View Full Version : ASPO Newsletter (Peak Oil)
The latest issue of the ASPO newsletter came out, and it seems to have some interesting developments and implications in terms of geopolitics.
I'll provide a few excerpts, along with a link to the full PDF.
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868. Peak Oil hits a political manifesto
The Conservative Party, which is the principal opposition party in Britain, has issued an important report describing its political objectives. The following extract demonstrates an awareness of Peak Oil and its serious impact:
Peak Oil theory refers to the point at which half the world’s accessible oil reserves have been extracted. After crossing this threshold, oil production starts to decline, with future demand outstripping supply. The resulting increase in oil prices has vast economic, social and political implications, with conflict between nations competing for ever-scarcer oil resources. A number of authorities believe that we will have passed the point of world peak oil production in 2008. (Reference furnished by Mark Griffiths)
The issue of "conflict between nations" is likely to be salient to Quiet Professionals.
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871. Oil Price and Financial Chaos
Oil prices rose again during the month to near record levels, as did coal prices, implying that there is very little available spare oil capacity, although price surges are often self-fulfilling as operators and speculators have every financial incentive to build storage in such circumstances. Those with sharp noses will judge the height of the spike and buy forward before opening the tap to drain the tank and depress the price. Volatile trading can be expected as the crisis deepens.
The financial markets continue to be in disarray as debt increasingly loses its collateral. The dollar, which was formerly a prestigious world trading currency in which foreign governments held their savings, is also losing its lustre. Foreign dollar holdings have apparently fallen by 48 billion over the past month. The Bank of England has been forced to prop up a major British mortgage lender, as nervous savers withdraw their savings. The former Chairman of the Federal Reserves has said that interest rates may have to rise to 10% to counter inflation, but interest itself is a form of false money supply, not reflecting goods or services.
Growing numbers of people seem to be perceiving that energy supply is set to decline in the years ahead, which in turn spells a contracting rather than an expanding economy. It is not surprising therefore that debt premised on ever onward expansion loses its illusory collateral. It has been calculated that current oil supply is equivalent in energy terms to that furnished by 22 billion slaves working 24 hours a day.
It is interesting to note the impact of fuel source on naval operations. Crude oil was more energy dense than coal - so the transition by the British fleet provided an advantage. The modern military makes considerable use of petroleum products, so the implications of restricted supply could be significant.
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875. Conflict in Myanmar
It transpires that the recent disturbances in Myanmar (Burma) were triggered by the government’s decision to reduce the subsidy on fuel, such that the cost of diesel has doubled, putting further pressures on the economy.
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LINK (http://www.aspo-ireland.org/contentFiles/newsletterPDFs/newsletter82_200710.pdf)
Ret10Echo
10-07-2007, 15:22
Neccessity breeds ingenuity...unfortunately I am afraid the lesson will be hard learned.
Technologically I believe the U.S. has the capability of greatly reducing our dependance upon oil...we just haven't been kicked in the chops hard enough for it to sink in.
The U.S. dollar is now valued below the Canadian dollar....
There is no accountability for fiscal irresponsibility on a personal or corporate level....
U.S. elected officials lack basic math and accounting skills....
Our system is resilient, but we tread new ground. Comparisons to the 70's I believe are unrealistic. Time will tell.
A further straw in the wind about energy trends.
I've attached a link to a new DOE report. The bad news is that we can expect energy availability to decline and energy costs to increase. This is likely to have an adverse economic impact. It may have strategic military implications.
The good news is that our national political leadership appears to be awakening to the issue.
LINK (http://www.unconventionalfuels.org/images/Volume_I_IntegratedPlan_Final_.pdf)
As long as the US sits on the Oil in AK and off the coast I'd say we're a long way from crying time.
When AlGore is almost forced to park his SUV will be the time the drills start turning.
Sir, we may be, as you say, a long way from “crying time”. A few argue a date as late as 2030. On the other hand, quite a number contend that 2010 is the key year, when global production will slip into irreversible decline. A few others present data that suggest the decline began last year (2006). The data is far from transparent; Saudi Arabia treats information about their oil fields as a state secret.
The problem we face is that when the super-giant fields – Saudi Arabia’s Gwahar field being a case in point – go into decline, the flow available from our own Alaskan and offshore fields are unlikely to offset the impact. We will, of course, be in much better shape than Japan – but I cannot help but wonder whether we will divert domestic production to important allies. Our choices will affect both the domestic and global economy, as well as the political balance.
Al Gore is, as you point out, one of the most profligate energy users around; and you’re probably right to suggest that drilling will begin when he faces some inconvenience. That said, when enough folks making $8 per hour can’t afford to go to Wal-Mart, the ripples will spread all the way to Wall Street. I suspect we’ll see some of those ripples by the end of the second quarter of next year, 2008. I hope that I’m wrong.
..... On the other hand, quite a number contend that 2010 is the key year, when global production will slip into irreversible decline. A few others present data that suggest the decline began last year (2006).....
In 2010, if gas is at $8 a gallon, the key question will be "How much of that is Federal & State Taxes?"
The coming social programs are going to need tons of "new" money to fund them. One way is to punish the "EVIL" SUV drives with higher gas taxes to cut use.
Politicians have big plans for Our Money.
Sir, we may be, as you say, a long way from “crying time”. A few argue a date as late as 2030. On the other hand, quite a number contend that 2010 is the key year, when global production will slip into irreversible decline. A few others present data that suggest the decline began last year (2006). The data is far from transparent; Saudi Arabia treats information about their oil fields as a state secret.
The problem we face is that when the super-giant fields – Saudi Arabia’s Gwahar field being a case in point – go into decline, the flow available from our own Alaskan and offshore fields are unlikely to offset the impact. We will, of course, be in much better shape than Japan – but I cannot help but wonder whether we will divert domestic production to important allies. Our choices will affect both the domestic and global economy, as well as the political balance.
Al Gore is, as you point out, one of the most profligate energy users around; and you’re probably right to suggest that drilling will begin when he faces some inconvenience. That said, when enough folks making $8 per hour can’t afford to go to Wal-Mart, the ripples will spread all the way to Wall Street. I suspect we’ll see some of those ripples by the end of the second quarter of next year, 2008. I hope that I’m wrong.
Do you honestly think "big oil" is going to just roll over and die? I don't see the possibility of huge profits to made in a mad max scenario. I will bet it all on big oil making the transition to a new fuel, what ever that fuel is, seamless. In fact I will bet that the transition to a new fuel, with all the new cars and infrastructure upgrades will be greeted as the best thing to happen to our economy in 100 years.
I do wonder if main battle tanks and jet aircraft can run on "fuel cell" type technology. But I guess once we get all the cars and electricity off of oil there will be plenty for oil for the military and civil aviation for years to come.
No, I think big oil will be with us for quite some time. A depletion rate of 4% (which seems to be a consensus number) still leaves a lot of revenue and lots of profits for the oil companies. I’ll go further, and say that my investments in oil companies are doing nicely – and I don’t see any reason to get out of them. I might be worried about their health 40 years in the future, but I’d be in my mid 90’s then – and probably not in a position to care about oil. :D
Nor do I suggest a “Mad Max” scenario. Truth be told, most of us could cut our energy use by 50% with minimal pain. What I do expect is higher energy prices, lower growth, and financial distress for quite a number of people. In some third-world countries, I expect to see a lot more distress.
Where we part company is on the transition to a new fuel. That may be a lot more problematic. There is a lot of infrastructure to change, and a lot of vehicles to be replaced.
My contention is that such developments will cause changes – economic, political, and otherwise. The exact nature and degree of those changes is an open question, although I would discount anything extreme (for example, a Mad Max world). Still, if we as individuals can explore the idea, we just might be able to position ourselves favorably for the future.
GratefulCitizen
10-14-2007, 01:39
Rising oil prices will eventually make the development of alternative sources economically feasible.
(whether it's different petroleum sources or non-petroleum sources)
Investment will increase in these areas.
As soon as that happens, I predict the Saudis will manage to find some more reserve capacity, and those who invested in alternatives will lose money.
Investors will be wary of getting into this alternative stuff again.
Oil prices will rise...
The question is: how many times can the Saudis repeat this cycle?
GratefulCitizen
06-14-2008, 14:55
Rising oil prices will eventually make the development of alternative sources economically feasible.
(whether it's different petroleum sources or non-petroleum sources)
Investment will increase in these areas.
As soon as that happens, I predict the Saudis will manage to find some more reserve capacity, and those who invested in alternatives will lose money.
Investors will be wary of getting into this alternative stuff again.
Oil prices will rise...
The question is: how many times can the Saudis repeat this cycle?
Here we go again. :munchin
http://biz.yahoo.com/nytimes/080614/1194784977541.html?.v=3
Here's a little news item that may explain some things. The Saudis are, in fact, increasing supplies. Except...they're offering heavy and heavy sour crude when most refineries are set up to handle light sweet crude.
So the Saudis are, technically speaking, telling the truth. But their actions won't do much to reduce the benchmark prices, and won't help at the gas pump.
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Saudi crude sale to Asia limited by ‘low grades’Published: Friday, 13 June, 2008, 08:38 AM Doha Time
SINGAPORE: Saudi Arabia may find itself unable to fully serve its crude oil customers in Asia, the most important market for Middle East producers, as refiners are reluctant to accept the grades being offered.
Asian refiners want increased supplies of the lighter grades of crude to produce more expensive cleaner-burning fuels while Saudi Arabia is offering more of the heavy, high-sulphur grades.
Despite a surprise announcement by Saudi Oil Minister Ali Naimi about three weeks ago that the kingdom had ramped up output by 300,000 bpd or more than 3% from May 10, none of the additional barrels are likely to have been loaded onto tankers bound for Asia.
It’s not that state-owned Saudi Arabian Oil Co, better known as Saudi Aramco, is holding back shipments.
“We haven’t asked for incremental cargoes so we don’t expect to be given any,” an official with a leading South Korean refiner said yesterday.
Late Wednesday, Saudi Aramco notified term customers in Asia, mostly Japanese and South Korean refiners, that it will supply full contracted crude oil volumes in July.
Saudi Aramco is Asia’s top crude supplier and, like Iran and Kuwait, sells its cargoes only under term contracts.
Refiners, however, aren’t keen to buy more of the high-sulphur or “sour” cargoes that make up the bulk of output from these producers, due to poor margins for fuel oil and heavy products.
Instead, global oil prices have been driven higher in recent weeks by tightness in the supply of so-called “clean” products – light distillates such as gasoline, and middle distillates including diesel and jet fuel – which come mainly from processing light crude.
Recognising this, Saudi Aramco last week raised its monthly official selling prices for two of its most popular grades, Arabian Extra Light and Arabian Light, while marking down OSPs on Arabian Medium and Arabian Heavy.
As a result, the closely watched Saudi light-heavy price differential widened to a record $10 a barrel for July, a level unimaginable in August 2003 when it stood at a mere 40 cents a barrel.
Term lifters typically have the option to buy more cargoes if available. Although refiners say the latest Saudi OSPs are favorable, Saudi Aramco is understood to have only more of the heavier grades at its disposal.
Iran’s state-owned National Iranian Oil Co has been unable to offload about 25mn barrels of crude stored in tankers in the Arabian Gulf, mostly of heavy sour Soroosh and Norooz, despite steep OSP cuts.
Officials at Saudi Aramco don’t comment on the company’s policies.
The overnight term allocation announcement extends an arrangement for the ninth straight month and may be repeated for another two months, traders predicted.
That is because the Organisation of Petroleum Exporting Countries, of which Saudi Arabia is a key member, is scheduled to discuss output policy on September 9 in Vienna. – Dow Jones Newswires
LINK (http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=224084&version=1&template_id=48&parent_id=28)