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Oil Glut Ahead?

General discussions of the systemic, societal and civilisational effects of depletion.

Oil Glut Ahead?

Unread postby Pops » Wed 08 Sep 2010, 07:09:40

In May, less than a month after the blowout of the Deepwater Horizon oil rig in the Gulf of Mexico, a key milestone was achieved with little notice: Total U.S. supplies of petroleum and products refined from it (including the Strategic Petroleum Reserve) surpassed 1.8 billion barrels, reaching the highest level in the last 20 years. Since then the total has continued to edge upward, hitting 1.87 billion barrels in the week ended August 27, according to the Energy Information Administration.

Despite the Iraq War and the resulting production disruptions, despite the moratorium on drilling in the Gulf, despite turmoil in Nigeria and ongoing cross-border transshipment quarrels in Central Asia and the multiple, repeated declarations that "peak oil" has arrived and supplies will inevitably dwindle, the United States has more petroleum on hand today than it has had since at least the beginning of the first Gulf War.

Part of that surplus comes from increased oil and gas production, particularly from ongoing production in the non-OPEC countries (including the U.S., where a "shale gas boom" has created a natural-gas glut). It also comes from flat demand due to the stumbling economic recovery and changing consumer behaviors. Neither of those factors is guaranteed to last. But as the summer driving season passes and students head back to school, awareness has gradually dawned that we may be looking at an oil surplus for years to come.


Read the rest then tell me your opinion, Oil Glut or Oil Crunch?

Leaving aside criticism of the article, glut or crunch are two sides to the same coin, I think.

Oil production increased significantly in the US because of $150 oil, OK, that's one side of the coin.
Many argue $150 oil also caused, or at the least contributed to, a recession that has not yet abated - there is the other side.

It may be that we start to see a real correlation between employment and oil supply from here on out.

What do you think?
If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen we must live through all time or die by suicide.
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Re: Oil Glut Ahead?

Unread postby Xenophobe » Wed 08 Sep 2010, 07:26:40

Pops wrote:Read the rest then tell me your opinion, Oil Glut or Oil Crunch?

What do you think?


The implications of peak demand in the developed world and continued efforts at conservation and conversion have been quite amazing in the past 2 years.

I think OPEC (read Saudi Arabia) will restrict production capacity even further than the multiple millions of barrels a day they already have in order to defend $60-$70 oil, even in a reduced demand scenario. America has shown it doesn't mind that level of crude cost, and far be it for the Saudi's to take less than what the market will bear.
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Re: Oil Glut Ahead?

Unread postby pup55 » Wed 08 Sep 2010, 07:54:42

Hi Pops
Good topic.

1. The two previous periods when the crude oil inventory got above 360 million barrels were in 1982 and in 1990 both times we were in recession.

2. In 1982, when we had a "glut" of crude oil and the inventory was 360 million barrels, we had 30 days worth of refinery inputs in inventory, that is, if you take the crude oil inventory and divide it by 12 mbpd, our consumption at the time, it was about 30 days worth. Currently, with 360 million barrels in inventory, there are only 24 days production in inventory....In July of 1990, when the all-time inventory record of 390 million barrels occurred, we had 27 days in inventory.... soooo..... considering the size of the consumption we now have, our inventory is just a little bit above average....

3. Because of the current contango situation in the market it makes sense to buy and store oil.... There's a $4 incentive per barrel to buy and store oil for 90 days right now.

So, the inventory is really not all that high, compared to our historical consumption, the inventory rose significantly during the previous two recessions, and we are still in one, and there are economic incentives right now to store inventory.

Now it is quite true that 2008=1929 it could easily be another decade before we have any serious short term supply constrictions...... it took until mid-1985 to get the inventory "down" to 24 days consumption, and the "glut" in 1990 also took about two years to get "down" to where we are currently, which is 24 days consumption.
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Re: Oil Glut Ahead?

Unread postby pstarr » Wed 08 Sep 2010, 13:21:21

Pops wrote:Read the rest[/url] then tell me your opinion, Oil Glut or Oil Crunch?

Leaving aside criticism of the article, glut or crunch are two sides to the same coin, I think.
I read it and it was stupid. So how can I leave aside criticism of the article. What does that mean? The article is stupid. It confuses storage reserves (a paltry 1.87 billion barrels accounts for two months of US crude consumption) with geologic reserves and production. It further muddies the waters by throwing in a recent minor uptick in natural gas production that has nothing to do with PO. The article throws out a red herring ("repeated declarations that "peak oil"") and then makes a stupid mistake:
United States has more petroleum on hand today than it has had since at least the beginning of the first Gulf War.
WTF? In 1990 we were at 8 mbpd now we are at 5.
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Pops wrote:Oil production increased significantly in the US because of $150 oil, OK, that's one side of the coin.
Many argue $150 oil also caused, or at the least contributed to, a recession that has not yet abated - there is the other side.

It may be that we start to see a real correlation between employment and oil supply from here on out.

What do you think?
I believe the financial crisis is peak oil. And that this current "recession" will be understood in the future, with the advantage of hind sight, to have been the start of industrial and social collapse.
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Re: Oil Glut Ahead?

Unread postby pstarr » Wed 08 Sep 2010, 13:30:18

Xenophobe wrote:
Pops wrote:Read the rest then tell me your opinion, Oil Glut or Oil Crunch?

What do you think?


The implications of peak demand in the developed world and continued efforts at conservation and conversion have been quite amazing in the past 2 years.
What evidence do you have the conservation (rather than demand destruction) is responsible for reduced petroleum production. I am sure that you have no evidence that "conversion" (whatever that means) so I will not even bother requesting more data.

Xenophobe wrote:I think OPEC (read Saudi Arabia) will restrict production capacity even further than the multiple millions of barrels a day they already have in order to defend $60-$70 oil, even in a reduced demand scenario. America has shown it doesn't mind that level of crude cost, and far be it for the Saudi's to take less than what the market will bear.
SA has not "restricted production capacity". That would mean permanently shutting in operating wells. Or nuking the fields. What I believe you meant to say is that SA has "restricted production", i.e. enforced its own quota. There is a lot of contravening evidence that they are pumping to the maximum and exporting less. See Royal utterances regarding "future generations."

Wrong Shorty, America does mind "that level of crude cost."

You have to understand your own egocentrification to explain that last remark. If you haven't noticed . . . the rest of America is struggling to dig itself out of the deepest economic malaise since the Great Depression.
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Re: Oil Glut Ahead?

Unread postby pstarr » Wed 08 Sep 2010, 13:38:21

pup55 wrote:Hi Pops
Good topic.

1. The two previous periods when the crude oil inventory got above 360 million barrels were in 1982 and in 1990 both times we were in recession.
Oh. I see. We were discussing "inventory." Why didn't the article say so?

Analyzing "inventory" to study peak oil production is like examining the contents of a blood sample to diagnose a bloodied hemorrhaging trauma patient. :razz:
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Re: Oil Glut Ahead?

Unread postby Pops » Wed 08 Sep 2010, 17:42:25

pstarr wrote:Analyzing "inventory" to study peak oil production is like examining the contents of a blood sample to diagnose a bloodied hemorrhaging trauma patient. :razz:

And dismissing conditions likely to impact you tomorrow is like ignoring the hemorrhaging because you've already decided the patient has cancer.
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Re: Oil Glut Ahead?

Unread postby Xenophobe » Wed 08 Sep 2010, 17:57:18

pstarr wrote:SA has not "restricted production capacity". That would mean permanently shutting in operating wells. Or nuking the fields.


No it doesn't. It means they choose not to produce as much oil. This is accomplished by turning a valve, shutting in wells, doing something to keep oil in the ground rather than lounging around in surface storage where it isn't needed.

And obviously OPEC has quite a bit of spare capacity which isn't being used right now.

Point #6, 5.6 million/barrels a day

http://europe.theoildrum.com/node/6863#more

and please stop calling me names, I already told you that I am not short.
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Re: Oil Glut Ahead?

Unread postby Windmills » Wed 08 Sep 2010, 18:13:34

pstarr wrote:Wrong Shorty, America does mind "that level of crude cost."

You have to understand your own egocentrification to explain that last remark. If you haven't noticed . . . the rest of America is struggling to dig itself out of the deepest economic malaise since the Great Depression.


What household behaviors are indicating that America cares about the price of gasoline at this point? I don't see much. Bus lines are being closed, mass transit ridership is down again. Some hybrid models are seeing flagging sales relative to other models. People are still speeding and drag racing on the roads. I find myself driving at the speed limit and being constantly passed by traffic. Our company's participation in the state trip reduction program via altertantive transportation is dismal. People with jobs don't seem to care one bit anymore. They seem to have adjusted fairly well and gone back to their old habits. I think the rate of temperature increase has been turned down on the pot with the frog in it, and he's thinking it's a nice jacuzi once again.
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Re: Oil Glut Ahead?

Unread postby eastbay » Wed 08 Sep 2010, 18:19:57

Xenophobe wrote:
And obviously OPEC has quite a bit of spare capacity which isn't being used right now.


and please stop calling me names, I already told you that I am not short.


Wrong Shorty. They are pumping all they can. And it'll be a bit less each year from now on.
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Re: Oil Glut Ahead?

Unread postby rockdoc123 » Wed 08 Sep 2010, 18:59:20

Wrong Shorty. They are pumping all they can. And it'll be a bit less each year from now on.


not as far as Saudi Arabia is concerned. They were successful in all of the projects to increase spare capacity with the exception of the offshore heavy oil which they postponed. That would have brought them up to 12 MMB/d capacity. Given current production and even taking off the one project not completed they still have a couple of million barrels of spare capacity.
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Re: Oil Glut Ahead?

Unread postby Plantagenet » Wed 08 Sep 2010, 19:10:57

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Re: Oil Glut Ahead?

Unread postby pup55 » Wed 08 Sep 2010, 20:04:18

Total U.S. supplies of petroleum and products refined from it (including the Strategic Petroleum Reserve) surpassed 1.8 billion barrels, reaching the highest level in the last 20 years. Since then the total has continued to edge upward, hitting 1.87 billion barrels in the week ended August 27, according to the Energy Information Administration.


Yes, I believe the article said "there is plenty of oil in inventory therefore all is well, and there is a glut".....
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Re: Oil Glut Ahead?

Unread postby Xenophobe » Wed 08 Sep 2010, 21:48:51

eastbay wrote: They are pumping all they can. And it'll be a bit less each year from now on.


Not according to TOD.
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Re: Oil Glut Ahead?

Unread postby eastbay » Wed 08 Sep 2010, 21:56:00

rockdoc123 wrote:
Wrong Shorty. They are pumping all they can. And it'll be a bit less each year from now on.


not as far as Saudi Arabia is concerned. They were successful in all of the projects to increase spare capacity with the exception of the offshore heavy oil which they postponed. That would have brought them up to 12 MMB/d capacity. Given current production and even taking off the one project not completed they still have a couple of million barrels of spare capacity.



Yes, rockdoc123. I know this 12 mb/d SA capacity claim quite well. We all do.

I've read this countless times and yet I remain skeptical and will remain so until it's tested. And a testing will be performed in the next year or two. Maybe sooner. Until then we'll never know for sure due to their lack of transparency. Until then it's opinion and mine is ... I think they're exaggerating.
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Re: Oil Glut Ahead?

Unread postby Fiddlerdave » Wed 08 Sep 2010, 22:13:13

I can't believe I am in concert with Plantagenet!

This brief respite of what should be laughingly considered "high inventories" (if you can consider a quantity of oil that only would support us for a short time "high") will be gone as the middle class of China, India and other emerging countries develop their tastes for lifestyles that require oil consumption. Steak, entirely comfortable heat and air conditioning, plastic, travel, big screens TVs and tous of all kinds.

Even as their governments struggle to get technologies going that will keep these new consumers from ever using as much per person of the fossil fuels as Americans did, due to the incredible numbers of these new consumers, the situation will be unimaginably dire in a very short time.
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Re: Oil Glut Ahead?

Unread postby Quinny » Thu 09 Sep 2010, 02:02:42

When I first 'discovered' PO, one of the thing that amazed me was the extremely low inventory of oil (& food) that was available in case of a crisis. I remember thinking that if I was in power, building up stocks (together with rationing) to ensure vital services could be protected would be a key plank of any policy to avoid societal collapse. Where are these stocks kept?
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Re: Oil Glut Ahead?

Unread postby Comp_Lex » Thu 09 Sep 2010, 02:18:06

Saudi-Arabia's internal consumption grows 7.5 - 10 % per year.
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Re: Oil Glut Ahead?

Unread postby americandream » Thu 09 Sep 2010, 04:21:53

Part of this PO quest involves a bit of crystal ball gazing as no one really knows how much is left down there. I personally don't believe that Po has arrived yet. It will in due course but not yet. Risk capital is still wallowing in the China and India dream. They are the proverbial canary in the coal mine. When they run for the hills is when resouricing or climate or whatever will be unwinding. I don't see it yet. Suckers there are plenty of, yes, but the smart money is still out there looking for bargains.

Pops wrote:
In May, less than a month after the blowout of the Deepwater Horizon oil rig in the Gulf of Mexico, a key milestone was achieved with little notice: Total U.S. supplies of petroleum and products refined from it (including the Strategic Petroleum Reserve) surpassed 1.8 billion barrels, reaching the highest level in the last 20 years. Since then the total has continued to edge upward, hitting 1.87 billion barrels in the week ended August 27, according to the Energy Information Administration.

Despite the Iraq War and the resulting production disruptions, despite the moratorium on drilling in the Gulf, despite turmoil in Nigeria and ongoing cross-border transshipment quarrels in Central Asia and the multiple, repeated declarations that "peak oil" has arrived and supplies will inevitably dwindle, the United States has more petroleum on hand today than it has had since at least the beginning of the first Gulf War.

Part of that surplus comes from increased oil and gas production, particularly from ongoing production in the non-OPEC countries (including the U.S., where a "shale gas boom" has created a natural-gas glut). It also comes from flat demand due to the stumbling economic recovery and changing consumer behaviors. Neither of those factors is guaranteed to last. But as the summer driving season passes and students head back to school, awareness has gradually dawned that we may be looking at an oil surplus for years to come.


Read the rest then tell me your opinion, Oil Glut or Oil Crunch?

Leaving aside criticism of the article, glut or crunch are two sides to the same coin, I think.

Oil production increased significantly in the US because of $150 oil, OK, that's one side of the coin.
Many argue $150 oil also caused, or at the least contributed to, a recession that has not yet abated - there is the other side.

It may be that we start to see a real correlation between employment and oil supply from here on out.

What do you think?
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Re: Oil Glut Ahead?

Unread postby Ayoob » Thu 09 Sep 2010, 04:37:52

We will hit gluts and dry spells from here on out. Your best move is to buy and use cheap during the glut, and store during the dry spell and conserve. A storage tank is your friend. In my mind's eye, I have a few five hundred gallon tanks on my property in the future. Once every couple of years I'll wander across a good deal and buy.
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