Sunday, June 24, 2012

Oil Supply and Demand in State of Flux

North America is experiencing an energy revolution of oil & gas thanks to technological innovations of production. The same and similar innovations are beginning to sweep across large areas of the globe from Eastern Europe to the Levant to South America to China to Western Siberia. Combined with improved tools of exploration and discovery, improved undersea oil & gas production, and enhanced oil recovery tools, the production side is seeing an upswing.

This increase in production, combined with a growing sense of impending global economic downturn, appears to point to an ongoing period of suppressed oil prices -- when compared to recent highs well above $100 a barrel for both Brent and WTI.

A recent Manhattan symposium on oil supply and demand attempted to shine more light on various factors contributing to today's fluctuating oil price situation:
The consensus outlook (with one outlier) is for liquid fuel production to plateau to the end of the decade. This will constrain economic growth, particularly in the OECD as the OECD sheds liquid fuel consumption to allow consumption growth in the Chindia and oil-exporter developing world. Unconventional oil (deep-water, arctic, tight-shale) all have significant geologic/geographical limits. They can be expected to support a limited duration liquid fuel plateau but are not big enough or can be brought online soon enough to support increasing production. Saudi Arabia needs $80/bbl to support its committed government spending and has stated that $100/bbl is the “fair” price they expect. This should support, apart from short term financial crisis-type demand drops, the price of oil.

...Edward Morse, Citibank - the short and long-term outlooks are bearish.
North America is where production is growing fastest. Expects production increases to continue (no backup). Expects Mexico to starting growing based on deep-water (no backup). Without Mexico, expects North America to be a net exporter.
Claims Chinese slow-down is substantial and will affect demand growth.Global recession could also impact demand.
Claims in 2013, the US will stop importing light sweet crude. Land-locked Candian crude will be part of the difference.
Sees long-tterm oil prices (end of decade) at $80 to $90.

...Ray Leonard, Hyperdynamics:
A geologist. Has seen reserves data bases from Russia and the ME.
Expects oil plateua from 2005 to 2030 of non-renewable oil production of 84 to 88 MBPD.
More and more of it expensive unconventional and deep-water oil.

...Jason Stevens, Morningstar: Tight Oil
Thinks US production Shale-Oil production grows to around 3.0 mbpd/year to 2015.
Sees total US oil growing to almost 7 mbpd/year by 2020.

...James Henderson, Oxford Academic:
Russian oil production has risen every year except on since 1998.
Currently transitioning to harder to access oils.
400 to 500 B$ investment needed to maintain current production.
There will have to be some tax breaks to maintain current production.
The export tax is an impediment on new investment because there is no allowance for investment.
Tax changes are negotiated ad-hoc, e.g. arctic different than east siberia.
Oil is 64% of export revenues, 25% of GDP, big part of government revenues.
_World of Wall Street
More at the link.
Program and links to obtain video proceedings ($200)

Expert viewpoints for the future of petroleum supply and demand are all over the map. Wise persons capable of reading between the lines should comprehend that political factors are paramount in determining future supply & demand and other determinants of pricing.

The highly politicised and pseudo-scientific movement of global carbon hysteria, has had an undue effect on the politics of oil, gas, and coal in North America, Oceania, and Europe. But such poorly reasoned political crusades can only continue for so long in the face of the inevitable economic difficulties and societal disruptions which they cause.

The future suplies of liquid transportation fuels from all sources should be quite ample, as long as advanced nuclear fission and fusion are facilitated by wiser political leaders.
Once one tacks on advanced BTL (biomass to liquids) on top of the massive unconventional CTL, GTL, KTL, BitTL, and GHTL resources, one begins to glimpse a vast horizon for production of large scale liquid transportation fuels. Over time, the economies of production become more economical -- particularly with the widespread use of advanced gas cooled nuclear fission reactors.
Uses of advanced nuclear power beyond electric power generation.
More uses of nuclear process heat.

World hydrocarbon endowment via Swindell.

More: Oil Markets in a Flux as Demand Slows Interesting weekly update for global commodities

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