I have been staying on top of action in the oil patch, and right now it is very interesting. The latest weekly update suggests a couple of things:
1 - Saudi still has spare oil to pump, however it is looking like heavy sour and there is still some question as to how long they can keep it up, and
2 - Demand may be dropping, however slowly, year over year. This won't stop a peak from occurring, but it could soften the blow.
You may have noticed that oil prices are also sliding down. Robert Rapier is thinking they could fall back into the $80s. Oil closed today around $92 and the Dow went up 300 points so who knows what will happen next. In any case, the good news is not a herald that we have dodged a bullet, it does point out that we are still on the production plateau, which has its ups and downs.
From the Strange Bedfellows file; an article about I-69 and I-35 written from the POV of a liberal environmentalist and Peak Oiler, but on a subject near and dear to the heart of every opponent of the SPP/NAU. Those guys need to spend more time together working the issue.
And just for Natas: what does this have to do with RP? Simple; you can prepare for what you know is coming. The torpedo of change is on its way. We can bury our heads in the sand thus leaving our backsides raised in the air to be shot off, or we can face the challenge squarely and turn it into an opportunity. The choice is ours to make, but you can't make it if you don't know what is going on. Educate yourself.
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According to Dr. Kenneth Deffeyes, the world's foremost oil geologist, as well as oil analyst Matt Simmons and other experts, we are now two years past the peak year of 2005, when 86,000,000 barrels per day were produced worldwide.
We are now on the "bumpy plateau", a period of choppiness and volatility as demand destructs, due to many poorer nations dropping out of the bidding altogether, while demand increases in other parts of the world.
There is now no doubt that the lines of supply and demand have crossed each other.
It's hard to see just what will soften the blow when you consider the enormously higher cost of extraction and refinement not only for heavy, sour crude, but for the tar sands, for which it is astronomical.
If indeed all Mexican exports to this country are to cease in less than five years, while other oil-exporters cut their exports in order to reserve more of their supplies for their own use, we could be looking at a reduction in oil for our use here of up to 15%, which would be the worst shortfall ever.
The Dow went up 300 points mostly on short-covering, or at least so it appears to me. There is a "bumpy plateau" in the equities markets as oil supplies continue to be tight and declining;and as the credit bubble continues to unravel. These little 200 and 300 point run-ups following week-long drops are no cause for celebration-take a look at any 6-month chart for any of the market indexes and you will see the deterioration in the markets very clearly.
I'm stupefied that Natas or any other denizen of Rogers Park or Chicago or the U.S. could think that this does not pertain to us, or them. We will be able to survive a steep drawdown in oil supplies only because we have public transit available, but that advantage will be offset not only by the excessive car-dependence of most of our neighbors around here, but by the prevelance of poverty in this area. Poorer RP citizens are already taking very bad hits in terms of escalating fuel prices for inefficiant old furnaces and the jalopy fuel-burners they must rely upon to get to low-wage jobs; and for food prices driven steeply higher by the increases in fuel prices.
What will happen to our poorest people when even the nominally middle-class can barely afford heat or electricity?
Worst of all, if our leaders have any clue of the abyss that is yawning before us, they aren't letting on. I see no attempts, on the part of our local or national leaders, to mitigate our excessive auto dependence- no one is dismayed that transportation accounts for 70% of our energy consumption.
I hear no discussion of emergency measures that could mitigate the loss of electrical power for weeks on end, or what we will do to supply the reliable, plentiful power we are used to in the event of spot shortages of natural gas and fuel oil, and rapidly rising prices for coal and for nuclear fuel.
If any new nuclear plants are being planned, I have not heard of it, and I've been searching.
And if our political leaders DID make attempts at mitigation and preparation such as, say, diverting funds from the maintenance and expansion of our monstrous and wasteful highway and road infrastructure to public transit in the Chicago area and in major small towns, what would the response of the car-addicted public be? That is being suggested, and the response of the public is strident and hostile.
We are in trouble.
Today oil slipped just below $90 and I saw some info that suggested the tar sands are currently cost effective, but at this price how could they not be? I don't believe electricity will be an issue for a while. It's the transportation issues that really concern me, especially transporting food and other necesseties via trucks and rail. I do think we'll be riding the plateau for a while, the All Liquids peak appears to have moved to this year. Fasten your seatbelt.
Oil slipped below $90 on profit-taking, and $90 is nothing to write home about.
Last year, it was around $60.
Year before, under $50.
Tar sands projects are being abandoned.
Another worrisome factor is the increased demand from rapidly growing economies like that of China. If another 5% of China's population acquires cars, that's another 70 million cars on the road.
China is a major bidder for Canadian oil, and pretty soon they will be able to outbid us.
Merely providing power may not be a worry for a while, but paying for it alongside elevated food costs will be a big problem for many people who are now OK.
As usual, the lower and working classes will hurt first and the most. Expect more homeless, more jobless, more people dying earlier not only because of the lack of health car and decent nutrition, but because they can no longer afford heat or lights.
What tar sands projects are being abandoned, and why? My guess anybody walking away would do so due to costs to mitigate environmental concerns.
I understand Shell bailed on the tar shale due to technical issues with the freeze wall to keep melted kerogen from seeping out of the target area.
Evidently, oil sands projects are up against rapidly inflating labor and materials costs, which do not include environmental costs, but which are calculated figuring in the enormous tax breaks and dirt-cheap royalties granted the oil companies by the Canadian government.
This article, which appeared many places, including the oil drum, says it better than I could:
http://www.theoildrum.com/node/2915
And of course, nobody is reckoning in the enormous environmental costs.
What it adds up to, at this point, is that the operations are very heavily subsidized by Canadian taxpayers, for the oil companies are paying only 1% royalty at this point. Let's hope the royalties aren't too much higher when they are next renegotiated, because at some point, the local government will want to be compensated for the enormous drain on local services and infrastructure.
Shell Oil was dismayed by the increase in costs,when it was revealed that expanding its project there by 100,000 bls per day would cost $11Billion Canadian, six times Shell's original cost estimate; and one analyst stated that while oil has increased 32% in price since 2005, the cost of processing the Alberta sands has increased 79% in the same period.
France's Total is pushing its tar sands project back by three years at least, due to rapidly increasing costs.
Were it not for massive subsidies by the Canadian government, the whole thing would be impossible. Many analysts state that the main profits lie in the tax breaks and subsidies.
In other words, the easy oil is gone and we will pay very dearly to get at the rest. If the whole thing rests on taxpayer subsidies, you have to figure that the ERoEI is actually negative, and that is without reckoning the amount of water being used, which is enough to supply a city of 2 million people with water. And, of course, water is a separate issue in and of itself.
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