10/19/09 Pittsburgh, Pennsylvania
It might be a comforting thought to believe that world oil output can increase. Indeed, many policymakers in the U.S. and Europe apparently dream themselves to sleep at night pondering how the current oil volume of about 85 million barrels per day could move upward to, say, 95 million barrels per day – ‘if only the world oil industry were more efficient.’
Yeah, right. Except the global oil industry is not that model of dreamland efficiency. Sure, there are some bright spots. The big internationals like Exxon Mobil, Chevron, BP, Shell, etc. are good. There are some really good state oil firms like Brazil’s Petrobras and Norway’s StatoilHydro. Saudi Aramco is outstanding. These guys are all doing great work to keep the world’s pipelines and tankers filled.
But much of the rest of the world’s oil industry lacks the knack for capital discipline and crisp project execution. Venezuela’s oil industry is a basket case, what with the Chavez-led nationalizations and mass firings of recent years. Output is falling in Venezuela, and this from a nation with among the largest hydrocarbon reserves anywhere in the world.
Mexico’s national firm, Pemex, is nothing but a piggy bank for the politicians, who suck most of the investment capital away from the oil patch and into their own boondoggles. Thus is Pemex walking off a cliff of underinvestment, depletion and decline. According to Matt Simmons, Pemex may not be exporting any oil at all to the U.S. within 18-24 months.
Iran’s oil industry is in a slow death spiral, despite the occasional report of Chinese assistance with field development… Next door in Iraq, chaos reigns. The Iraqi oil legislation is so burdensome that almost all players within the international energy industry are spurning Iraq, including the Chinese. Wow. When the Chinese won’t invest in your oil fields, there MUST be something wrong.
And so it goes. The bottom line is that we should expect a global oil shock by 2012, or earlier if global economic activity kicks into high gear. Oh, well. It only means that the deep-water guys will do that much better as things unfold
Sign Up for The Daily Reckoning e-letter and receive a copy of Bill Bonner's The Trade of The Decade report… at NO CHARGE.
We Value Your Privacy.
ShareThis
Did you know that the American government imposes HEAVY penalties on conversion of existing/used cars to natural gas guzzlers? What do you think will happen when they decide to remove that penalty and put it the other way round — the support for natural gas is rising tremendously.
If the Chinese consumer cannot pull the world out of recession, why do you think he can afford to buy so much oil at 80 US$ or more?
From my point of view, that is all nonsense. The current price trend is because of idiotic speculators and nothing more. Look at the contango development!!! There was NO CONTANGO AT ALL until the price dropped from over 145 US$ to approx. 70 US$!!! During THE WHOLE RISE OF OIL PRICE to 147 US$, the market DID NOT BELIEVE IN HIGHER PRICES! It believes now because the participants look back and see: that must be peak oil. It is real.
The truth is: there was no shortage of oil. There was a shortage of high quality oil suitable to produce gas with low sulfur content and using the existing refineries which were not upgraded due to too low profits.