Saturday, June 21, 2008

Oil Tidbits and Robbbits

Steve Saaf provided some additional information on the oil business. A lot of good info if you follow this sort of thing.

I was surprised by the statement that U.S. natural gas consumption has dropped -- despite the large increase in price, the U.S. government has forced (indirectly) a lot of electric power generation to use natural gas, which has been primarily responsible for the large increase in gas cost over the last few years. Those generating stations wouldn't be shutting down; which tells me the reduction in use is probably coming from U.S. "consumers", and most of it would have to be in the winter: they're living in cold homes. When will they be cutting up the furniture and burning it in the fireplace? (Ie, like near the end of "Atlas Shrugged".)

The oil facts presented below don't mention Chinese price controls encouraging oil consumption, and I wonder how many other government influences and subsidies are encouraging oil use around the world?

Nor the amazing fact that even given the tremendous increase in legislation and regulations blocking exploration since the 70's, proven supplies have increased and the ratio of proven supplies to world consumption has increased since 1980. (see my recent email "Devils, Fools and the Bogeyman", which has charts from the U.S. Dept of Energy website.)

How much oil would be available, and at what price if we got all the governments of the world out of the way?

-----Original Message-----
From: steve saaf
Sent: Saturday, June 21, 2008 10:06
Subject: oil tidbits-should we drill here?

(NOTE: the following data are from various sources)

1) In 1990, oil was at $23 a barrel. Today, it's flirting with $140 - a 509%increase. U.S. oil imports are up 70% since 1990. [But remember: this is caused by a very small change in the ratio of supply and the demand that exists -- even a few percent reduction in supply can cause 5X price increases if people *must* have something -- Robb.]

US domestic oil production has been cut in half since 1970. The United States was the largest oil producer in 1970 and now ranks third behind Russia and Saudi Arabia.

Rig counts since 1944 peaked at 4,530 in 1981, during the height of the oil boom. Today rigs running nationwide -- 1,514 were exploring for natural gas and 384 for oil.

We have lost over 50% of gas stations since the '70's.

Oil - production: 8.322 million bbl/day (2005 est.)
Oil - consumption: 20.8 million bbl/day (2005 est.)
Oil - exports: 1.048 million bbl/day (2004)
Oil - imports: 13.15 million bbl/day (2004)
Oil - proved reserves: 21.76 billion bbl (1 January 2006 est.)
Natural gas - production: 490.8 billion cu m (2005 est.)
Natural gas - consumption: 604 billion cu m (2005 est.)
Natural gas - exports: 19.8 billion cu m (2005 est.)
Natural gas - imports: 117.9 billion cu m (2005)
Natural gas - proved reserves: 5.551 billion cu m (no date)

2) According to the International Energy Agency (IEA), China, India, Russia, and parts of the Middle East are expected to consume 20.67 million barrels a day this year - more than the United States will. China is the giant mover and shaker in the energy markets, as its gasoline and diesel demand has soared.

The main reason: Last year, Chinese bought 5.5 million cars, minivans and SUVs plus 3 million commercial vehicles, up fromjust 1.6 million vehicles sold in 1997. This year alone, sales are expectedto grow another 15% to 20%. And through 2015, China's auto sales are expected to grow by an average of 1 million vehicles annually. Meanwhile, India is poised to zoom past China as the world's fastest-growing car market, with sales of passenger cars in India increasing 12.17% to 1.5 million this past year.

3) Mexico is our #3 source of imported oil - 1.2 million barrels per day(bpd), or 12.6% of our imports, but as global demand for oil continued to explode last year, Mexico's oil production fell 5.3% - and then fell faster in the first quarter of this year, by 7.8%. Mexico's crude oil exports dropped even more sharply, down 12.5% to 1.49 million barrels per day in the first quarter!

Mexico's production crisis is deepening: In April, Mexico's oil output fell to a nine-year low of 2.8 million barrels a day, mostly because of a decline in the Cantarell field. [Let's be realistic here -- what about the incredible incompetence and corruption in the Mexican government and the government owned oil company, Pemex? They are well known for being inept at running an oil company.] At current rates of decline, Mexico will become a net oil importer by 2016, and maybe sooner, according to Mexico's Energy Ministry! And it's not just Mexico.

Venezuela, another big supplier of U.S. imported oil, is hemorrhaging oil production due to the slipshod management by its deluded president, Hugo Chavez. Result: The combined net oil exports from Venezuela and Mexico to the U.S.dropped by 414,000 bpd in just five months recently: An astounding annual decline rate of 32% a year! [Solution: We take over Mexico and Venezuela? ]

Nigeria has an installed capacity to produce 3.0 million barrels per day. Nigeria's production capacity is largely blighted by the activities of militants in the Niger Delta which accounts for close to 100 per cent of the country's hydrocarbon resources. The militants are demanding greater control of the hydrocarbon resources [my emphasis, cause this is the pattern of the past and future; for instance Chavez, if you exclude all the other thugs in Saudi Arabia, Iran, Russia, etc, who now have what they want. See Atlas Shrugged, with special attention to the character of Cuffy Meigs. ] and to push their demands, in the last three years, they have heightened a terror campaign including bombings, arson, pipeline vandalism and hostage-taking which have resulted in the shut-down of over 1.0 million barrels of crude oil per day.

May, 2008 production figures released by the Organisation of Petroleum Exporting Countries (OPEC) showed that Nigeria produced 1.89 million barrels per day. [ie, 1/2 of capacity]

4) Today, fully half of the world's oil production comes from less than 120 giant fields. But the majority of these fields are more than a half-century old and some are running on fumes: We're getting between 3% and 4% less oil out of the world's existing oilfields every year [the question isn't whether we're getting less; that's normal for any resource; the question is why aren't new reserves being developed? ], the top five oil exporting countries -- Saudi Arabia, Russia, Iran, United Arab Emirates and Norway -- responsible for half of world net oil exports, are using more and more of their own oil. At the same time, their production is flat or falling, driving their exports into an accelerated decline.

According to the U.S. Department of Energy, the volume of petroleum products shipped by the world's top oil exporters fell 2.5% last year, despite a 57% increase in prices, and the same trend is holding this year. [Well, yeah -- OPEC is restricting output (partly to make sure Bush isn't re-elected), partly because the market is willing to pay the going rate; and in the U.S., Congress has done nothing but stop new development for three decades. ] Indonesia and Great Britain, both exporting oil as recently as two years ago, are now importing oil, competing with the U.S. for scarce energyresources.

6) Natural gas production in the U.S. is flat, despite many more wells being drilled. Production in Canada, which supplies over 80% of our imported natural gas, has peaked. America is building facilities to import liquid natural gas (LNG), but with demand rising rapidly in other consuming nations and exporting nations, it remains to be seen if we can import nearly enough. [Start building nuclear power plants and coal-fired power plants, and shutting down natural gas power power plants -- we'll have plenty of LNG at a much lower price.]

The fact is, U.S. LNG imports dropped a whopping 31% in 2007 as higher-priced markets in Asia andEurope outbid us.As a result, America's natural gas reserves are dangerously low. A long, hot summer that pumps up demand for natural gas at power stations [my emphasis] could easily drive prices through the roof before the first frost. By the end of October, America will likely have only 3.1 trillion cubic feet of gas in storage -- almost 1 trillion cubic feet below full storage, just as we go into prime heating season.

7) A 2005 RAND study estimates that about 800 billion barrels of oil trapped in shale are technically recoverable from the Green River Formation. This amount is more than three times the proven oil reserves of Saudi Arabia. [all you've got to do is get rid of the 7 year permit application process, but of course, many politicians, like Colorado's own Senator Salazar, are vehemently opposed to oil shale because it disturbs the pristine hallowed sanctum of Earth goddess Gaia.]

8) The US Minerals Management Service estimates that America's outer continental shelf holds about 19 billion barrels of undiscovered recoverable oil and 85.7 trillion cubic feet of undiscovered recoverable natural gas. But Congress has outlawed development there - even though the Chinese are planning to explore for oil within 60 miles of the Florida coast. [Keep in mind, the US Minerals Management Service is likely grossly underestimating the undiscovered oil -- they think like the same US Bureaucrats who said in 1980 that the world would be out of oil in ten years.]

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