[R-G] The Peak Oil Crisis: Twin problems

[Nicholas Morcinek]

Just why should OPEC or anyone else increase production?

High prices result in higher profits. By managing the supply demand
situation, as is obviously happening, can only benefit the oil business.

Enron anyone???

Nicholas



Lilla Watson:
"If you have come here to help me, you are wasting your time.
But if you have come because your liberation is bound up with mine,
then let us work together." 

-----Original Message-----
From: rad-green-bounces+nick=faunusherbs.com at lists.econ.utah.edu
[mailto:rad-green-bounces+nick=faunusherbs.com at lists.econ.utah.edu] On
Behalf Of Macdonald Stainsby
Sent: Monday, July 02, 2007 2:25 PM
To: nick at faunusherbs.com
Subject: [R-G] The Peak Oil Crisis: Twin problems

The Peak Oil Crisis: Twin problems  	
Written by Tom Whipple
http://www.fcnp.com/index.php?option=com_content&task=view&id=1374&Itemid=35
Thursday, 07 June 2007

As we move into June, we are still confronted with a pair of energy 
crises that have the potential to upset our way of life. At the global 
level, worldwide oil production has been stagnant for the last two 
years. This is true for all the various kinds of liquid fuels we now 
consume: ethanol, conventional crude, liquids separated from natural 
gas, synthetic crude from tar sands, as well as other flavors of 
hydrocarbons that can be converted to liquid fuels. Demand for oil from 
China, India, Russia, and the oil producing Gulf States is still 
increasing dramatically; demand from the developed countries is flat or 
increasing slowly; and as usual, the poor countries, who cannot afford 
$70 a barrel oil, are going without.

Although OPEC theoretically can increase production a bit, spokesmen for 
this organization remain adamant there is no need to examine the issue 
of production levels until fall. Right now, the race between declining 
production from old oil fields and production from new discoveries is 
just about a dead heat. Actually oil depletion is somewhat ahead, but 
extraction of liquids from increased natural gas production is making up 
the difference. While oil prices have risen, so far the bidding war has 
been largely between the rich countries and the poor countries, which is 
obviously no contest. It didn't really take much to knock Central Africa 
and small island nations out of the competition for available oil.

Someday soon, however, the poor countries of the world will be importing 
so little oil that increasing demand will leave only the rich bidding 
against the richer, prices will move up again and still fewer will be 
sharing in the last years of the oil age.

This situation could change for the worse, even before the end of the 
year, as knowledgeable observers are starting to issue stronger 
warnings. This week at an energy summit, Guy Caruso, the head of the 
EIA, called on OPEC to increase production immediately; otherwise the 
world faces higher prices and shortages due to increasing demand. The 
normally optimistic Caruso noted that with potential outages from 
Nigeria, Venezuela and Iraq, there are few reasons to think global oil 
prices will fall anytime soon. "Most of the price risk is on the upside."

Before we have to deal with the tightening world energy market, America 
has to get through its immediate problem of potential gasoline shortages 
this summer. This week's oil stockpiles report is mixed. Our demand for 
gasoline continues to grow. In April we were burning 9.2 million gallons 
a day; we are now over 9.5 million and this will probably increase by 
another 200 - 300,000 barrels a day in July and August. Our demand for 
gasoline is running 1.5 percent higher than last year and our demand for 
all petroleum products is up 2.4 percent.

Again there is good and bad news. The good is that our ability to 
attract gasoline imports remains high with 1.5 million barrels a day 
arriving last week so that U.S. gasoline stockpiles increased by a 
satisfactory 3.5 million barrels.

The bad news is that U.S. refinery utilization actually dropped a bit to 
below 90 percent and, coupled with reports of continuing outages, shows 
no indications of getting back over the desirable 95 percent in the near 
future. Once again we have an imbalanced import problem with gasoline 
stockpiles on the West Coast growing by 1.3 million barrels while on the 
East Coast stocks dropped by 800,000 barrels.

Part of the problem was a several-day outage in the pipeline that brings 
gasoline from the Gulf Coast to tank farms along the east coast. As 
stockpiles in the Midwest grew during the week, it appears more gasoline 
was directed north from the gulf while the pipeline was out of service.

Some analysts are already questioning the validity of this week's EIA 
stockpile numbers. They note that with production and imports down from 
last week, and demand going up, it seems strange that the total U.S. 
stockpile would jump so much. I guess we will have to wait for another 
day to get an explanation or correction.

So where does all this leave us? The short answer is still highly 
vulnerable. As U.S. refineries seem to be unable to increase production 
sufficiently to meet increasing demand, we are increasingly dependent on 
imported gasoline to keep prices under control and shortages from 
developing. The situation is the most serious along the Atlantic Coast 
from New York to Florida, where stockpiles continue to drop and may be 
getting very close to the unknown level at which shortages develop.

The current East Coast stockpile situation makes it more likely that 
disruptions from a hurricane hitting the Gulf will promptly lead to 
gasoline shortages, unlike two years ago when local stockpiles were 
sufficient to get us through. As the pipelines pumping gasoline from 
Gulf Coast refineries to East Coast tank farms are reported to be at 
capacity, it is unlikely we will see an improvement in the situation 
anytime soon.

For the next week or so, gasoline prices probably will ease a bit as 
traders perceive reported increases in total U.S. gasoline stockpiles as 
a good thing. The fundamentals, however, are still not good. Although 
very high U.S. gasoline prices should, in theory, allow us to outbid 
others for cargos of gasoline, there are many possibilities for 
disruptions to gasoline imports before the summer is over. Any piece of 
bad news is likely to lead to higher prices very quickly.
-- 
Macdonald Stainsby
Coordinator, http://oilsandstruth.org
--
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http://lists.econ.utah.edu/mailman/listinfo/rad-green

In the contradiction lies the hope.
    --Bertholt Brecht.


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