Here’s a happy thought about higher oil prices: maybe if the price goes high enough the military forces of the world will not be able to afford to go out and fight each other.  Of course this won’t happen at $120 a barrel or even $200.  But in five years the price could be $500 - and that could be enough to give some generals second thoughts about going to war.  Conventional thinking is that oil shortages will cause military conflicts.  But I wonder if just the opposite might …

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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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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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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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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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Russian’s Natural Resources Minister, along with two investment banks, is predicting that the January and February declines in Russian oil production of .7 and .9 per cent are preludes to a full year decline.  Here is the Bloomberg report: Russian Oil Output May Fall for First Time in Decade in 2008 By Greg Walters March 27 (Bloomberg) — Russian oil output may fall this year for the first time in a decade as the world’s second-biggest supplier struggles with rising costs and harder-to-reach fields, Natural …

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Politics and oil each influence the other, to state the obvious.  I note  two examples.  The first is the growing tensions between Syria and other Arab countries in regard to Lebanon, which was highlighted in an excellent New York Times piece today. Both Saudi Arabia and Syria seek to determine the political outcome in Lebanon.  KSA is allied with Egypt and Jordan while Syria is allied with Iran, a non-Arab country.  The potential for a military escalation of the conflict seems real.   Obviously, any armed conflict in the Middle …

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According to the Russian News and Information Agency, January oil production in Russia was down .5% from a year ago.  Exports were up more significantly, by 1.7% indicating a draw down of inventory and increase in demand from customers of Russian oil.  There is no indication of whether it went to China or EU countries.

Here is the full report:

Russia’s oil output down 0.5%, gas production up 0.8% in January

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05/ 03/ 2008

MOSCOW, March 5 (RIA Novosti) - Russia’s crude production declined 0.5%, year-on-year, in January to 41.35 million metric tons (830,000 …

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Ukraine’s Naftogaz Ukrainy says Gazprom has cut shipments by 35 pct 03.03.08, 9:42 AM ET KIEV (Thomson Financial) - NJSC Naftogaz Ukrainy said OAO Gazprom has cut natural gas supplies to Ukraine by 35 pct, 10 percentage points more than the supply cut announced this morning, Interfax reported. ‘According to the latest statistics from Ukrtransgaz, supplies have been cut by 35 pct, or by 46 million cubic meters per day,’ a Naftogaz Ukrainy spokesman said. A spokeswoman …

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As Putin’s younger alter ego takes the Presidency from his base at Gazprom, speculation is growing that the Russian economy may take on a more mature and dynamic phase of growth.  A “kinder. gentler” approach to trade issues and perhaps a clamp down on mob rule could push growth more broadly into the Russian economy. 

Such developments are very much consistent with the general arc of Russia’s place in the world.  It’s vast energy resources will increasingly make Russia a winner in the coming years in terms of both economic and …

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  By Lucian Kim Feb. 4 (Bloomberg) — OAO Gazprom Neft, the Siberian oil company once owned by billionaire Roman Abramovich, plans to double crude production by the end of next decade through developing Arctic fields and investing $70 billion. The oil unit of natural-gas producer OAO Gazprom wants to pump as much as 90 million metric tons by 2020, Chief Executive Officer Alexander Dyukov said in an interview published in the Moscow-based Kommersant newspaper today. His spokeswoman, Natalya Vyalkina, confirmed his comments to Bloomberg News. …

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The following news report describes the inflationary impact of the recent flood of oil and gas revenues on the Russian economy.  Apparently the combination of an incompetent bureaucracy and a bloated upper class are distorting the economy and making life difficult for ordinary citizens.  The risks include a downturn in economic activity and possible difficulties in keeping the oil and gas flowing.   Here’s the poop from Britain’s Telegraph: By Ambrose Evans-Pritchard International Business Editor Last Updated: 1:44am GMT 05/02/2008 Moscow is the most expensive city in …

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A recent Economist piece describing the views of the president of the French oil major, Total, in regard to the global oil outlook is worth reading on numerous levels.  One is his statement that the global decline rate of existing fields is 5 - 6 mb/d per year, much higher than the 3.3 mb/d estimated by Chris Skrebowski at in October at ASPO.  Another is his reported opinion that global production has probably peaked in terms of the practical maximum flow of oil given political realities.   Related to …

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It’s not clear how much of the increase would be from the Yukos "acquisition". Here is the story: MOSCOW, Dec 28 (Reuters) - Russia’s state-controlled oil champion Rosneft (ROSN.MM: Quote, Profile, Research) will raise oil output by 11 percent in 2008 maintaining impressive growth in West Siberia and launching a new major field in East Siberia, it said on Friday. Rosneft, which this year acquired most of the assets of bankrupt firm YUKOS, said its production will rise to 111.93 million tonnes or …

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