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by Jerome a Paris Sun May 6th, 2007 at 09:23:46 AM EST

Production (mboe/d)ExxonMobilShellBPChevronTotal ConocoPhillips
Q1 20064.563.754.042.642.44 2.09
Q1 20074.443.513.912.642.43 2.01

So what are market forces doing, exactly? 8 years into a massive increase in oil prices, and the big Western oil majors seem unable to get their production up. For most of them, this is the fifth year of production decline (if you adjust for acquisitions of other companies):

Can we conclude that, whatever the price of oil, the majors are unable to boost their production? Which would bring about the question as to whether this is done on purpose (to get prices up) or despite their best efforts (because there is no accessible oil). The fact that many articles lately have criticized oil producing countries for not opening their reserves to foreign investors suggests that it is the latter to a large extent. Which means that we have effectively lost control of oil supply.

Time to think about our oil demand?

I'm not sure what conclusion you are trying to draw. Is it that the majors are seeing "peak" oil or are having technical problems (certainly true in the case of BP)?

Or is it that the majors are now a smaller part of the world oil business than before? If this is what you mean that this is certainly true as more countries take back control from private firms and shift ownership to state controlled enterprises.

I don't know if this a good thing or not. Even state run oil firms need to sell their oil and compete against other countries so the only overall effect may be to eliminate a layer of middlemen and reduce growth potential for the majors.

If, on the other hand, you are implying that world supplies are in decline than that is really worth discussing. It seems like the folks at The Oil Drum do this frequently, but I don't think there is any consensus.

Perhaps Mother Nature will take control sooner that we expected and discussions about carbon trading, CAFE standards and the like will be replaced by concerns for adequate supplies. The US military is certainly acting as if resource shortages will happen sooner rather than later. There have been several planning documents generated which equate America's "vital interests" with oil supplies in the Middle East and Africa.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Sun May 6th, 2007 at 10:33:11 AM EST
I am simply noting that there is something that prevents Oil Majors from investing in oil production, and it's not oil prices, so it's something else.

  • is it return on investment, because (i) costs are skyrocketing, or (ii) host ocuntry taxes are increasing?

  • is it that they are completely cut off from reserves?

  • is it that good prospects are simply dwindling?

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun May 6th, 2007 at 10:49:31 AM EST
[ Parent ]
Saudi oil production is also lower, for now his is attributed to transcient technical problems.

Or may be you have too many fans of your $100 diaries in power position :)

by Laurent GUERBY on Sun May 6th, 2007 at 11:06:15 AM EST
[ Parent ]
Or perhaps that the short-term returns on investment now demanded by "the Market" are so unrealistically high that if they take the long-term view they lay themselves open to being hoovered up by the "locusts".

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Sun May 6th, 2007 at 11:13:06 AM EST
[ Parent ]
Indeed; when you can make record profits by passively </snark> getting caught up by the increasing prices, why bother to invest...just keep things the same while the corporate profits go exponential, exec bonuses go stratousferic, and stock investors hang on for the ride - 60/share to 80 in the last year.

But from what I understand, not even by half what goes on in Malta.

Never underestimate their intelligence, always underestimate their knowledge.

Frank Delaney ~ Ireland

by siegestate (siegestate or beyondwarispeace.com) on Sun May 6th, 2007 at 11:38:36 AM EST
[ Parent ]
Perhaps 'stratousferic' is the Maltese for stratospheric?

How could I make such an error? I used to sell a video editing product called the Stratoshere. Sheesh.

Never underestimate their intelligence, always underestimate their knowledge.

Frank Delaney ~ Ireland

by siegestate (siegestate or beyondwarispeace.com) on Sun May 6th, 2007 at 11:45:25 AM EST
[ Parent ]
I would imagine that among the reasons oil production has failed to increase is a seeming rise in local uncertainties in various major oil-producing nations.

For example, in Nigeria, the estimate of shut-in oil output -- mostly due to regional violence in the Niger Delta -- is close to 600,000 boe/d (mostly affecting RDS, but also Chevron).

Then, with the recent nationalizations in Venezuela, there have been recent news reports that the big oil companies are reluctant to make any further investments there.

The situation in other, smaller producers like Sudan or Burma/Myanmar is such that it is effectively a toxic environment for western oil companies, leaving things wide open for the Chinese, who are still playing catch-up in terms of technical expertise.

And of course, no oil company in its right mind would consider sinking billions of dollars into projects in either Russia (which is rapidly evolving into a kleptocracy) or Iraq (for reasons that are all too obvious).

by The Maven on Sun May 6th, 2007 at 03:53:35 PM EST
[ Parent ]

All your diaries (and others sources as well) are quite convincing that we have a drop in oil production/excess capacity/rig maintenance.

Do you know why the oil prices are still stable around $60 (even if it is a big increase from 2002) and not skyrocketing as you forecasted it ?

what is happening ? is it just a market inertia (psychology?) ? are you wrong somewhere ?

by fredouil (fredouil@gmailgmailgmail.com) on Sun May 6th, 2007 at 10:21:33 PM EST
is that this winter has been extraordinarily mild, thus demand for oil was much lower than expected. The fact that prices nevertheless remained high reflects the underlying tension on the production side. The next few months might be interesting again, as we enter the "driving season".

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon May 7th, 2007 at 08:11:28 AM EST
[ Parent ]
Certainly over here in the U.S., there are now almost daily stories on the rapidly rising price for gasoline, for which much of the specific blame is being laid at the foot of refiners.  There have been calls for federal investigations, most notably by Sen. Chuck Schumer of New York.

Without becoming at all conspiratorial, it's not a stretch to assume that limitations on refining capacity during the "off-season" for motor fuels (compounded by the lessened need for heating fuel during a mild winter, as you point out) were designed to ensure that retail prices remained at least constant with those from a year ago.

by The Maven on Mon May 7th, 2007 at 10:28:27 AM EST
[ Parent ]

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