Date: Thu Mar 13 2003 12:04
trotsky (Crmblr - attention, rant...) ID#377387:
yes, nobody believes the higher energy prices will stick...just ask the Wall Street 'analysts' - they've been bearish on crude oil all the way up from the post 9/11 low. and they're STILL bearish. however, w.r.t. to NG i think you may be misinterpreting the industry's lack of motivation. fact is, we had the biggest drilling boom of all time when the price spike in 2000 occurred - and 75% of these newly drilled wells ( i think 22,000 new wells were drilled ) are already running on empty. never before have such huge decline rates in giant gas wells occurred. it was a waste of money to drill them. so they've stopped drilling...because there's not enough NG left to be found. and since we have not even had an attempt at another drilling boom this time, the supply crisis is bound to worsen considerably. next winter we'll see new all time highs in all the energies imo, but especially pronounced in NG. i also believe the crude oil supply crisis will worsen, although it seems likely that we'll get a correction in the near term. that correction will be used by China to replenish its crude reserves, which have fallen to just 2 weeks of demand. Saudi Arabia is pumping over 9m. bbl./day at the moment, iow., OPEC's 'swing producer' is already running at full capacity. Saudi Aramco says it would only take 'a phone call' to go to 10.5 m. bbl./day, but most experts dispute this. it is possible in theory, but would require some $15 - 20 billion in fresh investments to bring Saudi capacity to this level. overall OPEC production has plunged by 10.5% over the past year, in spite of the oil price spike ( which proves that oil supplies are not just a 'question of price' ) and that was BEFORE Venezuela went off-line. in the meantime, former USSR production increases have begun to level off and stall - apparently maximum capacity has been reached there for the time being as well. and Venezuela, Norway, the North Sea fields and Mexico have all passed their respective Hubbert peaks over the past 2 years. Norway's production is declining very fast...at about a 9-10% annual rate currently, in keeping with the rates predicted by the Hubbert model. North Sea is not declining as fast, as it consists of a multitude of fields, some of which are already past the peak and some of which have yet to get there. there is no reliable info on the very old Kuwaiti giant fields, but the production decline there has been so massive that i suspect the peak may have arrived earlier than predicted. the ME still holds the by far largest reserves overall, but will require huge investment in drilling and development to bring new fields online, as the 14 largest fields, which provide 20% of global demand are all between 50 and 70 years old - which is to say one can not know for sure if those fields have or haven't yet peaked - they may well have. note that OPEC's reserves are overstated by at least 50% due to their perverse quota system.
in short, judging from the available data , which defy conventional wisdom completely at the moment ( referring to OPEC's production declines here, which could not possibly have happened according to every WS 'expert' out there, but have happened nevertheless ) it appears as though longer term oil supply problems are already beginning to bite left and right. the worst thing that could happen here would be a sharp decline in prices, as that would delay the necessary investment and conservation measures that are urgently needed to push out the global production peak. note that at the moment, global crude inventories sit at a 30-year low - coincident with the highest nominal prices since 1980. an alleged 'impossibility'.
as an aside, if i were in charge in Saudi Arabia, i'd triple the guards at the Ras Tanura terminal. all OBL has to do if he really wants to cripple the West economically would be to blow up that terminal. that would push out the global peak for sure, since we'd see triple digit prices then. note that the alleged remaining spare capacity of all OPEC producers together currently amounts to less than Iraq's daily production. nothing must go wrong in this market now...any further supply disruption would produce a full-blown crisis, dwarfing anything we've seen in the 70's. |
