely celibrating what has repeatedly proven to be a false hope, yet we all know logicaly, that the day will, as it inevitably must, come sooner or later.

forgive me if i seem unwilling to shed too many tears over the potential demise of factory 'mussle' cars and 'cowboy caddilac' 'suv's!

or a world where you can't find someplace to sit down and rest in the middle of a long walk because thoughtless people have torn them all up.

yes food will get more expensive, and cities well become, for a time even less practical then they are now. we may even wake up one day to find the power has gone off, and hear through rumor that it might not come back on any time soon.

i'm not suggesting this will immediately bring about any sort of nervana, but it won't be the end of the world, or even that of our own species, though the web of life might well find itself better off as a resault.

even that is of course speculation, but all things do chainge, though if there is one that doesn't, it is that diversity goes right on being the nature of reality.

so i'm keeping my fingers crossed, that i might yet live to see the day, when big oil has to suck it in, but i'm not exactly holding my breath in expectation.

i will however, continue to look forward in eager anticipation.

=^^=
.../\...

Not with this massive deficit I think.

The deficit is irrelevant: Nationalize and prioritize healthcare, ration education at the tertiary level, convert social security to a means tested basic living welfare program and you've just found about a trillion dollars a year.

There will be a lot of pain for some people of course, but that's going to happen anyway. It's like gangrene in a toe. The whole foot has to come off if you want to save the patient.

One has to wonder where all that new oil that nearly doubled their reserves in the 80's came from and at an average of 8 million barrels/day for the last twenty years one has to wonder why their reserves haven't depleted. Everywhere else in the world reserves seem to drop, but in Saudi Arabia and the other Arab OPEC states there seems to be a sort of magical fearie who comes along at night and refills their oil fields.


Because they have sheet loads of oil.

When you comprehend how much oil Russia and Saudi have, you will not need to ask the question. If they can keep it up for more than 50/60 years, I'd be suprised.

The deficit is irrelevant: Nationalize and prioritize healthcare, ration education at the tertiary level, convert social security to a means tested basic living welfare program and you've just found about a trillion dollars a year.

There will be a lot of pain for some people of course, but that's going to happen anyway. It's like gangrene in a toe. The whole foot has to come off if you want to save the patient.

Wow, profit before people I see. It's good to see the Saudi's use their oil money to fund a welfare state, god knows where the money would go if the US had that kind of oil.

Because they have sheet loads of oil.According to who? Who is it that has stated how much oil they have? Who has audited their fields and reported their reserves?

When you comprehend how much oil Russia and Saudi have, you will not need to ask the question. If they can keep it up for more than 50/60 years, I'd be suprised.

Russia does have a fair bit of oil:

Oil - proved reserves: 74.4 billion bbl (2005 est.)
https://www.cia.gov/cia/publications/factbook/print/rs.html

(And those are real barrels because, unlike the Arab OPEC states Russia alows private investment and therefore independent audits of their reserves. There hasn't been an audit of Saudo Arabia's fields since the late 70s.)

But they are past peak and are in decline:
http://www.mnforsustain.org/images/oil_lisbon_laherrere_us_fsu_prod_fig43.jpg

the demise of cheep oil is something cameroi/themnax, has looked forward to all our lives. needless to say, i am cautious of prematurely celibrating what has repeatedly proven to be a false hope, yet we all know logicaly, that the day will, as it inevitably must, come sooner or later.

forgive me if i seem unwilling to shed too many tears over the potential demise of factory 'mussle' cars and 'cowboy caddilac' 'suv's!

or a world where you can't find someplace to sit down and rest in the middle of a long walk because thoughtless people have torn them all up.

yes food will get more expensive, and cities well become, for a time even less practical then they are now. we may even wake up one day to find the power has gone off, and hear through rumor that it might not come back on any time soon.

i'm not suggesting this will immediately bring about any sort of nervana, but it won't be the end of the world, or even that of our own species, though the web of life might well find itself better off as a resault.

even that is of course speculation, but all things do chainge, though if there is one that doesn't, it is that diversity goes right on being the nature of reality.

so i'm keeping my fingers crossed, that i might yet live to see the day, when big oil has to suck it in, but i'm not exactly holding my breath in expectation.

i will however, continue to look forward in eager anticipation.

=^^=
.../\...

I agree that society will come out teh other side of peak oil better off in many ways than we are now - provided we don't get into a world war over the remaining reserves in the Middle East and Central Asia which unfortunately seems likely, but we won't see that day. We're going to live through the labor pains of the birth a new world and that birth will be a difficult one with lots of complications. And, BTW, even if you live in a country that is not as dependent on oil as the US, Europe and China increasingly is, you're still going to feel that pain. Just as the whole world suffered through the Great Depression, the whole world will suffer through energy descent.