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At least according to the latest and greatest from the CNBC.com homepage.
Red flag!
http://www.cnbc.com/id/35890963
Red flag!
http://www.cnbc.com/id/35890963
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Re: Peak Oil? Nothing to worry about...
I really get a laugh when I read this sort of stuff...especially coming from a company that spend most of this decade insisting the "correct" price for oil was $25 per barrel, and only reluctantly and belatedly raised that to $40 when the former figure became too embarrassing to maintain:Originally posted by lsa420 View Post
As I have posted before, the world cannot burn virtual barrels."...BP Chief Executive Tony Hayward said last month world oil demand would peak sometime after 2020 at between 95 million and 110 million barrels per day (bpd), compared with current oil demand of around 85 million bpd..."
So "demand" will always, over time, equal all the barrels we can afford to find and develop. Short term swings in global inventories [even those that can be built up using idle oil tankers] are inconsequential compared to global consumption [something to keep in mind as one watches the histrionics on Bubblevision that accompany each weekly release of US oil inventories] .
I agree with the premise that there is tremendous potential for energy intensity reductions, primarily [imo] from conservation efforts, as compared to substitution with alternatives. And such conservation efforts can be implemented very rapidly across the large, developed economies, and with material effect as we saw in the early 1980s after the Iran Revolution oil price spike. This is a point that has been made quite eloquently in the past by fellow iTuliper C1ue.
However, unlike the 1970s/'80s, this time we didn't see the supply response from the increase in investment [There are good reasons to be sceptical of current estimates of global surplus production deliverability], and this time the marginal barrel of consumption is not coming from the developed economies. -
Re: Peak Oil? Nothing to worry about...
Reading today that SHELL was looking to sell its Gas stations here in the UK. They sussed that very soon they be selling gas to eletric cars with ranger extenered engines that require a visit once a month!
MikeComment
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Re: Peak Oil? Nothing to worry about...
Refining and retailing oil products has been a tough business for decades. It becomes even more so with every recession, when demand for petroleum products shrinks. Finally, selling out of the refining & marketing operations has been going on for a long time. For example, through the 1980s Amoco Corporation sold much of its international [non-USA] refining and retailing operations after it lost its largest crude oil production asset base in the 1979 Iran Revolution.Originally posted by Mega View Post
But it would not appear that Shell thinks electricity is going to put them out of business...;)May 1, 2008
Shell lambasted as it seeks exit from offshore wind farm
Royal Dutch Shell yesterday provoked a storm of anger among its partners in the world's largest offshore wind proposal when it revealed plans to sell its stake.
The world's second-biggest oil company said that it planned to sell its 33 per cent stake in the London Array project, which plans for as many as 341 turbines off the Kent and East Sussex coasts. Shell, which reported record quarterly profits of £3.9 billion this week, is understood to have approached Centrica, the owner of British Gas, and other utilities about a possible sale.
Shell said the decision was made following reappraisal of its UK and European assets...
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Re: Peak Oil? Nothing to worry about...
From Gregor.us today [emphasis mine]:Originally posted by GRG55 View Post
...so it’s rather quaint that the energy analysts from that previous era still gather each week on American financial TV, to discuss the inventories at Cushing, Oklahoma. Inventories at Cushing, Oklahoma? The US has been removing discretionary demand for oil for years, starting back in 2004. And current unemployment in California is at 13.2%–another new post-war high. Yet oil is at 82.00 dollars? Get these analysts off TV. Please. We need analysis of diesel demand in Guangdong, and Uttar Pradesh...
...As you can see from the chart below, the twin peaks of oil production in 2005 and 2008 reveal that while the world was able to respond to a moderate price advance coming out of 2002, nearly all of the price action above 40.00 dollars a barrel starting in late 2004 did not produce more supply...
"...The familiar names that you see on financial TV here in the US, talking about oil, are generally living in a past that no longer exists. One really has to go to London, Sydney, and Toronto to find not only the best minds in energy, but TV hosts smart and informed enough to even handle the conversation. Global oil production peaked in the 2005-2008 period and now trades at levels thought unthinkable in 2005 when unemployment levels in the OECD were half current levels...
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Re: Peak Oil? Nothing to worry about...
Glad I found you, GRG55.
I wanted your opinion about a companion article from Gregor.us.
Gregor.us
Portrait of Price vs Non-Opec Supply
February 19, 2010
Non-OPEC crude oil supply peaked six years ago in 2004, at a sustained annual average of 42.068 mbpd (million barrels per day). Supply then fell every year thereafter through 2008, before making a small recovery in 2009. What’s telling, of course, is that supply peaked in a year when the price of oil averaged only $41.51 per barrel. Yes, I’ve made this point before but it’s worth making again: Non-OPEC oil supply, which accounts for 60% of total world supply, failed completely to make a response to price. To illustrate, I have drawn up a chart showing both: average annual Non-OPEC supply vs. the average annual price, of oil.
Readers will no doubt draw their own conclusions from this chart. I will offer you mine. The supply surge you see coming out of 1999 is a depiction of how the oil business actually works. And that is producers are merely looking to make a healthy spread between the cost of production and the market price. In that 1999-2004 period the final, remaining portions of easy oil were pumped out of the ground among Non-OPEC producers. That spike, that moonshot of supply between 1999 and 2004 is not responding to an advance in the price of oil. It’s responding to a good enough price of oil, compared to production costs.
The peak in supply in 2004, accordingly, is the point in time where production costs (and time delays) begin to show up in the global supply system. Thus, just as the price of oil starts its heroic trajectory higher from 56.64 to 66.05, and then on to 72.34 and finally 99.67, the cost of oil production in Non-OPEC races ahead as the availability of new supply slows down and decline from existing fields start to take its toll. It is only with the advent of prices above 70.00 per barrel that Non-OPEC is able to start fighting decline, as it reaches for ultra-deep offshore, unconventional sources like tar sands, and conducts enhanced oil recovery on aging fields.
Now for the really bad news: there will be no supply surge this time from Non-OPEC when the world next exits recession. Unlike the last decade, when alot of idle supply across Non-OPEC (especially from Russia) was turned back on as the world exited those recession(s), Non-OPEC will only be able to increase oil supply now at much higher prices. How high? Well, it’s not even clear that Non-OPEC could repeat its 2004 performance of a sustained 42.068 mbpd at any price.
We are actually looking at a situation where a certain floor in price is needed to simply keep 60% of total oil supply from declining even further. But should the world exit recession, I would expect a new normal for the price of oil at 120.00 dollars per barrel.
-Gregor
Are we facing MUCH higher oil prices within the next two or three years?
If so, I suppose we should look to buy more shares in stocks like OXY, CPG.TO, etc. Do you think so?
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Re: Peak Oil? Nothing to worry about...
RazOriginally posted by Raz View PostGlad I found you, GRG55.
I wanted your opinion about a companion article from Gregor.us.
Gregor.us
Portrait of Price vs Non-Opec Supply
February 19, 2010
Non-OPEC crude oil supply peaked six years ago in 2004, at a sustained annual average of 42.068 mbpd (million barrels per day). Supply then fell every year thereafter through 2008, before making a small recovery in 2009. What’s telling, of course, is that supply peaked in a year when the price of oil averaged only $41.51 per barrel. Yes, I’ve made this point before but it’s worth making again: Non-OPEC oil supply, which accounts for 60% of total world supply, failed completely to make a response to price. To illustrate, I have drawn up a chart showing both: average annual Non-OPEC supply vs. the average annual price, of oil.
Readers will no doubt draw their own conclusions from this chart. I will offer you mine. The supply surge you see coming out of 1999 is a depiction of how the oil business actually works. And that is producers are merely looking to make a healthy spread between the cost of production and the market price. In that 1999-2004 period the final, remaining portions of easy oil were pumped out of the ground among Non-OPEC producers. That spike, that moonshot of supply between 1999 and 2004 is not responding to an advance in the price of oil. It’s responding to a good enough price of oil, compared to production costs.
The peak in supply in 2004, accordingly, is the point in time where production costs (and time delays) begin to show up in the global supply system. Thus, just as the price of oil starts its heroic trajectory higher from 56.64 to 66.05, and then on to 72.34 and finally 99.67, the cost of oil production in Non-OPEC races ahead as the availability of new supply slows down and decline from existing fields start to take its toll. It is only with the advent of prices above 70.00 per barrel that Non-OPEC is able to start fighting decline, as it reaches for ultra-deep offshore, unconventional sources like tar sands, and conducts enhanced oil recovery on aging fields.
Now for the really bad news: there will be no supply surge this time from Non-OPEC when the world next exits recession. Unlike the last decade, when alot of idle supply across Non-OPEC (especially from Russia) was turned back on as the world exited those recession(s), Non-OPEC will only be able to increase oil supply now at much higher prices. How high? Well, it’s not even clear that Non-OPEC could repeat its 2004 performance of a sustained 42.068 mbpd at any price.
We are actually looking at a situation where a certain floor in price is needed to simply keep 60% of total oil supply from declining even further. But should the world exit recession, I would expect a new normal for the price of oil at 120.00 dollars per barrel.
-Gregor
Are we facing MUCH higher oil prices within the next two or three years?
If so, I suppose we should look to buy more shares in stocks like OXY, CPG.TO, etc. Do you think so?
I've been looking at crude priced in the trade-weighted dollar index, which I prefer to the Dollar Index. From a brief look back at historical data, when the ratio goes above 1.25 it appears the US economy can't "handle it" and subsequently enters a recession. I've been keeping my eye on this.
As of now, approx:
Crude: $82
TWDI: 76
Ratio: 1.08
I'll be buying shares in non-US energy companies going forward.Comment
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Re: Peak Oil? Nothing to worry about...
The reports highlighting the lessened economic intensity of developed nations is at best leaving out key parts of the discussion IMO.
I believe the reason developed nations have lessened the intensity of oil in their economic growth is b/c they moved their production assets offshore to developing countries, & instead allowed the FIRE industry to become the biggest % of GDP, allowing leverage in the system to magnify ROC, investment returns & GDP...till that game blew up in 2008...
Unless we think that game is coming back (it's probably not b/c it was fraud in many cases a la LEH), i would love to see the "oil intensity of economic growth" chart updated in another 10 years...Comment
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Re: Peak Oil? Nothing to worry about...
The winter of 1998/99 marked the end of a 20 year secular bear market for oil as the price bottomed. The 2001/02 recession momentarily dampened the initial price rebound but, as we all know, once Greenspan and Co. got into high gear with the usual reflation moves it was liftoff for the commodities bull.Originally posted by Raz View PostGlad I found you, GRG55.
I wanted your opinion about a companion article from Gregor.us.
Gregor.us
Portrait of Price vs Non-Opec Supply
February 19, 2010
Non-OPEC crude oil supply peaked six years ago in 2004, at a sustained annual average of 42.068 mbpd (million barrels per day). Supply then fell every year thereafter through 2008, before making a small recovery in 2009. What’s telling, of course, is that supply peaked in a year when the price of oil averaged only $41.51 per barrel. Yes, I’ve made this point before but it’s worth making again: Non-OPEC oil supply, which accounts for 60% of total world supply, failed completely to make a response to price. To illustrate, I have drawn up a chart showing both: average annual Non-OPEC supply vs. the average annual price, of oil.
Readers will no doubt draw their own conclusions from this chart. I will offer you mine. The supply surge you see coming out of 1999 is a depiction of how the oil business actually works. And that is producers are merely looking to make a healthy spread between the cost of production and the market price. In that 1999-2004 period the final, remaining portions of easy oil were pumped out of the ground among Non-OPEC producers. That spike, that moonshot of supply between 1999 and 2004 is not responding to an advance in the price of oil. It’s responding to a good enough price of oil, compared to production costs.
The peak in supply in 2004, accordingly, is the point in time where production costs (and time delays) begin to show up in the global supply system. Thus, just as the price of oil starts its heroic trajectory higher from 56.64 to 66.05, and then on to 72.34 and finally 99.67, the cost of oil production in Non-OPEC races ahead as the availability of new supply slows down and decline from existing fields start to take its toll. It is only with the advent of prices above 70.00 per barrel that Non-OPEC is able to start fighting decline, as it reaches for ultra-deep offshore, unconventional sources like tar sands, and conducts enhanced oil recovery on aging fields.
Now for the really bad news: there will be no supply surge this time from Non-OPEC when the world next exits recession. Unlike the last decade, when alot of idle supply across Non-OPEC (especially from Russia) was turned back on as the world exited those recession(s), Non-OPEC will only be able to increase oil supply now at much higher prices. How high? Well, it’s not even clear that Non-OPEC could repeat its 2004 performance of a sustained 42.068 mbpd at any price.
We are actually looking at a situation where a certain floor in price is needed to simply keep 60% of total oil supply from declining even further. But should the world exit recession, I would expect a new normal for the price of oil at 120.00 dollars per barrel.
-Gregor
Are we facing MUCH higher oil prices within the next two or three years?
If so, I suppose we should look to buy more shares in stocks like OXY, CPG.TO, etc. Do you think so?
One of the takeaways from the Gregor item you posted is that production costs start to trend upward as oil prices increase. This happens in every single cycle. As the price of crude oil increases a battle emerges to determine who is going to capture the increasing margin. The producers find themselves in an environment of increasing cashflow and a financial sector able and willing to raise lots of capital for the sector from eager investors. The service companies start to raise prices - everything from drill rig day rates to chemical costs start going up - as producing company demand [from all the cash and capital gushing into the sector] starts to outstrip their ability to supply. Later in the cycle governments start raising taxes and royalties, to get their "fair share". In extreme cases assets get confiscated through nationalization. The final phase "always" involves misallocation of capital...producing companies executing projects that require continued high prices to make any sense. That usually marks the approaching end.
All of these things, except for the very last item, happened between the 1999 bottom and the 2008 spike.
Yes, there were some notably stupid expenditures by some companies late in this cycle. But this time these were the exception. For the most part the industry remained sceptical of the durability of the price increases, and acutely sensitive to the margin squeeze from increasing operating & service company costs, and voracious governments. Instead of investment in exploration and new production, an amazing amount of increased company cashflow went to buying back common shares...to support the stock and option grants given to management, Board members and staff - all of whom have now joined the queue looking for their share of any increasing margin.
The lack of non-OPEC supply response is partly due to all of these factors.
Looking forward you may want to consider some of the following in your investment decision making:- In a world with a seriously vulnerable global economy, is any near term material increase in crude oil price sustainable...or does it simply plunge the world back into recession? Does this lead to price volatility even greater than we have seen in recent years?
- Can stockholders of producing oil companies...the companies that have ownership or access to the reserves...make money on a consistent basis when prices rise again? Or do stockholders continue to come last in the line of "stakeholders" [which now includes insiders] grabbing their "fair share"?
- What is the real potential for conservation in the developed economies that currently consume most of the world's oil production?
- Will climate change and "carbon taxes" come back on to the policy agenda after the disaster in Copenhagen?
].
The cynic in me is convinced that, just like the Wall Street banks during the FIRE era, in any commodity bull market the producing companies will, for the most part, reward their internal constituents [Board, management, staff] with a disproportionate share of the profits. They have been waiting their turn to make like the bankers, and they aren't going to let it pass when they get their chance. The egregious behaviour of the vast majority of these people during the earlier run this decade convinces me of that. There are some exceptions, but one has to work bloody hard to find them, and even then there are no assurances they won't succumb to the temptation of "instant" riches.
This is the unfortunate moral legacy of the FIRE economy, and may just turn out to be the reason that investors eventually turn away in disgust from capital market participation for a generation.
Now if I haven't completely discouraged you, it could be that the way to make money in this cycle is to buy solid balance sheets, backed by unhedged reserves in the ground, in reasonably "safe" jurisdictions [there is no such thing as a completely safe jurisdiction any more], and be willing to trade those positions on commodity price and market sentiment, instead of fundamentals.Comment
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Re: Peak Oil? Nothing to worry about...
Many, many thanks, GRG55. What a detailed and excellent response.
I'll most likely continue my strategy of maintaining at all times approxiamately 15% of my assets in oil equities with very strong balance sheets, but bumping the allocation to at least 30% when there's a deep sell-off. Right now I'm at 22%, having sold my remaining OXY on the big reversal day down on Jan 11th. (I wish I'd sold Progress Energy then, too!)
Your knowledge of the industry and all things petroleum is a great resource for iTulip.
Thank you again.
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Re: Peak Oil? Nothing to worry about...
Thanks, Isa420. Intriguing idea, and I'll watch this too.Originally posted by lsa420 View Post
I pick up much useful info from the community, and this also appears useful.
PS. I'll post the research I have on Canadian oil & gas equities under "Stock Market Research" in the Resources section.Comment
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Re: Peak Oil? Nothing to worry about...
Just a quick follow-up on a point I've made in a couple of previous posts:
From earlier in this thread:and from a post dated Oct 9th 2009, a more pointed excerpt:Originally posted by GRG55 View PostToday's Bloomberg:Originally posted by GRG55 View PostIf there is a major multi-national petroleum company that is run as the personal fiefdom and cash cow of its Chairman and CEO, it is Occidental.Ray Irani Making $59 Million as Americans Deplore Executive Pay
March 25 (Bloomberg) -- Ray R. Irani earned $31.4 million last year as chairman and chief executive officer of Occidental Petroleum Corp., making him the highest paid executive in a Bloomberg News survey of compensation.
Barring a sudden reversal at Occidental, more is on the way for Irani later this year: $58.5 million from an incentive plan based on the company’s return on equity for the three years ending June 30.
The payment is atypical because it will be made in cash and will reward Irani for a lower return than the company recorded before the incentive was granted...
For any Oxy shareholders out there, I apologize if you coughed up your Corn Flakes this morning.
The rest of the Bloomberg article is equally entertaining...but I recommend you finish your breakfast first... ;)Last edited by GRG55; March 25, 2010, 08:18 AM.Comment
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