[copious.abundance]

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Petrol glut spells bleak years for Asian refiners Web posted at: 8/15/2008 REUTERS

singapore • Refineries in Asia face falling petrol prices and growing losses in producing the fuel, as the prospect of a sustained global supply glut looms over the industry in the next few years.

After more than five years of robust profits, the value of petrol against benchmark Brent crude has slid into discounts last month, and more losses are expected due to additional output capacity in Asia and the Middle East as US demand falls.

“We are just seeing the tip of the iceberg in terms of the whole petrol situation,” said Vijay Mukherji, head of Middle East and South Asia research at FACTS Global Energy in Singapore. Asia would see an excess of about 500,000 barrels per day (b/d) of petrol in 2010 against 80,000 b/d last year, data from the consulting firm showed.

Petrol production capacity in this region will jump nearly 20 percent to 5.2 million bpd in 2010, compared to last year. During the period demand will rise 10 percent to 4.7m b/d. Globally, some 7.354m b/d of secondary unit capacity-producing higher-value products such as petrol, diesel, jet fuel and naphtha — will come online from this year until 2013, the International Energy Agency (IEA) said.
[...]

[idiom]

This is why nobody wants to build refineries.

[Plantagenet]

"petrol glut"...... is the media really saying we are in a petrol glut?

[the48thronin]

"petrol glut"...... is the media really saying we are in a petrol glut?

English petrol.. I think they are projecting both a continued lowering of demand as noted in billions of less miles being driven this year and 18% drop in deisel volume of sale etc coupld with the output of that new refinery in INDIA which wile it will sell local will displace sales from somewhere.

As to the reality of those projections... Hey could be and the easter bunney might visit Qatar this spring also.. LOL

[Oil_be_alroit]

Elsewhere on this forum you can find plenty of stuff from economics experts going on and on about how the market will find its level so that there will always be oil, but at a price, etc. etc. So if it's all so simple how come if the Asian refineries are producing too much petrol (gasoline) we are having to pay more and more at the pump?

Does this really mean that pump prices are really driven by crude oil price, not the price of the refined product? Is that market economics at work?

[pup55]

falling petrol prices and growing losses in producing the fuel

They are not in business as a charity. When they start losing money they will shut down capacity. The least efficient will go first.

Don't worry about these guys.

Anyhow I am sure all of the millionaires in China will be delighted that they can get cheaper gas. They will go back onto their trajectory of doubling every 10 years until this spare capacity is gone.

[neocone]

I think oil will fall down to about $70 and stay there until 2015 or so... I mean come on... does anybody here know anything about the laws of large numbers???

Energy efficiency of a typical ICE engine: 15%... so just raising it to 20-30% can make the world run the same on 50 mpb as it is now on 80-90 mpbd.

I think most doomers don't have a clue about the capacity of human beings for adaptation.

Look at Africa... their oil consumption has fallen below that of theirs during the 1960s, yet the population is like 3X now of what it was then.

[Carlhole]

Forget $100 a Barrel - Oil Will Plummet to $30

...The conclusions are obvious. If you are thinking that the oil drop in oil to $115 a barrel is all we're going to see than you haven't connected the dots. This oil spike was a bubble fueled by a group of deceived investment speculators who failed to account for adaptable demand destruction from consumers. The technology to replace oil already exists and high oil prices merely provide the necessary motivation to bring these products to market.

The United States is leading an alternative energy charge that will spread throughout the globe and cause a major shift of power away from the Middle East. I'll save the ramifications of such a power shift for another article but simply stated, OPEC's greatest fear has been realized. Short oil.

If your prime source of information about all things petroleum comes strictly from PeakOil.com, TheOilDrum.com, EnergyBulletin.net and all those places, then you will scratch your head in puzzlement that anyone could possibly be optimistic about world oil supply.

However, if you expose your certainty about the facts to the crucible of the stock market, you will discover that differing opinions are quite strong and they want to take your money away from you. And they are quite confident that they can! So it makes you think twice.

Personally, I'm amazed that anyone believes that oil could reach $30 - 50. But how would I feel when it does? What would my portfolio look like? Ouch!

I'm with T. Boone Pickens on oil - I think it could bottom out around $100. But I can't help noticing that lots of stock investors who are invested in the same oil sensitive stocks I'm in think oil could get down to the $70 - 80 range.

[Oil_be_alroit]

I think oil will fall down to about $70 and stay there until 2015 or so... I mean come on... does anybody here know anything about the laws of large numbers???

OK, I'll bite. Please enlighten me about the Laws of Large Numbers.

[emersonbiggins]

This oil spike was a bubble fueled by a group of deceived investment speculators who failed to account for adaptable demand destruction from consumers. The technology to replace oil already exists and high oil prices merely provide the necessary motivation to bring these products to market.

Is anyone else getting tired of the announcer calling the winner of the ballgame in the middle of the 2nd inning?

Or maybe this article was sent to us from far in the future, where some of the things he's talking about might have actually taken place?

[ROCKMAN]

And once again you have the simple economist's view of a commodity: if prices rise enough more of the commodity will be produced and prices will drop. An easy theory to accept if you buy the concept that a few Ghawar's will materialize just as soon as prices get high enough.

And it's good to check the numbers a little closer: the 4% drop in US oil demand was more than offset by a bigger increase in global demand. But I do expect demand destruction with catch up with the rest of the world in the next 12 months. But to what degree? Don't know...just have to wait and see.

(Actually I am a petroleum geologist and have just been waiting for prices to get high enough to justify drilling up that 100 billion bbl field I've hidden away in my file cabinet all these years. Ha ha...I win.)

[Carlhole]

This oil spike was a bubble fueled by a group of deceived investment speculators who failed to account for adaptable demand destruction from consumers. The technology to replace oil already exists and high oil prices merely provide the necessary motivation to bring these products to market.

Is anyone else getting tired of the announcer calling the winner of the ballgame in the middle of the 2nd inning? Or maybe this article was sent to us from far in the future, where some of the things he's talking about might have actually taken place?

Here's some more from the same guy:
The Oil Bubble Will Meet the Same Fate as Tech, Housing

Over the last ten years the S&P 500 has returned a meager 2.88%. Why? Because in the long run the market doesn’t like bubbles. We’re now in the third wave of bubble euphoria and we’re hearing the same underlying message that we heard during the first two, just in different terms. During the dot-com era we watched tech fly to P/E multiples of 200 and above. When fund mangers were questioned about investing in such companies back in 1999, they collectively responded by saying times had changed. Lofty valuations became the new norm-until they crashed that is. The Nasdaq (QQQQ) still isn’t even half of what it was in 2000. The market’s punishment of the dot-com bubble has lasted for seven years.

Real estate investment shifted into bubble status due to low interest rates and easy lending practices advocated by the Greenspan Federal Reserve. Back in 2005 it was difficult to find anyone who didn’t want to jump into real estate. Flipping homes was the new trend for amateurs. Unfortunately it’s always the last guys in who get burned by a bubble. Those developers are being suffocated from the holding costs on their sinking investments. After watching home prices double and triple, nationwide home valuations have plunged since 2006 with more yet to come. Homebuilders (XHB) and financials (XLF) have been crushed by the bursting real estate bubble and it will likely take years before these stocks regain prior highs.

Now it’s oil (USO) that's bubbling. Two weeks ago oil prices reached a 600% increase since the bull market began. The oil bulls are using the same arguments that we heard from tech analysts in 1999 and real estate agents in 2005. They will use any rationale they can find to shift our focus away from the fact that gasoline shortages don’t exist and new oil is plentiful. There are now 53 commodity ETFs and ETNs that have caused average daily volumes to soar from 5 million in 2006 to well over 30 million today. History will repeat itself and the last guys in will get burned. Industry insiders believe that the proper valuation of crude is somewhere between $40-$50 a barrel. When will this bubble burst? Nobody can predict the exact time but the essential elements are in place: the Fed is done cutting interest rates, Bush is waiting on Congress to lift the offshore drilling ban, Congress in considering limits on speculation and high gas prices are decreasing demand.

The conclusion is that we are hearing the same story coming from the oil sector that we have heard in previous bubbles. They will tell you that this time is different, or that the fundamentals have changed - when they really haven’t. The only thing that has changed is sentiment. This bubble will burst just like the last two and it will be ugly for those who have gotten caught up in the hype. Over the next six months investors should average in to a short position in the U.S. Oil Fund (USO). Be suspicious of alternative energy as well. Solar, wind, natural gas, etc... will all fall with oil.

I have to say, I truly do love posting these contrary opinions because peakers just can't stand anyone disagreeing with them. If you think oil will cost $500/barrel in 2011 and you spend most of your time logged on here, you won't be challenged much in your opinion. Most people here will either agree with you or they won't challenge you.

But, again, the above is not necessarily MY opinion - this is simply an example of some the opinions I run into all the time on Google Finance or other stock market forums. And the people that share this view are not just forum rats with nothing better to do; they have personal money, client money and professional reputations riding on the calls they make. Time will tell!

[neocone]

OK, I'll bite. Please enlighten me about the Laws of Large Numbers.

The difference between 20 mpd and 90 mpd as perceived will be the same because of the HUGE quantities involved for the average individual. Psychologically it means enormous quantities of energy will still be seen and given the ability of human beings to adapt to *any* kind of environment means the sky will never fall. Case in point the graph of the Rwandan population where everything bounced back pretty nicely. To note the fact the die off in 1994 had nothing to do with an energetical crisis.

photo

In practice 90% of human activity is disposable... just like 90% of all car and truck trips. All the doomers seem to ignore the power of demand destruction as perceived and in practice.
Sure there might be a die off... but a 1/2 hr nuclear war between China and India might cause more damage to the world population curve than all the Saudi wells shutting down overnight for good.

Sure energy might have a play in the later, or need to acquire ressources. But like road rage cases in south central LA illustrate... human beings are not rational nor do make very rational life or death decisions... and that will always take care of not making any massive die off for "rational" reasons happen.

We kill each other or dominate each other to assert power, not by some rational need to create demand destruction.

[Carlhole]

Oil Seen Dropping Under $90 by Year End

First Global
OIL AT $30-$50 A BARREL? We don't know about you, but this wouldn't surprise us at all. Our Quant side flagged the move in crude oil prices on May 30. They were, as nearly always, right on the money. And now it's time for the data crunchers like us to get into action. It is our firm belief that crude oil represents a true bubble. The tests of a true bubble are that it should have little connection with fundamental data; that the bubble's very existence should create ample nonsensical stories as to why the bubble is for ..

(The full article is available only to subscribers. Anyone got a subscription? Share it!)

[TheDude]

Now it’s oil (USO) that's bubbling. Two weeks ago oil prices reached a 600% increase since the bull market began. The oil bulls are using the same arguments that we heard from tech analysts in 1999 and real estate agents in 2005. They will use any rationale they can find to shift our focus away from the fact that gasoline shortages don’t exist and new oil is plentiful.

I do enjoy a good asshat. Doing my occasional Google News search for 'fuel shortage' we get the old standbys like India and Nepal; also the Comoros Islands NW of Madagascar, Bosnia, Kenya, etc. Empty pumps in BC and Alberta owing to a cat cracker failing in some Edmonton refinery, too.

Looking at the comments for piece #1 he's getting a good flaming from Hubbertians, too.

[gnm]

I think oil will fall down to about $70 and stay there until 2015 or so... I mean come on... does anybody here know anything about the laws of large numbers? Energy efficiency of a typical ICE engine: 15%... so just raising it to 20-30% can make the world run the same on 50 mpb as it is now on 80-90 mpbd.
I think most doomers don't have a clue about the capacity of human beings for adaptation. Look at Africa... their oil consumption has fallen below that of theirs during the 1960s, yet the population is like 3X now of what it was then.

Yes, look at Africa. Last I checked people were DYING because they had insufficient fuel to bring crops to market even...

Zimbabwe and East Africa are facing massive food shortages. Farmers all over Africa are having problems securing insufficient fuel for agriculture. Etc, etc, etc.

wikipedia (ICE)

Most steel engines have a thermodynamic limit of 37%. Even when aided with turbochargers and stock efficiency aids, most engines retain an average efficiency of about 18%-20%

The thermodynamic limits will prevent those 20-30% gains from happening.
-G

[Carlhole]

Latest ODAC Newsletter

...What has been demonstrated in the last few months is that high fuel prices can bring about changes in behaviour which lead to reduced consumption. Given the predicted widening gap between supply and demand this is important (Tanaka points to a decrease in the volume in existing oilfields worldwide of an average of 5 percent a year needing an additional 3.5 million barrels of oil a day to offset these losses, while demand is growing by about a million barrels a day).

If governments (and voters) were prepared to learn from the situation and keep a high floor price on oil now, making it clear that there will be no return to ‘normal’, then these behavioural changes could be made permanent. If leadership could be shown to then promote further efficiency and a serious adoption of renewable sources as a real priority, then the future need not look quite so bleak.

"...then the future need not look quite so bleak".

Gee, that doesn't sound particularly doomerish either. Sounds a lot like Matt Simmons, in fact -- who says that the price of oil ought to remain high but not so high as to paralyze constructive global development, diversifying away from complete dependence upon hydrocarbons.

What is that ideal price for right now then? And what rate of increase would be ideal to spur maximum, constructive innovation and adaptation over the next 15 - 20 years? I would guess in the $100 - $120 range for right now and increasing at about a 5% per annum rate.

[dohboi]

The truth is that oil is at or near the point of permanent and irreversible decline in production, as nearly every major oil exporter has agreed that they are past peak.

But the other truth is that the enormous waste in gas use means there is the equivalent of a mega-oil find in even small efficiencies. The question has always been, how high do gas prices have to go before people start making the kinds of changes that can free up this extra capacity.

It is hard to think of conservation measures as the equivalent of new oil. Look at how successful the McCain people were at ridiculing Obama's claim that simple conservation measures like filling tires to their proper pressuse could achieve the same as new drilling off shore. Most people just couldn't imagine that this could be true, even though it is.

But if we only make changes because of price signals, we will never get very far ahead of the game for long. Just as we adjust to new usage pattern and as we think price will now reduce to more comfortable levels, we will be bitch-slapped with another sudden doubling of price over a very few months. This see-sawing will continue to be very hard on businesses, consumers, and all of those trying to build really significant long-term alternatives to an oil-based economy.

It is completely not interesting news that some people are predicting $30 oil. There have always been lots and lots of Yergins. Heck, they may even be (very briefly) correct, since most PO'ers worth their salt include increasing price volatility in their predictions for the plateau and slide down the far side of the slope.

[shortonoil]

gnm said:

The thermodynamic limits will prevent those 20-30% gains from happening.
-G

Since when were the laws of thermodynamics allowed to get in the way of a good economic theory? We all know that energy comes from money! Since money is unlimited (you can always print some more) energy must be unlimited. There is no energy crisis, and thus never can be!

These people who don’t believe in the Tooth Fairy, Goldilocks and the Three Bears, or that Humpty Dumpy can’t be put back to together again with some super-glue, are just a bunch of doomers!

[JohnDenver]

Now it’s oil (USO) that's bubbling. Two weeks ago oil prices reached a 600% increase since the bull market began. The oil bulls are using the same arguments that we heard from tech analysts in 1999 and real estate agents in 2005. They will use any rationale they can find to shift our focus away from the fact that gasoline shortages don’t exist and new oil is plentiful.

I do enjoy a good asshat.

Hardly. Schwarz said the oil bubble would pop on July 18, 2008, and guess what? It basically popped the next day.
The asshats are the numerous folks in here who ignorantly failed to heed the warning, and got financially reamed.

Greetings from Jason Schwarz, asshats!

Looking at the comments for piece #1 he's getting a good flaming from Hubbertians, too.

Yah, I bet. That's because he was right, and they lost a ton of money.