Churchill’s assessment applies to the current oil situation: this is the beginning of the end of OPEC.  That much is obvious; the more interesting question is “why?”

OPEC was founded in 1960 to protect the interest of its members, major oil exporting nations.  That interest is to stabilize world oil prices at levels that balance their competing objectives to maximize both long term oil demand and the short term oil price.   The idea was to keep enough oil off the market during glut periods to elevate the price and insert enough …

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One beauty of British mystery writers like Conan Doyle and early Le Carre is their use of deductive reasoning to relate odd facts and explain reality.  Matt Simmons used the same powers to help us understand why major oil companies deny Peak Oil and why they finance groups like Cambridge Energy Research Associates that go around sowing doubt in the public’s mind about Peak Oil (although, as recently reported, their scheme has failed). 

The reason, as Matt told us in Twilight in the Desert, is that the production sharing agreements …

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A remarkable poll shows that citizens are way ahead of politicians in understanding peak oil.  A huge majority in the U.S. and everywhere else (except Nigeria) say government action is needed to guide us toward a different source of energy because we are running short of oil.  If the U.S. presidential campaigns’ own polls find the same results, it may give the candidates courage to actually discuss energy policy realisticly.  It is clear that the public debate must become honest and realistic before there can be any likelihood of Congress …

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  The following report from Reuters suggests Iraqi reserves could be larger than Saudi reserves and three times as large as currently estimated.  I continue to believe that if there is any chance to mitigate the onset of Peak Oil it is the possibility that Iraq will resolve its politics and pass an oil law this year, issue deals to IOC’s next year and begin substantial increases in production by 2011.  Developing land sites can be accomplished with far greater speed than exploiting the off shore fields of …

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The report below points to a possible rationale for higher oil prices in the short term.
Peak oil in Russia?
 The ever-increasing oil price is not likely to result in increased output, with most suppliers experiencing flat output and Russian production in steep decline.

Having reached yet another record high of over USD 117 a barrel this morning, experts believe the price has not yet hit its peak and will continue rising. BP Capital founder T. Boone Pickens has reportedly said he did not expect supply to exceed 85 …

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Uncertainty has not been banished, but a few inevitabilities are now clear. Here are the certainties: 1.  Oil exporters led by Russia, Saudi Arabia, and Mexico will not expand production much further. 2.  Oil exporters’ internal oil demand will soon cause supplies of oil on the export market to begin falling. 3.  Food based ethanol production will not expand much further. 4.  Oil sands production growth will be limited by environmental concerns. 5.  Costs to produce new off shore discoveries will continue to escalate.  5.  …

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A few months ago, as the oil price was butting up against $100 and then finally going through it and then dropping back down below it, most respected oil analysts whom I read believed that the near term would see lower oil prices.  Most thought early 2008 would see a retracement into the low $80’s. That expectation is one reason the recent strong and consistent rally to just under $120 as of now is so dramatic.  But what comes next?  How much of the last $20  is speculation and …

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Khurais, with an estimated maximum flow of 1.2 mbpd is the Saudi’s best hope for adding capacity and/or blunting the eventual decline of Ghawar, their giant field that has been pumping 5 mbpd for decades. The Saudi’s have been circling around the Khurais field for 40 years, picking at it and then backing away at various times as they found difficulties.  Finally they decided to go all in, tacking one of the world’s most challenging and expensive oil production problems.  The cake will be baked in short order and we’ll …

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Barreling Along

The Big Thirst

Joon Mo Kang

The weak dollar, worries about terrorism and speculation on commodity markets certainly played a role. But, of course, so did demand. Producers are struggling to pump as much as they can to quench the thirst not only of the developed world, but fast-growing developing nations like China and India, the two most populous countries. To many experts, the steadily rising price underscored longer-term fears about the future of a system that has supplied cheap oil for more …

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The following news release from the International Energy Agency was highlighted on my Yahoo home page.  It suggests a fragility in spare oil capacity that should not be a surprise given recent price action.  Thus, it may be a useful clue to the reality of the current supply/demand relationship. But this sort of publicity does not seem very helpful in damping whatever speculative element is also currently part of the oil price. 

ROME, April 19 (Rome) - Record oil of $117 a barrel calls for a demand response and a supply …

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The following editorial in today’s Financial Times bemoans Russia’s presumed incompetence in cutting off investment capital from oil exploration and development through high oil taxes.  I think the Times misses the point.  Vladimir Putin is arguably the most brilliant geopolitical strategist going.  I doubt very much he has blundered into a no-growth position for Russian oil.  The obvious alternative is that he is pursuing a clever peak oil strategy of keeping all the oil he can in the ground for exploitation at some future time when the true value of …

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As the oil price gallops forward to new records, it seems to this observer that this time it really is a matter of speculation.  That does not mean the run is doomed to fail quickly.  It could actually go much further in the next months whether actual supply and demand justify it or not. 

The move seems to be propelled by a sharp reduction of traders’ skepticism about the validity of the peak oil argument just as the price of oil hit a new high and “broke out” of “resistance” as …

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Saudi Arabia is considered the “swing producer” of oil because conventional wisdom presumes they have the spare capacity and the will to boost or reduce supply as global conditions require.  But some doubt KSA true capacity .

If KSA is actually constrained, Nigeria and Iraq may be the world’s real swing producers in two senses.  First, they both have the geological opportunity to increase production substantially over a period of just a few years.  Second, and more relevant in the short term, both countries face a real risk that political problems …

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The following report published by Commodity Online says that Russian oil production may have peaked in 2006 and in any case has been declining in recent months. Commodity Online MOSCOW: Oil production in Russia, the second largest oil exporter in the world, is coming down drastically, says a new study. Studies on Russian oil production by Aram Mäkivierikko say that the country has not been able to increase its oil production for three months in a row now. The production have …

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The keeper of "magaprojects" data spoke in Africa recently in his typical no-nonsense and undramatic style.  Among other aspects of his peak oil predictions are that exports will peak before production does and that "resource nationalism" (which I call "hoarding") an important factor in global oil supplies.  He also added a subtle feature to the peak oil concept: that oil may peak on a seasonal basis before it peaks completely.  We may be witnessing that phenomenon very shortly, if it has not already occurred.  Here is the full …

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