THE EIA Thread pt 2 (merged)

[Aaron]

Aaron said:

Guy Caruso may be a tool, but we are #1 in the world for "oil news" according to Google.Not OGJ or CNN or ABC News... Peakoil.com

Well .... when you put it that way ......... maybe we are important!

Thanks Aaron, from all of us.

DantesPeak said:

Caruso expects oil priced at $104 to bring on new supplies. Didn't we hear that as it past $40, $50, $70, and $90?

It is amazing that anyone would still listen to this same old absurdity. It just shows how uninformed the general public is about PO, or just about oil in general. That is our biggest hurdle in getting the message out there; without a doubt!

It is most certainly been my pleasure.

You're welcome.

[pup55]

somebody, somewhere must eventually take physical delivery of that crude

I hope I didn't tell you this, because it is of course not right at all. Anybody can write a contract for delivery of some quantity of crude oil at some time in the future, whether they have the crude or not.

I, some jerk sitting in some office, can sell 1000 barrels of crude oil right now, if I want. Some other jerk elsewhere can buy some if he or she wants.

As long as I buy some back before the contract expires, I don't have to mess with it. That's why there is such a flurry of activity at the end of the month when the current contract expires.

I am taking a hell of a risk, of course. If I sell some November crude oil right now, the closer it gets to November, the more nervous I will be. I will be willing to pay whatever to get this offsetting contract.

What I would be speculating is that I can buy this contract back between now and November at something less than what I sold it for in the first place. If I can't, I lose. I will be pretty frantic on October 22, when the November contract expires, if I have not done something with this by then.

Each contract is 1000 barrels, so there are many many more contracts outstanding at a given time than there is actual physical oil.

The current (noon EDT) volume on April Crude Oil is 225,000 contracts, which represents 219,000,000 barrels of oil, and we are only talking about a half a day, and only one grade of oil, WTI. This does not inclue the "open interest" which is the number of contracts sitting around in some account somewhere. Right now, it's 333,000,000 barrels for April.

[emersonbiggins]

Thanks for the info, Pup55. I probably (completely?) misunderstood the concept at first, but your explanation makes a lot of sense.

[DantesPeak]

Methinks Caruso has become somewhat delusional about the US energy outlook, but this is what he said yesterday:

March 4, 2008

Annual Energy Outlook
TESTIMONY

March 04, 2008

GUY CARUSO

ADMINISTRATOR U.S. DEPARTMENT OF ENERGY

SENATE ENERGY AND NATURAL RESOURCES

ANNUAL ENERGY OUTLOOK

Energy Prices

EIA has raised the reference case path for world oil prices in AEO2008, although the upward adjustment is smaller than the last major adjustment, introduced in AEO2006. In the AEO2008 reference case, real world crude oil prices (defined as the price of light, low-sulfur crude oil delivered in Cushing, Oklahoma, in 2006 dollars) decline gradually from current levels to $57 per barrel in 2016 ($68 per barrel in nominal dollars), as expanded investment in exploration and development brings new supplies to the world market. After 2016, real prices begin to rise (Figures 1 and 2), as demand continues to grow and higher cost supplies are brought to market. In 2030, the average real price of crude oil is $70 per barrel in 2006 dollars, or about $113 per barrel in nominal dollars. In developing its oil price outlook, EIA explicitly considered four factors: (1) growth in world liquids consumption, (2) the outlook for conventional oil production in countries outside the Organization of the Petroleum Exporting Countries (OPEC), (3) growth in unconventional liquids production, and (4) OPEC behavior. With the forces driving demand outside the United States as strong or stronger than previously expected and with global supply projections somewhat weaker, trends in total world liquids production are similar to those in the Annual Energy Outlook 2007 (AEO2007) reference case but the oil prices are higher.



Energy Production and Imports

Liquids and Other Petroleum Products. U.S. crude oil production grows from 5.1 million barrels per day in 2006 to a peak of 6.3 million barrels per day in 2018, primarily due to increased production from the deep waters of the Gulf of Mexico and from the expansion of enhanced oil recovery operations in onshore areas supported by higher crude oil prices. Domestic production subsequently declines to 5.6 million barrels per day in 2030, as increased production from new smaller discoveries is inadequate to offset the declines in large fields in Alaska and the Gulf of Mexico (Figure Total domestic liquids supply, including crude oil, natural gas plant liquids, refinery processing gains, and other refinery inputs (e.g., ethanol, biodiesel, BTL, and liquids from coal) grows from 8.3 million barrels per day in 2006 to 10.5 million barrels per day in 2030. The net import share of total liquids supplied, including crude oil and refined products, drops from 60 percent in 2006 to less than 51 percent in 2022, and then increases to 54 percent in 2030 as crude oil imports grow rapidly at the end of the projection to meet liquids demand (Figure 9). Net crude oil imports in 2030 are 11.1 million barrels per day in 2030 and net product imports (including net ethanol imports) are 1.3 million barrels per day in 2030.

[Congressional Transcript – no link]

[Tyler_JC]

So much for Peak Oil in 2005...

Oil production keeps rising but spare capacity is shrinking.

I can understand why the contracts for 2010 would be expensive, I don't really understand why the April 2008 contract should be so expensive. The market fundamentals (supply growth, demand growth, inventories, etc.) don't seem to justify it.

[Iaato]

Bodman-Bloomberg

"March 5 (Bloomberg) -- Tight world oil supplies, not speculators, are driving up the price of oil to record levels, U.S. Energy Secretary Samuel Bodman said in an interview on Bloomberg Television today.

Bodman said the U.S. and the Organization of Petroleum Exporting Countries have different views on speculation.

``They see speculation in the market, I see a decline in global inventories,'' Bodman said."

Give it up, Tyler. Even Bodman is ready to refute OPEC. We're in some serious trouble if the administration is letting him say this.

[Tyler_JC]

\

Now do you see where I'm coming from?

If oil inventories and prices are at all related, we shouldn't be seeing such dramatically higher prices at this time.

We haven't even hit the inventory lows of the early weeks of the Iraq War.

In order to justify a price spike like this in the short term, we would have to see much lower inventory numbers. There would have to be concerns that consumers would find empty gas stations or that power plants would run out of diesel fuel. Instead we see respectable inventories in the OECD.

A pull back is coming.

[joewp]

Instead we see respectable inventories in the OECD.

A pull back is coming.

The OECD isn't the world. It's taking more US dollar funny money to keep the oil away from the non-OECD countries, who are now suffering shortfalls in their supply.

[Oil-Finder]

--> LINK <--

Exxon CEO says oil spike not caused by shortages
Weak dollar, speculation overshadowing market fundamentals

By Steve Gelsi, MarketWatch
Last update: 3:31 p.m. EST March 5, 2008

NEW YORK (MarketWatch) -- Exxon Mobil Corp.'s chief executive on Wednesday pinned blame for the recent run-up in crude oil prices to a confluence of market factors that have little to do with the actual fundamentals of supply and demand.

Speaking on the day crude-oil futures topped $104 a barrel for the first time, CEO Rex Tillerson called the move "pretty crazy", saying a weak dollar accounts for about a third of the recent record run in oil prices, another third on geopolitical uncertainty and the rest on market speculation.

Tillerson made his comments to reporters at the New York Stock Exchange following the giant oil company's annual meeting with Wall Street analysts.

The global energy market prices crude-oil in dollars. When the value of the U.S. currency drops, it leaves producers with less money once those dollars are converted to other currencies. At the same, speculators tend to flock toward oil and other commodities as a hedge against the falling dollar, putting even more upward pressure on oil prices.

"In terms of fundamentals, fear of supply reliability is overblown," he said, adding that despite the concerns about geopolitical instability hurting oil supplies, such disruptions are actually quite rare.

Tillerson's assessment of the 30% surge in oil prices since last summer is not unlike that offered by OPEC President Chakib Khelil earlier today in Vienna, where the 13-nation producers' cartel announced it saw no need to raise production levels since the global energy market is already well-supplied. See full story.

[...]

[shortonoil]

joewp said:

The OECD isn't the world. It's taking more US dollar funny money to keep the oil away from the non-OECD countries, who are now suffering shortfalls in their supply.

In 2002 Saudi light was selling for $17.68/b, it is now $104. That is an annual increase of 34%, but supposedly there have been no supply shortages, and supposedly there is still surplus capacity.

Something here just does not add up!

If the EIA, and the rest of the world, can’t see Peak in this, they can’t see!

[Oil-Finder]

joewp said:

The OECD isn't the world. It's taking more US dollar funny money to keep the oil away from the non-OECD countries, who are now suffering shortfalls in their supply.

In 2002 Saudi light was selling for $17.68/b, it is now $104. That is an annual increase of 34%, but supposedly there have been no supply shortages, and supposedly there is still surplus capacity.

Something here just does not add up!

If the EIA, and the rest of the world, can’t see Peak in this, they can’t see!

Between 1997 and 2006, the prices of housing went through the roof. Does this mean there was a shortage of houses, and we had reached "peak housing?" Hardly.

[DantesPeak]

The Exxon chairman said this:

"In terms of fundamentals, fear of supply reliability is overblown," he said, adding that despite the concerns about geopolitical instability hurting oil supplies, such disruptions are actually quite rare.

This statement is so incredibly wrong, considering the history of supply disruptions from 1972 until 2008, that I can't even comprehend what drugs would make him say something like this.

However if I were in his shoes, I would spend as little as possible looking for new oil and as much a possible buying up well proven reserves. So I guess he needs some type of cover story to pull that off.

[DantesPeak]

joewp said:

The OECD isn't the world. It's taking more US dollar funny money to keep the oil away from the non-OECD countries, who are now suffering shortfalls in their supply.

In 2002 Saudi light was selling for $17.68/b, it is now $104. That is an annual increase of 34%, but supposedly there have been no supply shortages, and supposedly there is still surplus capacity.

Something here just does not add up!

If the EIA, and the rest of the world, can’t see Peak in this, they can’t see!

Between 1997 and 2006, the prices of housing went through the roof. Does this mean there was a shortage of houses, and we had reached "peak housing?" Hardly.

The hosuing bubble, speculative finance, and its causes have been well documented here since 2004.

I challenge you to provide any evidence showing that speculation is pushing up oil prices. In fact, I challenge anyone to present a logical scientific study showing how speculation is pushing up prices. In your explanation, please address the current shortage of diesel and akaylate and why it we won't have to refine more oil than now to build up supplies of these products.

As I have said repeatedly, speculation may have been pushing down prices, and they are only now reflecting the realities of long term supply and demand. Note - long term - which means we don't have to have a shortage today, but one coming over the horizon.

[Oil-Finder]

The hosuing bubble, speculative finance, and its causes have been well documented here since 2004.

I challenge you to provide any evidence showing that speculation is pushing up oil prices. In fact, I challenge anyone to present a logical scientific study showing how speculation is pushing up prices. In your explanation, please address the current shortage of diesel and akaylate and why it we won't have to refine more oil than now to build up supplies of these products.

As I have said repeatedly, speculation may have been pushing down prices, and they are only now reflecting the realities of long term supply and demand. Note - long term - which means we don't have to have a shortage today, but one coming over the horizon.

I don't have time to do a scientific study. But there is plenty of evidence that speculators are, in fact, helping to drive up oil prices. For example:

LINK

The explosion in the number of financial players in the energy markets has occurred particularly in the past year or two. There are currently 530 energy hedge funds, according to Fusaro, up from just 180 in October, 2004. Of the total funds now, 177 are strictly energy commodity funds trading oil or oil futures and options, as opposed to the stocks of energy companies such as ExxonMobil and Chevron. Larger financial institutions such as Goldman Sachs and Morgan Stanley have also stepped up their participation in the energy markets recently.

A nearly 300% increase in the number of hedge funds in the energy sector, plus other large financial institutions getting into the act, all trying to buy what is only a relatively small increase in the amount of oil, is going to drive up prices. More buyers + almost the same amount of product = rapid price increases. And all those hedge funds and financial institutions are hardly real users of the product, they just want to buy and sell the futures and options.

[DantesPeak]

I don't have time to do a scientific study. But there is plenty of evidence that speculators are, in fact, helping to drive up oil prices. For example:

LINK

The explosion in the number of financial players in the energy markets has occurred particularly in the past year or two. There are currently 530 energy hedge funds, according to Fusaro, up from just 180 in October, 2004. Of the total funds now, 177 are strictly energy commodity funds trading oil or oil futures and options, as opposed to the stocks of energy companies such as ExxonMobil and Chevron. Larger financial institutions such as Goldman Sachs and Morgan Stanley have also stepped up their participation in the energy markets recently.

A nearly 300% increase in the number of hedge funds in the energy sector, plus other large financial institutions getting into the act, all trying to buy what is only a relatively small increase in the amount of oil, is going to drive up prices. More buyers + almost the same amount of product = rapid price increases. And all those hedge funds and financial institutions are hardly real users of the product, they just want to buy and sell the futures and options.

What's your point? It just says they could be buying, but they could be selling. All this article says is that there are more hedge funds speculating. For all we know they are speculating on prices to drop. If they are speculating in the futures market, it doesn't change the amount of physical oil inventories in speculators hands.

[seahorse]

Oilfinder,

Its easy enough to stop all the speculation, just flood the markets with all this cheap oil you say is out there.

Now,

I haven't followed your posts that clearly, but please go on record with:

(1) What do you believe the world's URR is?

(2) What do you believe is the maximum rate of Saudi Oil production today? In 2010? in 2015?

(3) What do you believe the maximum rate of Iranian oil production is today, and also for 2010?

(4) What will be the maximum rate of non Opec production in 2010?

(5) What will be the maximum rate of Opec production in 2010?

(6) What is the average world decline rate for oil production?

(7) What is the average decline rate for existing Saudi fields?

(8) When do you believe the world will reach peak oil? What will be the average decline rate after that point?

(9) What is the maximum rate of Canadian unconventional oil production in 2010? 2015?

For each of the above answers, please post the source or sources that you base your answer on.

Also, what do you do for a living? In fairness, I'm a lawyer.

[Oil-Finder]

@Seahorse,

1) I don't "know" what the world's URR is. Neither do you, nor does anyone else. In fact, the number can't even be a fixed one, because the amount of oil that can be recovered varies according to technology and price. It's on the order of trillions of barrels. But exactly how many trillions, who knows.

2) If I'm not mistaken, current Saudi output is - what? 9 million barrels/day? I believe they plan on raising that to about 12 mbd by 2010 or thereabouts. I would assume the same for 2015, maybe a bit more.

3) According to this, Iranian oil production is now about 4.15 mbd and they plan on increasing it to 4.5 mbd in two years.

4) and 5) Click here

6) What decline?

7) Don't know about the others, but their largest field is not in decline

8 ) Dunno, maybe 2050? 2060? 2070? Somewhere around there. After that - who knows? Much depends on the state of technology then.

9) If I'm not mistaken, oil sands production in Canada is projected to rise to 2 or 3 mbd by 2015.

I do geographic information systems for a living. Sort of.

[Ache]

Bush 'disappointed' by OPEC move

Washington attacked the Organisation of Petroleum Exporting Countries for its refusal to increase oil production yesterday after an unexpected drop in US crude oil inventories pushed prices to a record high.

In strongly worded criticism, George W. Bush, the president accused the oil producers' cartel of damaging the US economy. Mr Bush said oil prices were "making it harder here in America for working families to save and for farmers to be prosperous and for small businesses to grow".

He said he was "disappointed" by Opec's decision to leave production unchanged in the face of record prices. US oil yesterday jumped $5.04 to a record $104.56 a -barrel, before closing at $104.52.

[joewp]

4) and 5) Click here

So you're using a source who's latest prediction of oil prices doesn't call for $100 oil until 2030?


That sure does explain a lot about your posts.

[Oil-Finder]

joe, I'm sure you, too, have cited plenty of sources which have made inaccurate forecasts now and then.