What's the deal with oil?

[wayneL]

I am now totally confused about oil.

On the one hand we have the peak oil mob, saying civilization as we know is about to end.

On the other hand there's the Abiotic oil mob.

Both have credible arguments for their own case and against the other.

Then I spot this article about oil reserves:

http://www.radford.edu/~wkovarik/oil/index.html

I'm totally FUBARed about what the truth is about oil!

WTF's going on?

 

[GreatPig]

Re: Whats the deal with oil?

Wayne,

The truth is that it's all an intergalactic plot to shatter the bonds of human civilisation so that the impending invasion will progress more smoothly.

In the meantime, as Steve Navra once commented: buy, sell, buy, sell...

Cheers,
GP

 

[Milk Man]

Re: Whats the deal with oil?

Wayne,

The truth is that it's all an intergalactic plot to shatter the bonds of human civilisation so that the impending invasion will progress more smoothly.

In the meantime, as Steve Navra once commented: buy, sell, buy, sell...

Cheers,
GP

You behave or i'll fly a plane up ya clacker on independance day! The galactic trade federation will not be impressed!

 

[Smurf1976]

Re: Whats the deal with oil?

The key issue going forward is not oil in the ground but rather, the ability to get it out of the ground. A billion barrels in the ground is useless unless it can be extracted at a meaningful rate.

And this is the problem. With the actual projects being built (or planned) there simply isn't enough new capacity coming online to offset the natural decline of existing fields plus demand growth (assumed to be 2% per annum). For that matter, there isn't enough even without demand growth.

The other big problem being largely ignored is natural gas. With both the UK and North America (and New Zealand) being post-peak gas producers with significant reliance on gas-fired power generation this is a huge problem. The short term solution is simply to burn oil in the power stations but that only adds to oil demand which is already a problem in itself.

Short term the bottom line is that business as usual oil demand (including substitution for natural gas) simply can not be met over the next 6 months (unless it's abnormally warm) without abnormal stock drawdown which will not likely be replenished. A few years of that and there would be no stocks at all...

Long term it really depends on how much is invested in both oil and alternatives. Technically it's doable but financially we're talking about numbers where $100 billion is a rounding error and even $1 trillion is play money so I have my doubts that the necessary investments will actually take place worldwide. Some will, but probably not enough.

As for the USGS claims about oil, they have a truly woeful track record with their oil and gas forecasts with even their own employees publishing private reports discrediting the official line. That the USGS always seems to produce forecasts which support whatever the present energy policy is (cheap natural gas for Bill Clinton, lots of oil in certain locations for George Bush) doesn't add to their credibility.

One of the big problems with the USGS and some others is the circular use of data. That is, they take their data (unverified) from some other "offical" source (such as a foreign government) which is itself simply requoting other "offical" data from someone such as BP who are themselves simply requoting "offical" data from USGS or the IEA. BP in particular keeps its own data confidential and just quotes governments, USGS or the IEA. So it's just the same numbers going round and round. No surprise therefore that despite ongoing oil production and discoveries the data basically doesn't change at all in many countries. So the truth is anyone's guess but just don't take too much notice of the circular offical figures.

I am optimistic about the future though. But I just don't see us getting there with cheap oil and gas.

 

[markrmau]

Re: Whats the deal with oil?

Good points. Just an additional point, don't forget the distinction between grades - Light sweet crude, and heavier grades.

The light sweet crude is in demand as the heavier grades require more refining. Due to underinvestment in the oil refining industry, heavy grade refiners are running flat out. Sometimes OPEC says that it is increasing output, but it is the heavier grades so it cannot be refined quickly enough.

It is even rumoured that the saudis are running out of LSC....

 

[Smurf1976]

Re: Whats the deal with oil?

It is even rumoured that the saudis are running out of LSC....

The apparent mad scramble to get drilling rigs to Saudi indicates that something is up. It was reported that they are offering 3 times the going rate or thereabouts to try and get rigs.

 

[wayneL]

Re: Whats the deal with oil?

Smurf,

Thanks, I knew you'd know.

Cheers

 

[kaveman]

Re: Whats the deal with oil?

it becomes a juggling act
Talk down reserves to maintain bouyant price, without becoming too much doom and gloom to push people to alternatives, but don't be too jubilant about good reserves as the price may fall.
so you make sure that the rumours cover both ends of the scale