Wednesday-Night

More on oil and Wednesday-night.com Oil Notes

For several years, Wednesday Nights have witnessed often passionate discussions on the validity of M. King Hubbert’s prediction of the early depletion of (easily accessible - ‘cheap’) fossil fuels. With current rising oil prices, Hubbert’s Peak has become a familiar term far beyond the circles of energy experts. While we are in the camp of believers in Hubbert’s Peak, in the interests of continued debate, we present an array of news and views, including Greg Palast’s vitriolic accusations of complicity between governments and oil companies, and the role of what he terms the “McCain-Bush surge”.

August 14
Brazil’s plans to control oil could cause delays
BRASILIA (Reuters) - The Brazilian government’s plan to take greater control over huge new oil discoveries will face obstacles in Congress and could delay its ambitions to become a global oil player, experts said on Thursday.
President Luiz Inacio Lula da Silva wants to change the structure of oil control to give the government more funds for social welfare and education while reducing the power of state-owned oil firm Petrobras and its partners.
August 8
Kurds claim responsibility for oil line blast
(FT) Kurdish separatists claimed responsibility on Thursday for an explosion that has halted the flow of oil through the Baku-Tbilisi-Ceyhan pipeline, helping to push up oil prices amid uncertainty over the security of the supply route.
July 27
‘Blood oil’ dripping from Nigeria
Nigeria is losing billions of dollars every year to oil smuggling.
The illegal “bunkering”, as it is known, makes a huge profit for Nigerian syndicates and rogue international traders.
It leaves in its wake chaos and misery for the people of the Niger Delta.
July 25
Arctic’s Oil Could Meet World Demand for 3 Years
WASHINGTON - The Arctic Circle holds an estimated 90 billion barrels of recoverable oil, enough supply to meet current world demand for almost three years, the US Geological Survey forecast on Wednesday. The government agency also said the area could contain 1,670 trillion cubic feet (Tcf) of natural gas.
July 15
Shell in C$5.9bn Canada gas deal
(FT) It illustrates the growing importance of “unconventional” resources that require greater investment and more sophisticated technology to access.
Duvernay, based in Calgary, has substantial assets in Alberta and British Columbia in “tight gas” – gas trapped in rocks from which it will not flow easily.
July 14
Bush to Lift Offshore Drilling Ban in Symbolic Move
(Planet Ark/Reuters) WASHINGTON - President George W. Bush plans to lift a presidential ban on offshore drilling on Monday to combat soaring energy prices, a largely symbolic move unlikely to have any short-term impact on the high cost of gasoline.
Bush’s move is largely symbolic because Congress also has a ban on offshore drilling and while it expires on Sept. 30, it could be renewed. Government officials also say it would take years for any oil to be produced in those areas.
July 11
Democrats Dig In as G.O.P. Presses for Oil Exploration in Protected Areas
A significant divide remains between the parties’ leaders. Republicans are rallying behind a demand for lifting a longtime ban on drilling offshore along much of the nation’s coastline and in the Arctic National Wildlife Refuge.
July 2
Two very bitter commentaries on the manipulation of oil supplies and prices from opposite sides of the globe. Worth pondering.
Exposing the oil conspiracy
Oil cartel making windfall profits
By M.D. Nalapat
The anti-humanity activities of the oil speculators, who have been taking in billions of dollars in profit since 2003, need to be exposed and countered, including by the people of the US and the EU. The population in both is suffering at the expense of the greedy few who have placed their own financial gain above the future of the world.
Happy Oil Dependence Day
(Truthdig) As we head into the Fourth of July weekend … Why not take a moment to heed the cautions of our founding father, George Washington’s “Farewell Address” to the new nation … about the threat of American imperial ambitions and a declaration of his high expectations for a republic of free men: “In offering to you, my countrymen, these counsels of an old and affectionate friend, I dare not hope they will make the strong and lasting impression I could wish; that they will control the usual current of the passions, or prevent our nation from running the course which has hitherto marked the destiny of nations. But, if I may even flatter myself, that they may be productive of some partial benefit, some occasional good; that they may now and then recur to moderate the fury of party spirit, to warn against the mischiefs of foreign intrigue, to guard against the impostures of pretended patriotism. …”
(Foreign Policy June 2008) The New World Energy Order
Why are oil prices soaring so high, and will they ever return to Earth? Fatih Birol, chief economist at the International Energy Agency in Paris, explains why peak oil is real, why biofuels are indispensable, and how China determines what you pay at the pump.
FP: Do you believe in peak oil?
FB: Of course, but the question is when? Global oil resources are limited. We have conventional oil; we have unconventional oil. We have oil in the North Sea, in the Gulf of Mexico. We have more oil in the OPEC countries. What I can tell you is that one day global conventional oil will peak. This will depend on many factors, including the role of technology, investment, and production policies. When we look at oil outside of the OPEC countries, when you put all of them together, I think it is going to peak very soon. But we have unconventional oil, and we have oil in the Middle East as well. How much will come to the market from unconventional oil?
June 29
Drilling Deeper by The Editors
(The New Republic) This past Wednesday, President Bush called for ending a federal ban on offshore oil drilling, two days after John McCain flip-flopped to take the same position. The idea may or may not have merit in the long run, but what it won’t do is lower gas prices in the short term: The Department of Energy estimates that it would take more than 20 years for either production levels or prices to be affected by a repeal of the ban on offshore drilling. Because the amount of oil at stake is so tiny (about 19 billion barrels, equivalent to around seven months of global consumption), it won’t do much at all to ease jitters or help deflate a bubble in oil markets.
June 19
Bush Calls for End to Ban on Offshore Oil Drilling
(NYT) WASHINGTON — President Bush urged Congress on Wednesday to end a federal ban on offshore oil drilling and open a portion of the Arctic National Wildlife Refuge for oil exploration, asserting that those steps and others would lower gasoline prices and “strengthen our national security.”
Deals With Iraq Are Set to Bring Oil Giants Back
(NYT) BAGHDAD — Four Western oil companies are in the final stages of negotiations this month on contracts that will return them to Iraq, 36 years after losing their oil concession to nationalization as Saddam Hussein rose to power.
Exxon Mobil, Shell, Total and BP — the original partners in the Iraq Petroleum Company — along with Chevron and a number of smaller oil companies, are in talks with Iraq’s Oil Ministry for no-bid contracts to service Iraq’s largest fields, according to ministry officials, oil company officials and an American diplomat.
June 17
World crude production has peaked: Pickens
WASHINGTON (Reuters) - World crude oil production has topped out at 85 million barrels per day even as demand keeps climbing, helping to drive a stunning surge in prices, billionaire oil investor T. Boone Pickens, who heads BP Capital hedge fund with more than $4 billion under management, said during testimony to the Senate Energy and Natural Resources Committee.
Kuwait Says Oil Over $100 Is Too High; Support Saudis
(Bloomberg) — Kuwait followed Saudi Arabia in saying crude oil prices are too high as evidence mounts that energy costs are restraining growth and accelerating inflation.
Every $1 increase in oil prices earned by Kuwait would equal $2.59 million a day, or about $79 million a month. For Saudi Arabia, a $1 increase in the selling price of the 9.7 million barrels a day it plans to pump would add about $295 million a month to the treasury.
June 16
Saudi King: ‘We will pump more oil’
Saudi Arabia will raise oil production to record levels within weeks in an attempt to avert an escalation of social and political unrest around the world. King Abdullah signalled the commitment to the UN secretary general, Ban Ki-moon, at the weekend after the impact of skyrocketing oil prices on food sparked protests and riots from Spain to South Korea.
(Bloomberg) Saudi Arabia, the world’s largest oil exporter, has said the surging price of the commodity is “unjustified” and will host a meeting of producers and consumers in the coastal city of Jeddah on June 22 to help stabilize prices.
June 14
Plan Would Lift Saudi Oil Output
The increase could bring Saudi output to a production level of 10 million barrels a day, which, if sustained, would be the kingdom’s highest ever. The move was seen as a sign that the Saudis are becoming increasingly nervous about both the political and economic effect of high oil prices. In recent weeks, soaring fuel costs have incited demonstrations and protests from Italy to Indonesia.
While they are reaping record profits, the Saudis are concerned that today’s record prices might eventually damp economic growth and lead to lower oil demand, as is already happening in the United States and other developed countries. The current prices are also making alternative fuels more viable, threatening the long-term prospects of the oil-based economy.
June 12
The end of cheap oil helps renewables, but makes far dirtier alternatives viable. A low-carbon future will demand brave leadership
(New Statesman) There are two competing explanations for today’s high oil prices. One sees the price rise as the result of a temporary imbalance between supply and demand, exacerbated by a weak dollar and a bubble of speculative commodities trading. Fix these problems, adherents suggest, and the price can return to previous low levels, allowing business to continue as usual. The other sees the current price spike as symptomatic of a much deeper crisis, one that could end life as we know it in the rich, consuming west as global supplies of cheap oil begin to run short, not temporarily, but for ever. As Chris Skrebowski, editor of the UK Petroleum Review, puts it: “This is what I would describe as the foothills of peak oil.” An imminent oil peak is no longer just a fringe theory: increasing numbers of experts view the topping out point as very close, if not actually upon us. “Easy, cheap oil is over, peak oil is looming,” warns Shokri Ghanem, head of Libya’s National Oil Corporation. If they are right, we are about to move into a very different world.
June 11
Why the Oil Price Is High
By Paul Craig Roberts, Assistant Secretary of the Treasury during President Reagan’s first term and former Associate Editor of the Wall Street Journal.
How to explain the oil price? Why is it so high? Are we running out? Are supplies disrupted, or is the high price a reflection of oil company greed or OPEC greed? Are Hugo Chavez and the Saudis conspiring against us?
In my opinion, the two biggest factors in oil’s high price are the weakness in the U.S. dollar’s exchange value and the liquidity that the Federal Reserve is pumping out.
The problem seems to be getting to enough of the oil that is known to exist
(The Economist) The root of the high oil price in BP’s view [see below] is not a mismatch between strong demand and feeble supply, but failure on the part of various governments to allow markets to work their magic. There are hints of an improvement on the demand side: several Asian governments have recently decided they can no longer afford subsidies. But it is hard to imagine the world’s ardent energy nationalists suddenly throwing their doors open to foreign investment.
That obliges the likes of BP to concentrate on marginal projects, either in difficult surroundings (the Arctic or deep water, for example), or with trickier forms of oil (such as tar sands). The development of such fields has been hampered of late because of a shortage of qualified engineers and suitable equipment. The traders who have been driving up the oil price believe that these bottlenecks will prevent global output from keeping pace with the developing world’s thirst for oil. For the past few years, BP’s number-crunching suggests, they have been right. But by the firm’s own admission, its statistics, although illuminating about the past, are no guide to the future.
June 10/11
Let the markets solve the energy crisis
By Tony Hayward, CEO of On Wednesday, BP is launching the latest edition of the BP Statistical Review of World Energy*. … At times such as these it is a useful analytical tool for those both inside and outside the industry.
It also exposes some myths that need to be put to rest if we are to find the right solutions to big global problems such as energy security and climate change.
The first myth is that high prices are caused by technical factors, such as speculation. While these factors may have an impact on the margins, the data clearly show that high prices are really caused by economic fundamentals.
June 9
Oil shortage a myth, says industry insider

There is more than twice as much oil in the ground as major producers say, according to a former industry adviser who claims there is widespread misunderstanding of the way proven reserves are calculated.
(The Independent) Although it is widely assumed that the world has reached a point where oil production has peaked and proven reserves have sunk to roughly half of original amounts, this idea is based on flawed thinking, said Richard Pike, a former oil industry man who is now chief executive of the Royal Society of Chemistry.
Current estimates suggest there are 1,200 billion barrels of proven global reserves, but the industry’s internal figures suggest this amounts to less than half of what actually exists.
… Dr Pike said there was anecdotal evidence that big oil producers were glad to go along with under-reporting of proven reserves to help maintain oil’s high price. “Part of the oil industry is perfectly familiar with the way oil reserves are underestimated, but the decision makers in both the companies and the countries are not exposed to the reasons why proven oil reserves are bigger than they are said to be,” he said.
Dr Pike’s assessment does not include unexplored oilfields, those yet to be discovered or those deemed too uneconomic to exploit.
The environmental implications of his analysis, based on more than 30 years inside the industry, will alarm environmentalists who have exploited the concept of peak oil to press the urgency of the need to find greener alternatives.
Proven oil reserves are likely to be far larger than reported because of the way the capacity of oilfields is estimated and how those estimates are added to form the proven reserves of a company or a country. Companies add the estimated capacity of oil fields in a simple arithmetic manner to get proven oil reserves.
However, mathematically it is more accurate to add the proven oil capacity of individual fields in a probabilistic manner based on the bell-shaped statistical curve used to estimate the proven, probable and possible reserves of each field. This way, the final capacity is typically more than twice that of simple, arithmetic addition, Dr Pike said. “The same also goes for natural gas because these fields are being estimated in much the same way. The world is understating the environmental challenge and appears unprepared for the difficult compromises that will have to be made.”
Jeremy Leggett, author of Half Gone, a book on peak oil, is not convinced that Dr Pike is right. “The flow rates from the existing projects are the key. Capacity coming on stream falls fast beyond 2011,” Dr Leggett said. “On top of that, if the big old fields begin collapsing, the descent in supply will hit the world very hard.”
[See also Jeremy Leggett What they don’t want you to know about the coming oil crisis in The Independent, Jan. 2006]
June 8
Peak oil debate will rage as long as doubts remain over Opec’s reserves
The Organisation of Petroleum Exporting Countries (Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar, Libya, the UAE, Algeria, Nigeria, Ecuador and Angola) produces 40pc of the world’s oil, about 32m barrels per day (mbd).
The de facto leader of Opec, Saudi Arabia, produces the most at around 9.25mbd, or 30pc of total Opec output. “Effective Opec spare capacity stands at 2.3mbd on paper, although refinery outages, crude quality and high prices mean much of this oil would be difficult to [bring to] market,” said the International Energy Agency in its May oil market report.
May 27
The Geopolitics of $130 Oil
(Stratfor) Oil and food differ from other commodities in that they are indispensable for the functioning of society. Oil and grains — where the shortages hit hardest — are not merely strategic commodities. They are geopolitical commodities. All nations require them, and a shift in the price or availability of either triggers shifts in relationships within and among nations.
May 26
Majesty, We Have Gone Mad
An open letter to King Abdullah of Saudi Arabia
By George Monbiot. Published in the Guardian
Your Majesty,
In common with the leaders of most western nations, our prime minister is urging you to increase your production of oil. I am writing to ask you to ignore him. Like the other leaders he is delusional, and is no longer competent to make his own decisions.
You and I know that there are several reasons for the high price of oil. Low prices at the beginning of this decade discouraged oil companies from investing in future capacity. There is a global shortage of skilled labour, steel and equipment(1). The weak dollar means that the price of oil is higher than it would have been if denominated in another currency. While your government says that financial speculation is an important factor, the Bank of England says it is not(2), so I don’t know what to believe. The major oil producers have also become major consumers; in some cases their exports are falling even as their production has risen, because they are consuming more of their own output(3).
March 22
Driving the surge in gas prices?
The Bush-McCain surge in Iraq
Greg Palast
Again and again, year after year, the world price of oil has been boosted artificially by keeping a tight limit on Iraq’s oil output. Methods varied. The 1928 “Redline” agreement held, in various forms, for over three decades. It was replaced in 1959 by quotas imposed by President Eisenhower. Then Saudi Arabia and OPEC kept Iraq, capable of producing over 6 million barrels a day, capped at half that, given an export quota equal to Iran’s lower output.
… the recent engorgement in oil prices and profits goes right back to the Bush-McCain “surge.” The Iraq government attack on a Basra militia was really nothing more than Baghdad’s leaping into a gang war over control of Iraq’s Southern oil fields and oil-loading docks. Moqtada al-Sadr’s gangsters and the government-sponsored greedsters of SCIRI (the Supreme Council For Islamic Revolution In Iraq) are battling over an estimated $5 billion a year in oil shipment kickbacks, theft and protection fees.
Peak Oil Overview - March 2008
March 12, 2007
The new seven sisters: oil and gas giants that dwarf the west’s top producers
(FT) The “new seven sisters”, or the most influential energy companies from countries outside the Organisation for Economic Co-operation and Development, have been identified by the Financial Times in consultation with numerous industry executives. They are Saudi Aramco, Russia’s Gazprom, CNPC of China, NIOCof Iran, Venezuela’s PDVSA, Brazil’s Petrobras and Petronas of Malaysia.
Overwhelmingly state-owned, they control almost one-third of the world’s oil and gas production and more than one-third of its total oil and gas reserves. In contrast, the old seven sisters - which shrank to four in the industry consolidation of the 1990s - produce about 10 per cent of the world’s oil and gas and hold just 3 per cent of reserves. Even so, their integrated status - which means they sell not only oil and gas, but also gasoline, diesel and petrochemicals - push their revenues notably higher than those of the newcomers.