Random charts - Oil prices

 

Source: Oil and Gas Trends 2018-2019

Random chart - oil prices

Source: Staying on top of oil market volatility

Random chart

Source: Saudi Arabia did not make up for Libyan oil

Random pictures

Source: Crude Awakening. Great infographic of information related to the Deepwater Horizon disaster...

Random chart

Source: Energy and the Economy

Pray - June 25th, 2008

Quaking in their boots

Well it seems that Israel has figured out a way to defang Iran... and to simultaneously free the world from the 'oil dictatorship' of Saudi Arabia, Venezuela, and other oil-producing nations! How you ask? Well, Israel's Infrastructure Minister Uzi Landau has a master plan - "... in October 2009 Israeli PM Netanyahu launched a "national project" at Israel's National Economic Council to find a way to end the world's dependence on fossil fuels ..." So, Israel will develop the green technologies that will end the industrialized nations' dependence on fossil fuels, which will de-fund these regimes...

After a fit of hilarity (that really hurt) this blogger checked the date on the article and googled to find this story elsewhere. He found numerous references, none of them dated April the first! So, apparently this is "real". One wonders what Landau has been drinking....


Maybe it was something in the water, because the very next day another article suggested that a cap on carbon in the U.S. would be a good thing because the reduction in oil consumption would significantly hurt Iran by putting a crimp into its flow of petrodollars. It was accompanied by the graph below...

Wow, this really looks like a very serious reduction, assuming of course that the U.S. can (or will) actually reduce its emissions to get to the "167 case." However, the graph seems to imply much more than the reality... after a cursory glance one might infer that from 2010 to 20150 Iran's oil revenues would crater by approximately 90%. However, looking at the 'Core Scenario 167 bmt' on page 69 one sees that the price index for petroleum products in 2050 would be 1.20, or slightly higher than the price index for 2010 (at 1.15)

Using the index numbers from the MIT Assessment of U.S. Cap-and-Trade Proposals, this blogger graphed out the two cases - the baseline "reference case" if nothing is done, and the "167 case." If the assumption is made that Iran's production remains at 4.174 million barrels per day (as in the article), and that the 2010 price starts out at $83 a barrel you get the graph below:

Iran will "lose" the revenue between the two lines, or the area in red... Indeed a serious hit but no where near as drastic as is implied by the article's graph. Anyway, there are better reasons for the U.S. to cap its greenhouse gas emissions than a putative crimp in Iran's oil revenue...

Quick update

The June 25th blog entry 'Pray' observed a report that: ""China today consumes as much crude oil per person as the US did in 1905, before mass production of the Model-C Ford and long before the advent of the jet engine," points out Robin Batchelor, manager of BlackRock's BGF World Energy fund. "If China and India were to increase their consumption per person to current US levels, these two countries alone would require 160 million barrels per day, more than twice the world's supply of oil today."

Well, China's oil demand increase 'astonishing', says IEA reports that the International Energy Agency reported that China's oil purchases in January of 2010 were 28% above the levels just one year earlier... Pray indeed!

Random chart...

Per-capita oil consumption... speaks for itself.

Huh?

Exclusive: Neither Obama nor McCain nor the Government Has a Plan in the Event of a Protracted Oil Stoppage - It Isn't Even Being Discussed is an article that introduces a book just published by the author Edwin Black (via Dialog Press) - The Plan: How to Save America When the Oil Stops—or the Day Before. There is also an associated web site, www.planforoilcrisis.com

OK this is an important topic and it is entirely possible that this is a great book, but this blogger isn't enticed into reading it by the breathless prose of the article, e.g. "... It is like seeing a hurricane developing without a disaster plan or evacuation route. Our allies have oil shortage interruption contingency plans, but America does not..."

Incredibly the article then goes on to say: "... The crude realities: America uses approximately 20 million barrels of oil per day, almost 70 percent of which is imported. If we lose just 1 million barrels per day, or suffer the type of damage sustained from Katrina, the government will open the Strategic Petroleum Reserve, which offers a mere 6 to 8 week supply of unrefined crude oil. If we lose 1.5 million barrels per day, or approximately 7.5 percent, we will ask our allies in the 28-member International Energy Agency to open their SPRs and otherwise assist. If we lose 2 million barrels per day, or ten percent, government crisis monitors say the chaos will be so catastrophic they cannot even model it..."

Hmm, as of today the Strategic Petroleum Reserve currently has 702.6 million barrels, so in the above scenario if we lose "1 million barrels per day" the SPR could close the gap for crude for almost two years (assuming that all the oil can be pumped out of the underground salt domes in Bryan Mound, Bayou Choctaw, Big Hill, and West Hackberry), and not "a mere 6 to 8" weeks. The 6-8 weeks figure is to replace 100% of US import volumes! Add to this that commercial stockpiles of crude in the U.S. are at least as big.

OK, so it's true that there are no stockpiles of refined products e.g. gasoline, jet fuel, etc. (as there are in some other countries). It is also true that the SPR's maximum drawdown is 4.4 million barrels per day and that crude from the reserve would normally only come on line thirteen days after a Presidential order (though it was done faster after Katrina). It is also true that if U.S. refinery capacity was greatly degraded that we would not be able to refine the crude in the SPR, etc. However, the article's gross error highlighted above, plus its suggestion that a 7.5% cut would make the U.S. dependent on its allies (way off the mark) certainly does not motivate this blogger to run out and purchase the book!

Alternative fuels

Nice presentation - Biofuels: Facts and Fallacies via R-Squared Energy Blog.

Sex, drugs and royalties...

Wide-Ranging Ethics Scandal Emerges at Interior Dept Evidence has surfaced of high jinks and frat-house behavior at the Denver office of the Minerals Management Service , the arm of the federal government that collects royalties from companies that exploit minerals on federal lands to the tune of approximately $10 billion per year (the largest non-tax revenue stream to the government). Sex, drugs, bribes.... This blogger is waiting for the opponents of drilling to start to wave this around as prima facie evidence of the evils of drilling!

At least the blathering about a 'windfall profits' tax has subsided a bit as oil prices (and thus gas prices) have dropped and the campaigns have moved on to other topics. Note: the oil companies pay royalties to the government for oil that they get from federal and Indian lands (which accounts for approximately 33% of the domestic oil production total) - usually a royalty of 12% for onshore production, and a royalty of 16.66% on the outer continental shelf (assuming that the Secretary of the Interior has not adjusted the royalty rate, which he can do at his discretion). The royalty payments may be either in cash or as Royalty-in-kind (RIK) i.e. the delivery of the appropriate amount of crude to the Strategic Petroleum Reserve (SPR). It seems to this blogger that as the price of oil increased from about $60/barrel up to the recent high of $147/barrel the federal government has already been sharing in the 'windfall profit.'

Updates...

1. Kashmir (2002 reprint) gave a brief background on the problem of Kashmir. Well, the area has been on the boil for the last few weeks:

Kashmir Flashpoint: In Depth (BBC Special Report)
The Future of Kashmir?
Perspectives on Kashmir

2. Some further articles on oil prices (without comment or endorsement):

Are Oil Prices Rigged?
Oil Speculators Cost Consumers $31 Billion this Summer (Rep. Ed Markey)
TIME Blames Speculators: "We Are Slaves To This Black Gold Standard"
Past Its Peak

3. The blog entries Caste & Frame of Reference spoke to the horror of casteism and poverty in India. A couple of links on the subject:

Exploring India's Prosperity Through the Eyes of the Invisible Men
Verse for classmate gets Dalit boy death

Oil price follies - II

Oil Speculators provides information on a private Swiss energy conglomerate called Vitol, which apparently has taken huge positions (quote "... at one point in July, the firm held 11 percent of all the oil contracts on the regulated New York Mercantile Exchange...").

The article goes on to say "CFTC documents show Vitol was one of the most active traders of oil on NYMEX as prices reached record levels. By June 6, for instance, Vitol had acquired a huge holding in oil contracts, betting prices would rise. The contracts were equal to 57.7 million barrels of oil -- about three times the amount the United States consumes daily. That day, the price of oil spiked $11 to settle at $138.54. Oil prices eventually peaked at $147.27 a barrel on July 11 before falling back to settle at $114.98 yesterday. The documents do not say how much Vitol put down to acquire this position, but under NYMEX rules, the down payment could have been as little as $1 billion, with the company borrowing the rest... So much for supply and demand."

Apparently this must be "proof" that it is speculators such as Vitol that are responsible for the run up in world oil prices... Vitol bought huge while "betting prices would rise." They did, and no doubt Vitol made out like a bandit. Seems like a post hoc ergo propter hoc argument, however, assuming causality... Buying a huge position while gambling that prices will rise can hardly be the cause of prices rising, otherwise why have we had fiascos like the "Nick Leeson/Barings Bank" and "Jerome Kerviel/Societe Generale" blowouts?

Also, what if Vitol had bought huge positions after July 11th while "betting prices would rise?" Would prices have continued to rise due to speculation, instead of falling as they did in reality? Hmm, so much for "so much for supply and demand."

Oil price follies - I

Earlier this blogger had noted that there doesn't seem to be an accepted "correct" answer re why oil prices climbed so high, the three dominant theories being a) supply/demand and external factors, b) speculation, c) the fall of the dollar (or perhaps, a fourth theory, a combination of the previous three).

In How to Burn the Speculators the onus is placed squarely on the speculators. Perhaps, perhaps not. This blogger, however, was wondering about a statement included i.e. "And as economist Tom Palley has pointed out, consumers can help too. An awful lot of gas is stored in cars. If people stop topping off and make do with half a tank, they'll back up supply and lower demand. It's a brilliant suggestion and definitely worth a try." Hmm, brilliant? Over the past year this blogger has averaged 550 miles a month. Assuming that this stays constant, as does his mpg, this blogger is not sure how he is reducing his demand one iota by only filling up half a tank each time. It seems like this would only require twice as many trips to the gas station, wasting a little more gas (unless the gas station is always along the daily route). Multiply by all the other motorists out there... What was so brilliant about that suggestion?

Previous blog entries:
Who (or what) is responsible for high oil prices?
Dunces

Energy IQ Quiz

Must see TV

Surprisingly gripping television series that follows the competition/progress between three oil drilling rigs (the Longhorn, the Viking and the Big Dog) in Andrews County sixty miles northwest of Odessa, Texas. Being a roughneck looks like a tough job, being a driller rather thankless. Supposedly this series has that "... wow-I-wish-I-could-give-that-a-try quality, which is sure to resonate with men..." This blogger has zero inclination in this regard, but the series still sucks you in, leaving you wanting to know what is going to happen next. Strongly recommended!

Black Gold TruTV
'Black Gold,' hardlives in the oil fields
Black Gold (TV series) - Wikipedia

Pray!

"China today consumes as much crude oil per person as the US did in 1905, before mass production of the Model-C Ford and long before the advent of the jet engine," points out Robin Batchelor, manager of BlackRock's BGF World Energy fund. "If China and India were to increase their consumption per person to current US levels, these two countries alone would require 160 million barrels per day, more than twice the world's supply of oil today."

Oil, the 21st Century dot.com boom

Who (or what) is responsible for high oil prices?

There's much discussion going on re the reason for recent run up in world oil prices. At the summit in Saudi Arabia King Abdallah blamed speculators (amongst others) for the state of affairs. However, at the same summit U.S. Energy Secretary Samuel Bodman blamed the record oil prices on a lack of production. This blogger has also seen arguments by some that a significant portion of the run up in oil prices has been due to the fall in the value of the U.S. dollar. 

OK, given that the boffins and all these very smart people don’t seem to be able to articulate an explanation that is persuasive to all, this blogger certainly can’t answer the question, though he is inclined to believe that it is due to an amalgam of multiple reasons. 

The article linked below marshals arguments in support of the “speculation” theory of high oil prices. This may or may not be supported by the fact that the Presidential candidates are suddenly jumping on the “close the Enron loophole” bandwagon. Since this regulatory issue was pointed out in June of 2006 in a report (“The Role of Market Speculation in Rising Oil and Gas Prices: A Need to Put the Cop Back on the Beat”) to the United States Senate Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs, this blogger wonders why they waited until June of 2008 to show "leadership" by stating that they will (note future tense!) now do something about it. 

‘Perhaps 60% of today’s oil price is pure speculation’

Obama vows crackdown on energy speculators