Price Surge Puts Focus on Oil Supplies ($300/barrel coming?)

Associated Press ^ | November 15, 2007 | Peter Enav

[beaversmom]

TAIPEI, Taiwan (AP) — Perhaps the biggest reason that oil costs nearly $100 a barrel can be found in places like China, where roads that were full of bicycles 15 years ago are now choking with cars and trucks. Or in India, where sales of diesel-powered generators have soared as people try to avoid frequent power outages.

The rapid growth in China, India and other emerging economies has been fed by crude oil, but this rising demand for fossil fuels may finally be pushing the limits of supply. If basic economics is any guide, that could also mean $100 is just the beginning of far higher prices.

The International Energy Agency warned earlier this month that growing global demand, particularly from China and India, could create a supply crunch as early as 2015. Currently, oil producers are turning out about 85 million barrels a day, while the U.S. Department of Energy says consumption is between 85 million and 86 million barrels a day.

The department predicts output will reach 118 million barrels by 2030.

Some experts see a potential disaster looming — in as soon as five years or even less. Chris Skrebowski, the editor of the London-based Petroleum Review, thinks slower-than-expected supply growth combined with rising demand from burgeoning Asian economies could result in a worldwide shortfall of as much as 7 million barrels a day by 2013.

Demand is so strong that Matthew Simmons, a Houston oil and gas investment banker, says $100 a barrel oil may even be a bargain, with $300 crude likely in the future.

"I think oil prices are unbelievably inexpensive," said Simmons, the author of "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy," a widely debated book suggesting that the world's largest oil exporter will be hard pressed to maintain its crude output, let alone increase it.

From the oil industry, too, there are voices of concern. For example, Christophe de Margerie, chief executive of Total SA, France's largest oil company, believes the Department of Energy's global production forecast is far too high.

"One hundred million barrels ... is now in my view an optimistic case," de Margerie said at an industry conference in London late last month.

Over time, soaring energy costs could have disastrous consequences for the world economy, with affordable transportation being the most obvious casualty. Manufacturing, petrochemicals and power generation would all be affected.

But some analysts argue that consumption growth will slow if limited supply keeps prices high.

Recent evidence suggests that prices of $80 a barrel have already begun to put a crimp in consumption in industrialized countries, said Leo Drollas, chief economist at the London-based Center for Global Energy Studies.

He projects annual consumption growth of 1.2 percent to about 93 million barrels a day in 2015. That growth figure is lower than in many existing forecasts.

Oil prices surged to a record $98.62 a barrel last week and hovered just below $94 in Asian trading Thursday.

"Demand will not grow at those prices," Drollas said of oil at current, let alone higher levels.

Drollas' view appeared to get a boost Tuesday when the IEA lowered its oil demand forecast for the fourth quarter by 500,000 barrels a day and for 2008 by 300,000 barrels a day. Demand growth will now average 1.2 percent in 2007, the group said.

However, it said demand will likely grow 2.3 percent in 2008, keeping consumption close to global supply.

So far, subsidies in China and India have blunted the impact of high prices on their consumers. But state-run oil refineries are feeling the pinch, and China recently raised retail gasoline prices about 10 percent.

And if anecdotal evidence is right, that could indeed affect demand.

"If the gasoline price jumps another 50 percent, I'll quit driving and take public transportation," said Zhou Zhiqiang, a Beijing driver. "I think it is the trend for oil price is to go up. The international oil price will ultimately surpass $100, because the resource will become scarcer and scarcer."

Looking at planned oil field developments, Skrebowski, the London-based oil expert, calculates that 23.6 million barrels a day of new production will come onto the market by 2013 — and that only if projects are completed on schedule, despite growing shortages of equipment and qualified personnel.

But the former long-term planner for energy giant BP PLC and oil analyst for Saudi Arabia believes that new production will be largely offset by the natural depletion of existing fields totaling 20 million barrels a day. The net gain, then, would be only about 3.5 million barrels over the five-year period, raising daily production to 88.5 million barrels.

Against that, Skrebowski says IEA demand projections would raise consumption to 96 million barrels by 2013, more than 7 million barrels short of his production estimate.

"After 2011 we could be in for serious trouble," he said.

[penowa]

We'll ship WHAT coal to Mexico or somewhere? The Chinese coal that the environmentalists are not stopping from being mined? More and more of our coal deposits are being put out of our reach by legislation (same as our oil resources) and regulation.

The good thing is we won't have to worry about $ 300/barrel oil. The US will have gone belly-up long before oil reaches that price and will take down the rest of the world's economies with us, and consequently, oil will be back to selling @ $ 10/barrel with few takers.

[RightWhale]

Oil surges to $92.55 down 1.43
Gold surges to $794.00 down 20.70
Temperature surges to -6 down 15

[Paladin2]

I believe that ethanol has “higher” uses than to burn in my vehicles. Butanol sounds good tho’.

[RightWhale]

I’ve heard that the oil from Alaska right now is going to Japan

Myth

[Eric in the Ozarks]

I think you may be on to something...

[Just another Joe]

Naw, I get better reaction from the carrot.
Thanks, anyway.

Besides, I'd go with the bicycle most likely. It would keep me in better shape and I don't have to feed the bicycle.

[reagan_fanatic]

And no one in the West would care one whit.

True. The only reason we have any interest at all in that area is because of the black gold. Take that away, and they have nothing and we wouldn't care.

[azhenfud]

Let’s all just go back to coal-fired steam. Engines can be built to start up on oil or gas and switch over to coal or coal dust.

Rudolph Diesel used coal dust in his first engine - with engine-newity, so can we.

[devere]

In BTU terms, coal is currently 1/6 the price of oil. Even with all needed environmental cleanups ( aside from wacko Gorebot global warming fears ), coal is much cheaper, and we have a 500 year supply here in the USA.

[RightWhale]

Even so, the price of coal has also increased not a little.

[Dr. Sivana]

We'll ship WHAT coal to Mexico or somewhere?

I mentioned in my original post that the coal could come from someplace else. Regardless of where the fuel comes from, as supply goes up, the price stabilizes.

It took over 10 years to deal with the last big oil shock, and then we had a glut, and the economy hummed well during it (S & L bailout notwithstanding).

But yes, if we go the environmentalist whacko route, we will pay the price. Something you hinted at, a devastated U.S. economy will could bring $300/barrel oil, not because the oil is expensive, but because the dollar gets devalued. The devaluation of the dollar is respnible for a big chunk of the price hike.

[southernindymom]

THANKS

[southernindymom]

Thank you very much for the information. I’m glad to hear that our oil stay here, where it belongs.

[RightWhale]

The devaluation of the dollar is respnible for a big chunk of the price hike.

Too vague. How much? 20%?

[Dr. Sivana]

Extraction of oil from tarry sand in northern Canada is also becoming profitable at present prices. However, people in the U.S. are addicted to driving their SUV’s and oil prices will continue climbing although probably not to $300 within our lifetimes.

Absolutely. My wife is from Grande Prairie and her mother "cashed out" when the housing prices went up and moved to Saskatchewan.

Americans are not "addicted to SUVs." When I was a kid, my four siblings and I were moved around in a 1968 Dodge Dart. These days, with all of the safety regulations, that is impossible. You can't get multiple child seats and boosters into those cars, and the air bags make problems for kids in the front. Of course, you get to pay for all of this stuff whether you like it or not.

The fact is, normal sized families are pretty much required to drive a minivan or SUV. We have a minivan ('91 Aerostar), and it blows around in the wind pretty badly (and THAT one at least is RWD). Some of the large families in our church had to buy full-size vans, as nine passenger station wagons have disappeared.

Another new safety reg requires that cars have a higher profile (safety for pedestrians), which means MORE weight and less aerodynamic designs.

If we are going to have our cars legislated for us, we have to decide whether we want fuel efficiency, low emissions, OR safety. We can't have all three. These regulations work at cross purposes. And all of them mean higher costs.

fuel efficiency--->lighter cars, less power, more electronic technological stuff

low emissions--->lighter cars (except hybrids with their lead batteries all over), efficient power, power robbing emissions systems

safety--->heavier cars, more room required per passenger to accommodate booster seats, extra padding (requiring more cabin room for the same capacity), more shoulder belts and head rests, less aerodynamic (for pedestrian safety), lots more technological gizmos, adequate power.

The top selling cars in the U.S. are from Toyota, known for its Camry cars. SUVs are not much worse on mileage than muscle cars (which have come back). The cars are MUCH heavier these days. The crossover we would consider for our next vehicle is the 8 passenger GMC Acadia/Buick Enclave/Saturn Outlook. These near SUVs get decent mileage, certainly much better than the '89 Chrysler Fifth Avenue I presently drive.

Americans drive the cars that suit their budgets and needs. That is not an addiction.

[Dr. Sivana]

Too vague. How much? 20%?

I don't know off-hand. Let's just say in 1997 a Canadian dollar was worth .59 US dollars. Now it is worth over $1USD.

[liberalsneedmeds]

No problem - My brother (the DR) bought a copy of the software package. He said he wanted to get a good laugh. To his surprise, he said the H2 generator works and he made a small test batch of diesel. He said it was simple. He is going to use the long holiday weekend to make some E85. The instructions show you how to make a legal still! He said it was worth the 12 bucks and the software is easy to use and the content complete and very well written.

I asked him to send me a copy and he told me to buy my own...LOL! Its called H2 Power Core (on Ebay)and also at www.touchntalk.com

Have a nice weekend!

[RightWhale]

Has the price of oil held steady in $CA or $EU?

[thackney]

Oil has gone up in Canada as well.

[linn37]

Burning coal in my Harmon stove right now,it got so hot I had to shut down the air flow to it.