Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre at nef dedicated to raising awareness of peak oil.
At the end of March, when Brent traded at around $125 per barrel, Saudi oil minister Ali al Naimi wrote a sharply worded article in the FT claiming there was no justification for such high oil prices, and Brent has since slumped to $100, which happens to be the Saudi target price. The decline is likely to be temporary, however, and Mr al Naimi soon shown to be as influential as King Canute. In answer to his complaint, he might like to read a recent paper from a team of IMF economists The Future of Oil Geology vs Technology which demonstrates the ten-fold rise in oil prices since the turn of the century is almost entirely due to depletion.
While output has risen in Saudi Arabia, the US, Libya and Iraq, the more important cause of the oil price slide is the economic slump – with many eurozone countries in recession and growth in China slowing sharply — in which oil prices are clearly complicit. Until 1st June, Brent had stood above $100 for 240 consecutive days, the longest on record, compared to just 170 days in 2008.
OECD oil consumption has fallen sharply since 2008, especially in the US, where it is now back at levels not seen since the mid-1990s, according to figures from the EIA. But the spare production capacity freed up by weaker OECD demand has been soaked up by the BRIC economies — especially China — thus keeping the crude price painfully high for the spluttering economies of the west. Now it looks as if even the ‘Chindia’ economies are cooling and struggling to pay the depletion premium.
There are also signs that the weakening oil price is beginning to have an impact on production. According to consultants JBC Energy, Saudi Arabia has already cut back shipments following a period of 3 months in which al Naimi claims that the kingdom has been pumping over 10 million barrels/day— its highest level since the 80s. It’s worth noting however that in that time Saudi domestic consumption has more than trebled.
What happens next is difficult to predict. A falling oil price will soon begin to affect other OPEC countries like the UAE and Kuwait, which like Saudi depend on oil revenues to keep social unrest at bay. It will also impact the expensive barrels like tar sands, shale oil and deepwater production, perhaps leading to cancellations or delays. This would advance the date of the next oil price spike when — or if — economic growth returns.
On the other hand, a combination of the impact of sanctions on Iran, and a possible OPEC production cut could push prices higher far sooner, causing still further damage to struggling economies.
Either way, it isn’t pretty.
Oil
Oil Heads for Longest Weekly Losing Streak in 13 Years
Oil fell a second day in New York, heading for the longest weekly losing streak in more than 13 years, on speculation the economies of the U.S. and China, the world’s biggest crude consumers, will slow and curb fuel demand.
Futures dropped as much as 2.6 percent. Federal Reserve officials need to assess the risk from Europe’s debt crisis and U.S. budget cuts before deciding on stimulus measures, Fed Chairman Ben S. Bernanke said to the Joint Economic Committee yesterday. China reports economic data tomorrow after cutting interest rates for the first time since 2008. Global crude supply is sufficient, Youcef Yousfi, Algeria’s energy minister, said before OPEC meets next week in Vienna…
Saudi Arabia Achieving $100 Oil Signals Output Reversal
Saudi Arabia is poised to rein in oil sales after it achieved a $100-a-barrel target by cutting the price of its crude and pumping at the highest rate in at least three decades.
The world’s biggest crude exporter started to scale back shipments this month, Vienna-based researcher JBC Energy GmbH said, citing tanker fixtures. Three days ago the desert kingdom raised the July official selling price to Asia of its main crude grade, Arab Light, for the first time in three months, another sign that it is reducing production, according to the Centre for Global Energy Studies in London…
For first time in years, the world is producing more oil than it needs
Remember when, a few short months ago, the whole planet was panicked about cripplingly high oil prices? That’s changed in a hurry. Crude prices are now plummeting. Oil in London is trading for $96 per barrel, way down from $126 back in February.
The big reason why: supply and demand. The world is pumping out more oil and other liquid fuels right at the moment when the global economy is starting to slacken and people are using less of the stuff…
Argentina to ‘immediately launch’ criminal proceedings against UK oil firms operating off Falklands Islands
The UK Government said it would support the country’s oil companies operating around the Falkland Islands after Argentina announced it is taking steps to sue five British firms.
The Argentine foreign ministry on Monday declared “illegal and clandestine” the activities of Desire Petroleum, Falkland Oil and Gas, Rockhopper Exploration, Borders and Southern Petroleum, and Argos Resources on the grounds that they are drilling in Argentine waters…
Oil rush in the Arctic gambles with nature and diplomacy
The small group of international scientists, politicians and business leaders are using the Arctic research station as a makeshift conference centre for urgent talks on how to fast-forward a low carbon economy. They have come to the snowy archipelago of Svalbard, a few hundred miles from the North Pole, to hear the latest bad news on melting glaciers and climate change.
“Nowhere are the implications of global warming more visible than in the Arctic. Ecosystems as well as livelihoods are presently undergoing rapid change. In spite of all the evidence provided by science, most governments in the world have failed to take the necessary action,” warns Anders Wijkman, the Swedish MEP who is chairman of this special symposium…
Gas
Halliburton blames guar bean shortage for profit warning
Halliburton has warned that a shortage of guar beans in India will hit its profits.
The oilfield services company said its North American profit margins would fall by twice as much as expected in the current quarter.
Guar is a key ingredient in hydraulic fracturing, or fracking, fluids, which are used to extract natural gas from rocks…
China’s shale future: not as bright as promised?
For something that is invisible, odorless and buried deep underground, shale gas certainly has a way of being controversial. In China, it is at the centre of heated debate: Will it, or won’t it, provide a huge new fuel source for the world’s largest energy consumer?
Even the finest minds in the oil and gas industry go back and forth over this question…
Gas Demand To Rise 17% By 2017 On Asia, U.S., IEA Says
Natural-gas consumption may rise 17 percent by 2017 from last year as demand surges in Asia and the U.S., according to the International Energy Agency. China’s use of the fuel will double while Europe’s will remain below the level of 2010, it said.
Demand worldwide will climb by 576 billion cubic meters to 3.937 trillion, the Paris-based adviser to oil-consuming nations said today in its first Medium-Term Gas Market Report. That’s an average increase of 2.7 percent a year, which is similar to the growth during the last decade, the e-mailed report showed. Emerging nations will account for 69 percent of the gain…
The Biggest Story in Natural Gas That Few are Talking About
The Middle East holds a little less than half the world’s proven natural gas reserves, but several countries in the region are facing gas shortages. In fact, many of these fossil fuel titans are pursuing solar power and other alternative energy technologies to supplement their soaring power generation requirements.
The International Energy Agency discusses this issue in its recently released Medium-Term Gas Market Report 2012 and says that — with the exception of existing export contracts — incremental medium-term production will exclusively serve domestic markets in the Middle East…
Nuclear
Japanese more opposed to nuclear power a year after tsunami
As Japanese authorities this week ponder whether to resume producing nuclear energy, a poll shows that opposition to nuclear power is strong and growing more than a year after the earthquake, tsunami and nuclear catastrophe that killed 20,000 and contaminated a broad swath of farmland.
Seventy percent of Japanese surveyed by the Washington-based Pew Research Center said they wanted nuclear power reduced or eliminated, while a year ago the nation was nearly evenly divided on the subject, with 44% urging a phaseout and 46% backing continued generation…
Japan PM urged to be cautious about nuclear restarts
Nearly a third of Japan’s ruling party lawmakers are petitioning Prime Minister Yoshihiko Noda to be cautious about restarting nuclear reactors given safety concerns after last year’s earthquake and tsunami, an organizer said on Tuesday.
Noda, keen to restart two reactors in western Japan before electricity demand peaks this summer, could decide as early as this week to reconnect them to the grid – despite the risk of a backlash that would weaken his already sagging voter ratings…
UK
UK signs ‘landmark’ energy agreement with Norway
David Cameron will pave the way for an increase in British imports of Norwegian gas and oil when he signs a new energy agreement with one of the world’s largest exporters of fossil fuels on Thursday.
As the International Energy Agency warns of a threat to the climate from a new “golden age of gas”, the prime minister will sign what Downing Street is describing as a landmark deal with Norway to strengthen energy links with Britain’s historical ally…
Windfarm subsidy faces huge cut
Treasury officials are drawing up plans for swingeing cuts in state support for onshore wind-farms, it was claimed last night. This is a dramatic move that threatens to undermine David Cameron’s claim to lead the greenest government ever.
The Chancellor, George Osborne, has demanded a 25 per cent cut in a subsidy regime that is worth some £400m a year to the industry, according to a report in The Observer…
Communities should be ‘bribed’ to accept more wind farms, says MP
Local communities should be “bribed” to accept more wind farms in the countryside so Britain can meet its renewable energy targets, a senior Conservative MP said yesterday
Tim Yeo, chair of the Energy and Climate Change select committee, said communities should be incentivised to agree to on-shore wind farms rather than simply having them imposed. He was speaking after it emerged the Treasury was considering cutting the subsidy for the turbines by 25 per cent after a sustained campaign by Tory MPs…
Fraudsters turn to carbon credits, according to FSA
Carbon credits have emerged as the latest asset class being targeted by fraudsters intent on fleecing vulnerable investors.
Figures obtained from the Financial Services Authority (FSA) revealed an explosion in companies fraudulently offering to deal in carbon credits — transferable certificates that allow companies to pollute. More than 100 companies have been reported to the watchdog over the past 12 months. The figure is up from just six prior to June last year…
Lincolnshire County Council approves wind farm restrictions
A Conservative-led council has approved new restrictions against the building of wind farms in Lincolnshire.
It voted unanimously and issued a statement advising district councils not to grant permission if wind farms failed to meet strict criteria…
Climate
Leaked documents reveal UK fight to dilute EU green energy targets
The government has been trying to water down key environmental regulations in Brussels despite trumpeting its commitment to green issues at home, leaked documents show.
The papers, seen by the Guardian, reveal British officials repeatedly trying to prevent the adoption of European Union rules on energy efficiency, curtailing the proposals and making them voluntary rather than mandatory in many cases. In addition, the UK has tried repeatedly to ensure that the EU does not adopt a new target for renewable energy generation…
CO2 Market Wants Tougher EU 2020 Climate Goal
The European Union needs to aim for a deeper emissions cut soon, to rescue a record low carbon price and spur long-term investment in low-carbon technology, leading carbon market players said at an industry gathering.
Europe’s economic slump has made it easier for the EU to reach its 2020 climate goal, and a tougher target to cut emissions would restore relevance in the EU emissions trading scheme by lifting carbon prices from record lows, they said…
Transport
Airline group says biofuels need govt support
Airlines need government support to lower the cost of biofuels that could help to reduce pollution and carbon emissions, the head of the global aviation industry group said Thursday.
Airlines have flown some 1,500 commercial flights using fuel made from plants, but supplies are limited and costly, said Tony Tyler, chief executive of the International Air Transport Association…
Geopolitics
Obama Order Sped Up Wave of Cyberattacks Against Iran
From his first months in office, President Obama secretly ordered increasingly sophisticated attacks on the computer systems that run Iran’s main nuclear enrichment facilities, significantly expanding America’s first sustained use of cyberweapons, according to participants in the program.
Mr. Obama decided to accelerate the attacks — begun in the Bush administration and code-named Olympic Games — even after an element of the program accidentally became public in the summer of 2010 because of a programming error that allowed it to escape Iran’s Natanz plant and sent it around the world on the Internet. Computer security experts who began studying the worm, which had been developed by the United States and Israel, gave it a name: Stuxnet…
