Back to Peak Oil. Over at the Oil Drum there is a raging discussion about Peak and the impact of the Kingdom of Saudi Arabia (KSA) on that discussion. The arguments center on whether or not KSA is in a voluntary or involuntary production decline. Right now the arguments are lining up well enough for anyone to say "maybe". Which means it may be a few more months before we can be sure as to what the answer is.
In any case, there have been several posts that are specific to KSA, and some of the charts are revealing. The fact that Matthew Simmons and T. Boone Pickens have both called peak for crude and condensate (the foundation for gasoline) gives cause to pause. I'll be keeping an eye on this since the last post has a possible projection about KSA that, if it were legitimate, truly does spell D-O-O-M. Most of the TODers, including the post author, don't believe for a minute that things will turn out that way, but they haven't come up with the factual basis as to why not.
The KSA is not the most important producer in the world, but it is the world's swing producer, meaning it can open or close the production valves as needed to offset high prices or low inventories. If they can no longer do that, and there isn't anyone else in the wings who can, we are in the zone for the slide down. Most of what they are producing is heavy sour at this point, not the light sweet that is easy and inexpensive to refine. KSA is building additional refining capacity to refine the heavy sour, some of which is carrying unique elements like vanadium. Refineries have to be able to build a refining process that removes those elements. KSA is the only country with a field producing vanadium contaminated crude. Thus refining for that field will be more expensive since the process has to be adjusted. KSA looks to be taking on that job itself.
Those of you who drive may have noticed that gas is at $2.74/gal for regular. It's higher than that in California right now. My bet is $4/gal in California by summer. That will be just the start.
2 comments:
There IS no swing producer anymmore. We are now at the point where any small event can cause a supply disruption.
KSA production dropped 8% in the past two years, against increasing world demand. Could this drop truly be voluntary? My feeling is that, given the size of the 'water cut' in Saudi oil just a few years ago, that it is not. Add this to the catostrophic declines of Canterell and the North Fields, against the increasing hunger for oil and American lifestyles in rapidly developing countries such as China and India.
The Iraqi oil is almost off the table, for so much destruction has been wrought on Iraqi oil fields. Iran has been in decline for some time.
You can't help but feel that no matter how much you reduce your lifestyle, you somehow won't be able to live small enough.
Euan Mearns responded to Stuart Staniford's latest by pointing out that part of the Saudi production drop occurred contemporaneoulsy with a resumption of Iraqi oil production, about 1 mbpd. There is a pipeline being used by the Iraqis that is funneling oil via KSA.
It's that level of detail which raises the question of voluntary vs involuntary. Summer may tell the tale. If we get hammered in the GOM by hurricanes and need more oil, will KSA come through? If there is any sort of crisis resulting in a need for more oil out of KSA, will they come through? They have the facilities, but do they have the product?
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