29 comments on San Francisco Passes Peak Oil Resolution
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There is always Occam's Razor, i.e., why not the simplest explanation? We are past Peak Oil, and the top four net oil exporters are farther down the depletion curve than the world is overall. And there is the little matter of the second largest oil field in the world, Cantarell, right at our back door with a decline rate probably in excess of 40% per year.
Remember, we have no idea what the quality is of the crude oil inventories and imports. We do know that we are seeing historically high spreads between light, sweet and heavy, sour. We also know that light, sweet prices are up about $10 since late December.
What if a continuing build in heavy, sour inventories has been obscuring flat to declining inventories of light, sweet crude oil?
"We are deeply concerned that the world is probably facing an imminent and catastrophic collapse in net oil export capacity because of declining production and increasing domestic consumption in the top exporting countries."
Coincidence or not, both crude oil and total net imports are now down (4% and 8.7% respectively) from late December, based on the four week running average.
Note that the four week period ending in late December bracketed Dr. Deffeyes' prediction of 12/16/05 for the peak of world oil production, so I think that this is a good baseline to compare recent data to.
M. King Hubbert's Lower 48 Prediction Revisited
http://www.energybulletin.net/13575.html
I've always thought about the idea of fungibility when you make this point about the exporters. An pure economist would say that as world market prices go higher, less will be consumed internally and countries will shift more of their production to export. The problem is that these are exactly the countries that subsidize their domestic consumption significantly. If they stop doing that, they will have to deal with domestic political/economic problems which for any politician/ruler, elected or not, is not something easily offset by more export income. I'll write longer about this when I can collect my thoughts and find the hard data, but this seems a critical point. In fact, ultimately it means that higher prices will result in less and less fungibility of oil exports over time. I can almost envision an oil/refined product smuggling market as the differential between domestic prices and world prices widens.
I've always thought about the idea of fungibility when you make this point about the exporters. An pure economist would say that as world market prices go higher, less will be consumed internally and countries will shift more of their production to export. The problem is that these are exactly the countries that subsidize their domestic consumption significantly. If they stop doing that, they will have to deal with domestic political/economic problems which for any politician/ruler, elected or not, is not something easily offset by more export income. I'll write longer about this when I can collect my thoughts and find the hard data, but this seems a critical point. In fact, ultimately it means that higher prices will result in less and less fungibility of oil exports over time. I can almost envision an oil/refined product smuggling market as the differential between domestic prices and world prices widens.
Indonesia subidizes (or use to subsidize) product prices. The UK taxed products pretty heavily.
It would be very interesting to plot their oil produciton, consumption and net exports for the past 10 years or so.
You might also add the US to the list.
In any case, I suspect that net exports are going to fall a hell of a lot faster than most of us think.
Question: What type of crude oil is stored in the Reserve?
Answer: During the quarter century that the Strategic Petroleum Reserve has existed, crude oil has been acquired from 25 countries. The oil is categorized as either "sweet" (with a sulfur content not exceeding 0.5 percent) or "sour" (with a sulfur content greater than 0.5 percent but less than 2.0 percent). Today, approximately two-thirds of the oil inventory is sour, and one-third is sweet.
http://www.fossil.energy.gov/programs/reserves/spr/spr-facts.html