Oil prices supported by IEA forecasts

Brent crude oil futures on Monday eased slightly from their 11-month highs, hit last week, but forecasts of a global oil supply crunch ensured some support.

The International Energy Agency said on Monday that global oil demand would rise more quickly than previously forecast through to 2012, while supply would struggle to cope.

Despite the IEA's predictions oil prices fell slightly as investors took profits from last week's rise to an 11-month high.

By midday in London, Brent crude, having hit an 11-month high on Friday, fell 33 cents to $75.29 a barrel, while Nymex crude lost 49 cents to $72.32 a barrel.

Hey, $75 oil is NOT NEWS! You'll be surprised how quickly we shrug at $100 oil too...

In the long run, we're all dead. John Maynard Keynes

Bush claiming 'Energy Independence' mantle already by Jerome a Paris on November 10th,  2006

The world is on a course that will lead it "from crisis to crisis" unless governments act immediately to save energy and invest in nuclear and biofuels, the International Energy Agency warned yesterday.

In an apocalyptic forecast, Claude Mandil, the agency's executive director, said that our current path "may mean skyrocketing prices or more frequent blackouts; can mean more supply disruptions, more meteorological catastrophes - or all these at the same time".

The IEA said the oilfields on which Europe and the US had come to depend to reduce their reliance on the Organisation of the Petroleum Exporting Countries would peak in the next five to seven years.

5 years of massive disruption to agricultural markets will provide enough fuel to cover the increase over one year. If that's not an indictment of the uselessness - and sheer folly - of the biofuels boom, I don't know what it will take.

By the way, I have found a remedy for the Cassandra-like angst produced by the fact that we know something awful is coming but no one is listening.

Oil investing. Prices go up, but instead of moaning, I just smile widely. I see Exxon, Total and Conoco are all upp 0,3-0,4 % today, while PetroChina is up almost 1,4 %. Maybe I'll add Chevron and Shell the next time prices go down.

Does this make me a bastard or just prudent? Or a prudent bastard?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

How does oil look against (say) sterling, the Euro and the Kuwaiti Dinar?

"The future is already here -- it's just not very evenly distributed" William Gibson

The concept of peak oil production and its timing are emotive subjects which raise intense debate. Much rests on the definition of which segment of global oil production is deemed to be at or approaching peak. Certainly our forecast suggests that the non-OPEC, conventional crude component of global production appears, for now, to have reached an effective plateau, rather than a peak...

    While there might be a temptation to extrapolate this trend, citing a peak in conventional oil output, a degree of caution is in order. Firstly, the concept of "conventional" oil changes with time, technology and economics. In the early 1970s, much offshore production was deemed unconventional, but this portion of global supply has since grown to account for 30 percent of the total. Evolving economies of scale and infrastructure development could do the same for [gas-to-liquid], oil sands and ultra-deepwater reserves in the future, shifting today's unconventional resource into tomorrow's conventional supply category...

    Finally, we note that focusing on non-OPEC crude alone is a rather selective way of considering the sustainability of global oil production. Peak or plateau production is frequently taken as shorthand for impending resource exhaustion. While hydrocarbon resources are finite, nonetheless issues of access to reserves, prevailing investment regime and availability of upstream infrastructure and capital seem greater barriers to medium-term growth than limits to the resource base itself.

Here is how Salon.com's Andrew Leonard interprets that:

To drastically summarize the report: The problem is not that the world is running out of oil, but that right now, offshore oil rigs are scarce and expensive, skilled labor is tight, transport infrastructure is limited, and political considerations such as "resource nationalism" in states such as Venezuela and Russia and geopolitical risk in Iran and Nigeria are hampering investment and development. Logistics are the real problem, the report seems to be saying, and not the actual amount of oil in the ground. This leads to the conclusion that even though nearly 3 million barrels of new supply will be needed each year just to offset the decline in established oil fields, "above-ground supply risks are seen exceeding below-ground risks in the medium term."

But there's a problem with this formulation that demonstrates a very careful, if not disingenuous, attempt to skirt the troubling implication of "peak oil." Peak oil does not mean, as has been emphasized a thousand times before, here and elsewhere, that "the world is running out of oil." It means that "the world is running out of cheap oil."

And that interpretation seems to be completely justified by the IEA report. Take, for instance, BP's much delayed "Thunder Horse" Gulf of Mexico offshore oil project. The IEA report notes that the project has faced a "perfect storm" of problems, including technical issues related to the new challenges of ultra-deepwater oil drilling, hurricanes and more mundane bumps in the road. Then the report notes that "Other projects may not face the same litany of problems as Thunder Horse, but as incremental non-OPEC supply becomes increasingly concentrated in technologically challenging areas, so cost over-runs and delays will remain part of the industrial landscape."

That's the most important sentence in the report. New supply is going to be harder to get, posing greater technological challenges and requiring higher levels of investment.

And yeah, the same salon.com introduces some peak oil computer games. Wanna play?