Oil to $60.....by January?

[BlackVoid]

Re: Oil to $60.....by January?

Oil at around $95, no sign of weakening.
I was also hoping for a slump in the price to go long in oil. No sign of weakness, it seems $160 is more likely by January than $60.

[c1ue]

Re: Oil to $60.....by January?

GRG, idianov,

Thanks for the information.

Given 6.29 barrels per cubic meter, it would seem the waterflooding impact on water supply is minimal given the numbers supplied.

Just curious.

[GRG55]

Re: Oil to $60.....by January?

Good luck with the trade! You have momentum and sentiment on your side right now. There will undoubtedly be more pressure applied in the run up to the Dec 11 FOMC, as the Fed badly needs a falling oil price to provide cover for a 50 bips rate cut (" Future inflation expectations are well anchored, blah, blah). This week's timing of the US annoucement about Iran's nuke program was priceless. Nobody should be surprised if Goldman again plays its part and issues a bearish oil call just ahead of Dec 11 (GS has probably been waiting for today's OPEC announcement so they can pile on and spin it with more authority).

I'm no conspiracy theorist, but having watched this same scenario play out each of the last 4 years, one doesn't need to be particularly attentive to discern the pattern.

OPEC's decision today in Abu Dhabi would have been much easier for them if oil had stayed in the $90's (or already collapsed). Now it's more difficult for the Saudis. They don't want $100. They don't want $50 either.

It depends which the Saudis fear most, a collapsing US$ or a collapsing oil price. Since they feel they can control/correct the latter more than the former, the announcement will be dovish about supply to avoid another run-up into the $90's, or even worse, a breach of $100.

Well waddaya know. I incorrectly thought Goldman would play ball and help the Fed by issuing a bear call on the oil price just before the FOMC meeting, thus giving the Fed more cover to cut the funds rate.

Instead Goldman waited until the DAY AFTER two consecutive Federal Reserve "Big News Days" to issue a bullish call. Does anybody else out there think the timing is just a tad coincidental? Hmmmmm. Bear Trap for real this time?

Oil Rises More Than $4 After Central Banks Act to Spur Growth

By Mark Shenk
Dec. 12 (Bloomberg) -- Crude oil rose more than $4 a barrel, the biggest gain since January, on speculation a decision by central banks to provide cash to financial institutions will spur economic growth.

The Federal Reserve, European Central Bank and three other central banks moved to end a credit squeeze that's threatened to slow the global economy and reduce energy consumption. U.S. crude-oil supplies fell as fuel use increased last week, an Energy Department report showed...

...Goldman Sachs Group Inc., the world's largest securities firm, raised its forecast for crude oil prices next year on concern that investment costs and weaker demand may prompt producers to limit supply. West Texas Intermediate crude oil will average $95 a barrel in 2008, up from a previous forecast of $85, the Goldman report showed.

WTI, which is traded in New York, may rise to as much as $105 a barrel by the end of next year, according to Goldman.

``Goldman has credibility because they were the first to predict that crude would spike to $100,'' Barakat said. ``A sharp increase in their forecast catches everyone's attention.''...

Link:
http://www.bloomberg.com/apps/news?p...d=aVG5BGBHAr4c

[GRG55]

Re: Oil to $60.....by January?

In view of the $4+ spike in oil today, here is the latest report from Henry Groppe on 12/7/07.

http://www.davidstrahan.com/blog/?p=105#more-105

IEA to blame for $100 oil spike - Groppe
Posted on Tuesday, December 11th, 2007
(Podcast) When the oil price soared to over $99 per barrel earlier this year, the cause was not surging demand, nor speculation, nor even impending peak oil, but a forecasting error by the International Energy Agency. That’s according to a presentation by veteran analyst Henry Groppe, one of the most original thinkers in the oil patch, at an investment conference organized by 13D Research in New York last week.
In an interview with lastoilshock.com, Mr Groppe went on to argue that Saudi Arabia can maintain current production for up to two decades, global peak oil will come in 2008, but that prices will nevertheless remain between $65 and $85 per barrel until around 2015.

The IEA was inadvertently responsible for record oil prices this autumn because of its bullish forecast – issued in September 2006 - that non-OPEC oil supply would grow by 1.8 million barrels per day the following year. According to Groppe, it was this that prompted the cartel to forestall an expected glut by cutting quotas by 1.7 mb/d in late 2006. However the IEA forecast proved wildly over-optimistic and the Agency now says non-OPEC output is likely to grow by just 500 thousand barrels per day. So when seasonal demand picked up this autumn “there wasn’t enough oil” and prices soared.
The IEA has a history of over-estimating non-OPEC supply, but this time the predicted increase was the largest since 1984, a time when massive over-supply forced Saudi Arabia to slash output from 10 mb/d to 2.25 mb/d. This, says Groppe, “got the Saudis’ attention”.
Groppe’s analysis challenges the growing belief that Saudi Arabian production cuts in recent years have been driven by geological constraints. The Houston-based consultant is convinced that the kingdom can maintain 8-9.5 mb/d for as long as two decades, and that it will also build a cushion of spare capacity. However he also believes global oil production will peak in 2008 because of steep declines elsewhere.
But in another challenge to conventional wisdom, Groppe insists that global peak oil is consistent with an oil price of $65-$85 until around the middle of the next decade – barring geopolitical spasms. That’s because around 15 mb/d of oil consumption in the developing world is still used for electricity generation and other non-transport purposes for which there are much cheaper alternatives such as coal. The substitution of such fuel oil is already under way, particularly in China, and will allow oil consumption in the transport sector to keep rising despite the cap on overall production. It was the elimination of this kind of oil use in the US and Europe that led global oil consumption to drop by 8 mb/d between 1980 and 1985.
Groppe is a Houston-based contemporary of M. King Hubbert who founded the consultancy Groppe, Long, Littell over 50 years ago, and who claims to have forecast every major discontinuity in the oil market since then. If he is right about the role of the IEA in the recent price spike, it would be ironic that the OECD’s energy watchdog, which routinely calls on OPEC to pump harder, should have scared the cartel into producing less. It would also be ironic that OPEC had been misled by the IEA, since Groppe’s analysis has also exposed how OPEC’s official production numbers are often falsely inflated by as much as 2 mb/d.
In a separate development, the IEA recently confirmed that it is reviewing its reliance on oil resource forecasts from the United States Geological Survey that are widely regarded as wildly over-optimistic.
Listen to the interview with Henry Groppe

Good interview, well worth the time to listen. Thanks for finding this Gordo. I copied your post over to the Peak Cheap Oil thread as that's what Groppe is speaking about...peak cheap oil.

I don't completely agree with all he says (converting from fuel oil to coal or natural gas is fine in China or Kuwait, respectively, but much more problematic for power stations in other places like the interior of Africa - no coal or gas, no railroad to move coal, etc.) We won't know how its going to play out in detail until it plays out...

[Gordo]

Re: Oil to $60.....by January?

Good interview, well worth the time to listen. Thanks for finding this Gordo. I copied your post over to the Peak Cheap Oil thread as that's what Groppe is speaking about...peak cheap oil.

You are right, Grg55, it is an interesting interview i.e. predicts BOTH peak oil and cheap oil (from $65 to $85 per barrel in 2008 and thereafter.) This contradicts "T Bone" Pickens who predicts consistent $100 oil in 2008 and thereafter. Both of these gentlemen have a proven track record.

We'll find out pretty soon who is right.

[Guest]

Re: Oil to $60.....by January?

Good interview, well worth the time to listen. Thanks for finding this Gordo. I copied your post over to the Peak Cheap Oil thread as that's what Groppe is speaking about...peak cheap oil.

I don't completely agree with all he says (converting from fuel oil to coal or natural gas is fine in China or Kuwait, respectively, but much more problematic for power stations in other places like the interior of Africa - no coal or gas, no railroad to move coal, etc.) We won't know how its going to play out in detail until it plays out...

_________

GRG55 -

"Peak Cheap Oil" [ TM ] is to my view a semantic game which risks being disingenuous. "Peak Cheap Oil"? It's not a whole lot more than an attempt to place some "disclaimer" distance between those now cautiously accepting petroleum production constraints in the future (e.g. continual displacement of expensive to refine sour crude over light sweet crude as just one example) and those proponents of "Peak Oil" for the past seven or eight years who have patiently and very clearly reiterated, in simple easy to comprehend terms, an infinite number of times on every last interview and posted article, that "Peak Oil" never meant the "end of oil", but simply meant the weakening, decline, or cessation of production growth.

Those now accepting this implication by coining the term "Peak Cheap Oil" have simply not acknowledged that this group of oil scarcity proponents (from whom they urgently wish to distance themselves politically or ideologically) have been saying precisely the same thing for years!

Really, I've read dozens and dozens of sober minded, astute articles in those suspect "Peak Oil" communities which go to great pains to point out the entire message is simply "the end of cheap oil" - and yet I read iTulip coining a term to define it's position as opposed and distinct from theirs?

Some real frankness on the matter would acknowledge this, and would be a considerable breath of fresh air. iTulipers clamber on board these theses surreptitiously, never acknowledging these people were saying virtually the identical thing to what is now acknowledged here - for many years. To my mind this little ritual dance gets mighty silly at times.

The fact that people here might get irritated at someone like me for pointing this small conceit out is merely one more example of flim-flam.

[GRG55]

Re: Oil to $60.....by January?

_________

GRG55 -

"Peak Cheap Oil" [ TM ] is to my view a semantic game which risks being disingenuous. "Peak Cheap Oil"? It's not a whole lot more than an attempt to place some "disclaimer" distance between those now cautiously accepting petroleum production constraints in the future (e.g. continual displacement of expensive to refine sour crude over light sweet crude as just one example) and those proponents of "Peak Oil" for the past seven or eight years who have patiently and very clearly reiterated, in simple easy to comprehend terms, an infinite number of times on every last interview and posted article, that "Peak Oil" never meant the "end of oil", but simply meant the weakening, decline, or cessation of production growth.

Those now accepting this implication by coining the term "Peak Cheap Oil" have simply not acknowledged that this group of oil scarcity proponents (from whom they urgently wish to distance themselves politically or ideologically) have been saying precisely the same thing for years!

Really, I've read dozens and dozens of sober minded, astute articles in those suspect "Peak Oil" communities which go to great pains to point out the entire message is simply "the end of cheap oil" - and yet I read iTulip coining a term to define it's position as opposed and distinct from theirs?

Some real frankness on the matter would acknowledge this, and would be a considerable breath of fresh air. iTulipers clamber on board these theses surreptitiously, never acknowledging these people were saying virtually the identical thing to what is now acknowledged here - for many years. To my mind this little ritual dance gets mighty silly at times.

The fact that people here might get irritated at someone like me for pointing this small conceit out is merely one more example of flim-flam.

Lukester: Must confess I am not completely clear on what you are driving at here. That the advocates of a declining production trend, including yourself, were correct all along? Fine, I don't think I am disagreeing or arguing with that.

What I have/will argue with is:

• "The decline is because we are running out of producable oil resources - the geology is in control" (although you may NOT be one of them, I hear this argument repeated ad nauseum from others). I am sure we both agree it's wrong. There's no shortage of oil resource in the world. There is a shortage of undeveloped oil resource that can be exploited at prices and within time intervals competitive with other, alternative energy sources - particularly coal & natural gas, increasingly nuclear, solar & wind, and eventually maybe even biofuels and so forth.
• The climate change debate is raising the prominence of the CO2 emissions cost of mankind's use of hydrocarbons and, through carbon taxes or other policy and public preference outcomes, may further widen the cost differential between crude oil and alternatives. Such measures, if implemented, will have exactly the intended effect - redirecting investment away from carbon intensive energy sources.
• Those who are predicting a sudden, surprising and rapid decline in global hydrocarbon production (the "hit the wall scenario") may be correct, but probabilities are NOT in their favour, IMO. I do not think we will hit the wall when it comes to liquid transport fuels because the combined effect of conservation (from secular rising prices), use of LPGs, additions from ethanol and other biofuels, shift of public transit to stationary (electric) power, additions from unconventional oil, and a myriad of other moderate, not radical, technology, behaviour and oil displacement/reallocation changes will offset the decline in conventional crude oil production. Only in the low (but not zero!) probability case of a precipitous decline in OPEC (read: Saudi) conventional production/exports will we "hit the wall". I do not have the same confidence that Saudi can maintain production for as long as Mr. Groppe thinks (I think the law-of-big-numbers is catching up with the world's largest producer), but neither of us has the definitive data to know the actual correct answer today.
• If cost and other resources were not limited, we could keep global crude oil production rising for many, many more years. Not economically (see first bullet), and maybe not environmentally either. That's why I agree with the terminology "peak cheap oil"...I think it describes the situation perfectly and disassociates "peak oil" people like me from the "apocalypse soon" peak oil advocates like James Howard Kunstler, the LATOC folks, and in some limited respects Matt Simmons also.

Respectfully,
GRG55

[Guest]

Re: Oil to $60.....by January?

GRG55 -

Too any points to answer one by one to keep the gist of any simple line of inquiry clear. But it can maybe boil down to this:

Do you believe (or does anyone here believe?), as regards "all liquids" hydrocarbons production, the world can see an "undulating plateau" in production? If so, why does production in specific large producing multi-well and even massive multi field areas, e.g. North Sea, Prudhoe Bay, Mexico Cantarell (early yet), Kuwait Burgan (early yet), or the entire USA fields (very clear example) describe a classic bell curve when they have reached maximum production? A number of these are clearly past their apex, and they all proceed, according to hard logged production data, with a quite well defined apex of production.

So my question is, when you examine entire nations or regions past peaks of production, what does it imply when these all describe a clear bell curve with a "top" after which production declines? Given that even the aggregate numbers of many different fields in a producing area follow this same trajectory, how reliably can one posit an "undulating plateau" of global production?

At the global level it's a truly vast set of datapoints, but we have multiple samples from history, where *very large* subsets of that global production, e.g. the entire US reserves, carved out a trajectory which faithfully followed the same classic bell curve as seems to govern all of these geologic depletions.

So I keep coming back to this and wondering (quite reasonably, it seems to me) - if in the space of the next five or ten years, we actually see global "all liquids" fuel production top out, (i.e. two to five years pass and global aggregate is flat despite massive ramp up of rig counts) how can we reasonably propose or forecast an "undulating plateau" thereafter? When even very large subsets of depletion models have never, ever described an "undulating plateau" in any single historic case whatsoever, how do we propose to introduce that trajectory now, and call it plausible? I mean, wouldn't that be a glaring anomaly against all previous local examples?

That's what I wonder about. If a calendar year passes, this decade or next, beyond which total global production numbers are never exceeded (and we can certainly log it if that occurs!), then we are relying (very earnestly indeed!) on the "undulating plateau" notion to presume that declines won't follow the same bell curves plotted previously by entire regions, e.g. continental US geologic area (and others). Those bell curves clearly described a maximum production that was followed by some very notable declines.

All of a sudden we are going to introduce new "behaviors" in depletion models that have been 100% consistent in local fields throughout the entire petroleum extraction era?

As far as my observations about "Peak Cheap Oil", I still reiterate, the distinctions between your views of increasing cost of petroleum extraction, and those of iTulip, and the scenarios described by many, many very sober proponents of "Peak Oil" are to the best of my understanding virtually indistinguishable. Every group has it's fringe proponents, and Richard Heinberg and many others there certainly thrive on the drama of course. But there are too many other, extremely sober minded and cautiously spoken people in the "Peak Oil" groups who's expressed views are practically indistinguishable from those of iTulip's "Peak Cheap Oil".

Consequently, I'm calling bunk here - I think iTulip distinguishing them as "nutty" by holding up someone like Richard Heinberg who is admittedly somewhat sensationalist, sells short a tremendous number of extremely sober minded oil industry people who do not subscribe to the "undulating plateau" theory. This was my entire point in the prior post. I think there is some flim-flam in iTulip's elaborate distancing from many segments of those commentators, because very, very many of them offer a careful sobriety of comment that is absolutely irreproachable.

As to Matt Simmons, if you pause to consider the valid question I'm raising above - i.e. that regional peaks of global production have all followed a classic bell curve with a very clearly defined top - well then the jury is most definitely still out on Matt Simmon's warnings.

Always appreciate your input GRG55.

[GRG55]

Re: Oil to $60.....by January?

GRG55 -

Too any points to answer one by one to keep the gist of any simple line of inquiry clear. But it can maybe boil down to this:

Do you believe (or does anyone here believe?), as regards "all liquids" hydrocarbons production, the world can see an "undulating plateau" in production? ...

Yes.

Another 5 to 10 years of roughly flat global production of hydrocarbons from all sources is well within the realm of the probable, and IMO is the most probable outcome. The main (predictable) threats to this outcome are collapsing prices (most likely the result of a severe global recession this decade) or a series of enforced climate change policy measures that severely discourage hydrocarbon usage and penalise investment.

(For those that may be desperately hoping for oil to fall to say $40-$50, there is no better way to assure that you'll be paying $5 or $6 or $7 a gallon for gasoline at the end of this decade than to have prices collapse now and stay there for a couple of years)

[zoog]

Re: Oil to $60.....by January?

Do you believe (or does anyone here believe?), as regards "all liquids" hydrocarbons production, the world can see an "undulating plateau" in production? If so, why does production in specific large producing multi-well and even massive multi field areas, e.g. North Sea, Prudhoe Bay, Mexico Cantarell (early yet), Kuwait Burgan (early yet), or the entire USA fields (very clear example) describe a classic bell curve when they have reached maximum production? ...

Yes.

Another 5 to 10 years of roughly flat global production of hydrocarbons from all sources is well within the realm of the probable, and IMO is the most probable outcome. ...

What may look like the peak of a classic bell curve on a long timescale scale can be an undulating plateau on a short timescale. Not mutually exclusive.

[Guest]

Re: Oil to $60.....by January?

Zoog -

I'm betting if we observe flat global "all liquids" production for two to five years we are staring a decline shortly thereafter right in the face. Five to seven years at the top of the bell curve sounds like a generous allotment already. The world is consuming some hefty quantities of petroleum yearly, with or without a recession, so that geological top of the bell curve is not going to be as leisurely as it would have been at 1980's pace of consumption. With China and India in the consumption mix, I surmise it will progress across the "undulating plateau" a good deal more briskly.

GRG55 -

Always appreciate your blunt, straightforward answers! I appreciate when someone "goes out on a limb" and commits themselves to a particular call clearly. Zero fudge factor! Well, we'll see what we'll see. Anyway, I sure as hell don't care about "saving the world" or any such "evangelizing for Peak Oil crap". I'm just curious - (the way a veterinarian might be curiuous about an unwitting hedgehog sitting in the middle of a busy freeway).

What may look like the peak of a classic bell curve on a long timescale scale can be an undulating plateau on a short timescale. Not mutually exclusive.

[Gordo]

Re: Oil to $60.....by January?

This is good news for shorts.The full article at the Resource Investor wep page.

Analysts Warn of Fuel Surplus Near-Term in China
By Interfax-China
14 Dec 2007 at 09:15 AM GMT-05:00

SHANGHAI (Interfax-China) -- Analysts are warning that the Chinese domestic market could experience an oversupply of fuel in the near future due to significant increases in crude throughput in December, after processing growth in November failed to meet market expectations.
"We predict that crude throughput this month will definitely be significantly higher than November, as both major refiners have pledged to run at full capacity, and the country's many local independent refineries were allocated crude resources at the end of last month," an oil product analyst with the energy information portal oilgas.com.cn, Zhou Fenting, said.

Such independent refineries, otherwise referred to as "teapots", were previously denied access to crude oil and were only able to use fuel oil for feedstock. Teapots account for 10% to 15% of the country's total refining capacity.
China's crude processing growth was slower than expected in November, with the country processing just 3.8% more crude oil during the month than it did a year previously, and around 2% more than in October, according to National Statistics Bureau data released today.
"In a somewhat ironic twist, an oversupply of fuel could arise in the domestic market in the near future," Zhou said. Though fuel output is building now, gasoline and diesel consumption will enter an off-season at the end of this month as cold weather temporarily puts the brakes on the country's agricultural, fishing and construction industries.

[GRG55]

Re: Oil to $60.....by January?

Apparently it's time to trade in the hybrid for a big SUV again...:eek:


(a bit of comic interlude for the weekend).

Brazil's Not Peaking

December 14, 2007: 08:05 PM EST

Dec. 17, 2007 (Investor's Business Daily delivered by Newstex) -- Energy: Global warming doomsayers have a mirror canard of doom in the peak oil theory, suggesting that the world is running out of oil. So is it? Not with countries like Brazil still not even done discovering it yet.

Last week came news that Brazil may be sitting on even bigger oil deposits than the huge Tupi field discovered just last month. According to Bloomberg News, if a geological formation beneath a two-mile layer of salt in Brazil's Santos offshore basin is oil-bearing, it may hold "significantly more" crude, says Gustavo Gattass, an analyst with UBS (NYSE:UBS) Pactual in Rio de Janeiro.

That's no small thing -- Tupi alone almost doubled Brazil's oil reserves and may raise Brazil to the rank of 10th biggest oil producer from 17th currently. Awed at the good fortune, Brazil's president, Luiz Inacio Lula da Silva sighed: "God must be Brazilian."

Wait a minute. Wasn't oil supposed to be running out? Wasn't all the oil out there already discovered? If this new "Sugar Loaf" field in Brazil pans out, the world oil picture won't be the same.

Brazil will become an even bigger exporter in a decade or so than projected and could put pressure on the club of petrotyrants that now has a monopoly on resources. Best of all, it throws doomsday assumptions about oil "peaking" on its head.

The world produces about 85 million barrels of oil a day, according to the International Energy (OOTC:ILGL) Agency. Global energy (NASDAQ:GEGT) demand is expected to rise 55% from 2005-2030. Peak oil theories abound that new discoveries are not keeping up with oil usage. But it's significant that the new demand also is fostering big new discoveries, largely from the very countries where demand is growing most.

Peak oil advocates claim that the world is running out of oil unless the West gives up its energy-consuming lifestyle. Like global warming and population-bomb Malthusianism, it's essentially junk science because it operates on a static model. Crucially, it leaves out the politics of whether oil companies are allowed to discover or not.

Might the recent shortage of new oil on the market have something to do with bans on offshore drilling, as in the U.S.?

Might this lack of new oil have something to do with the fact that less-efficient state oil ownership has grown globally to 80% of all reserves, while countries such as Venezuela have begun seizing private oil properties?

Might the fact that big emerging markets need oil badly and don't know where to get it motivate them to find more themselves?

Believing in their potential and determined to get rich, these countries are the ones making some of the most dramatic new energy discoveries this year. Besides Brazil, China has made 10 major new discoveries this year alone. Its Bohai Bay discovery last May, its largest in four decades, added 7.35 billion barrels of reserves. India, once viewed as an energy no-hoper, is also finding energy offshore, and Russia already is a major producer making itself bigger.

Meanwhile, last year Mexico made a huge offshore discovery it has yet to tap. And in the tiny area where U.S. energy companies are permitted to drill offshore in the Gulf of Mexico, Chevron, Statoil and Devon Energy made the biggest discovery since the Alaska Prudhoe find decades ago, called "Jack 2." It's so big it could add 50% to the U.S.' 29 billion barrels of domestic energy reserves.

"The world is not running out of oil," said Daniel Yergin, head of Cambridge Energy (OOTC:CNGG) Research Associates and one of the world's leading oil experts, in a recent interview with Les Echos in Paris.

Yergin noted that technological breakthroughs also are enabling the production of more energy. Not only can new technologies recover resources from old wells previously thought tapped out, it can create oil from formerly useless resources, like tar sands. It also can recover oil and natural gas from previously impossible geography, like the deep blue sea miles beneath the surface -- which will be Brazil's challenge.

Brazil's discovery isn't just wonderful news for Brazil -- it's a lesson for the West. Not only is there more oil out there than doomsayers claim, but it takes political will to ignore the naysayers and get out there and discover more.

The best part about Brazil's will to drill is it exposes the peak oil crowd for what it is: a group with a radical agenda that has less to do with science than with expounding "Western guilt" about its economic success, which is built on oil. Emerging Brazil has no such qualms, and shows just how useless such hang-ups are.

[GRG55]

Re: Oil to $60.....by January?

Now we're talkin'...

The Oil Czar

by Matthew Malone Dec 14 2007
The head of one of Russia's largest oil and gas companies discusses the futility of predicting oil prices. :p

Leonid Fedun likes to win big, whether on oil fields or soccer fields. At 50, Fedun is one of Russia’s wealthiest tycoons, having amassed a $4 billion fortune as the V.P. of Lukoil, one of Russia’s largest oil and gas companies. The next few years in Russia’s domestic politics and the energy trade could determine a boom or bust for the nation’s place in the world. But Fedun isn’t merely preoccupied with his company’s future, or his country’s—at least not when a soccer game is underway. In November, Fedun promised Mercedes-Benzes to four Croatian players if they won the game that would advance Spartak Moscow, the team he owns, in a European tournament. Croatia won.

We caught up briefly with Fedun on Wednesday, December 12, at New York’s Metropolitan Club to talk about oil, politics, and kicking the ball around.

Portfolio: President Vladimir Putin this week named his intended successor, Dmitry Medvedev, a Putin disciple who’s also the chairman of Lukoil’s chief rival, Gazprom. What impact will a Medvedev presidency have on the Russian oil business?
Fedun: Medvedev’s the most liberal of the existing policymakers, and he has deep expertise in the oil and gas industry. The Russian oil industry has reached peak production and requires a lot of investment. That means support from the government is required.

Portfolio: What’s your forecast for oil prices?
Fedun: There are no instruments worldwide that could be used to reduce the price of oil. The United States tried to change the situation—the idea was, “Let’s invade Iraq, and let’s have control over those reserves.” This year Iraq was supposed to produce six to eight million barrels, and now it’s barely producing two. That’s less than during Saddam’s administration.

Portfolio: What do you think of U.S. restrictions on developing Iranian oil resources?
Fedun: A new U.S. administration is coming in, and so we can only expect some changes. One will need to make a choice between more crude oil supplies to international markets and fighting something—I don’t know what. The attempt to force crude to the international market failed.

Portfolio: Do you see any viable alternative to oil in, say, the next 20 years?
Fedun: No. But if something should happen, it will be something that we have no idea of. I read a novel once about New York in 2000, written in 1850. What do you think was the major issue for New York in 2000? It was the removal of millions of tons of dung from the 40 million horses that were in New York at the time. That’s our ability to forecast the future.

Portfolio: Do you have any political aspirations?
Fedun: No. Soccer is better.

[jk]

Re: Oil to $60.....by January?

the thing that could produce "an undulating plateau" of oil production is high oil prices.

all regional production curves in the past were in the context of the global availability of reasonably cheap oil. thus there was no incentive to spend a lot of capital to extend regional production. thus, regional production was allowed to decline along a curve determined by the relatively stable global price of oil versus the continuously escalating cost of enhancing regional production as the more easily exploited of regional resources were progressively depleted.

in the context of the gradual but real global exhaustion of cheaply produced oil, there is no outside source of oil to keep prices from rising. as this price rises, it becomes economic to enhance production in increasingly costly ways. thus the curve of future production is determined by an unevenly rising global price of oil versus the progressively escalating cost of enhancing global production.

undulations in the production of hydrocarbon liquids will be determined by feedbacks between oil production, oil prices, conservation and the cost of conservation, variable lags in capital investments increasing production of increasingly expensive alternatives, economic cycles causing variations in consumption superimposed on the variations caused by increasing production costs, and so on.