Wednesday, August 26, 2009

Buddy Can You Spare A Dime?

Mexico's oil problem continues to deepen. At least one pundit is convinced Cantarell will be out of business at the end of 2010 and he has data to support that assertion. Th Mexicans know they are in trouble and at least one former politico is suggesting that the US front money to Mexico to secure future supplies. Mexico has a constitutional ban on foreign investment and this arrangement might get around the legal barrier. However, the prediction that Cantarell is going out of business in another year puts Mexico in the hot seat, regardless of whether the US ponies up any cash.

1 comment:

The North Coast said...

No surprise here. Cantarell has been in steep decline for a while now and has been depleting at a horrifying 15% a year. Figure out just how long it takes for a formation to deplete at that rate.

Mexico has been providing at least 10% of our oil. Given that the oil price crash killed further investment and development, and triggered the shutting-in of over half the world's oil rigs, you can figure we're setting up for real price shocks not far down the road. As of 2008, there were over 2000 wells being pumped, now there are about 800. Tar sands projects and expensive off-shore projects have been furloughed.

It looks to me like we could be in very bad trouble on oil prices very soon. Gas prices will follow oil. Amidst all the hoopla about "plentiful" supplies of natural gas, that resource is subject to depletion, too- and any ramping-up of demand for gas could send the price out the roof and cause much more rapid depletion than anybody touting it, is counting on.

I have heard Obama and Co. utter the "C" word- conservation- very rarely, and no measures are being taken to steeply reduce fuel consumption in the near term. 35MPG by 2020 doesn't mean a croc when most of the population drives, and 50% drive more than 25 miles per day.