1. Crude and Gasoline
2. The IEA Forecast
3. Nigeria at a Crossroads?
4. Peak oil in the media
5. Energy Bills
6. Oil exports
7. Energy Briefs
Oil prices touched a 10-month high on Friday sparked by worries of low US fuel supplies and an upsurge of violence in the Middle East. The Wednesday oil stocks report showed US refinery utilization dropping to 89.2 percent rather than increasing as analysts had expected. Most observers believe US refinery utilization should be above 95 percent in order to prepare for the increased demand during July and August. Imports dropped to 1.1 million from the 1.5-1.6 million in the two preceding weeks. Several weeks ago Reuters surveyed European gasoline exporters and forecast that shipments to the US during June would drop from the pace observed in May. While analysts had predicted that US gasoline stockpiles would increase by 1.5 to 2 million barrels, they were reported as remaining the same.
Most of the current US gasoline shortage now is along the east coast, probably the result of the late May 5-day shutdown of a major pipeline which delivers gasoline from the Gulf refineries to east coast depots. The gasoline stockpile deficit in the east coast petroleum district is now on the order of 10 million barrels which makes the region vulnerable to shortages this summer --- especially if hurricanes cause evacuations or other disruptions.
In its monthly Oil Market Report, the IEA reported that world oil supply fell by 565,000 b/d in
May to 84.9 million b/d, primarily because of a drop in Nigerian production. The Agency also
revised world demand for 2007 upwards by 1.7 million b/d to 86.1 million b/d. The widening gap between forecast supply and demand prompted the IEA to once again call on OPEC to increase production, warning that otherwise prices will increase significantly in the second half of this year. Once again OPEC reiterated that the oil market is fully supplied and that it will not consider raising output until September.
In response to a call for negotiations from the newly inaugurated Nigerian President, a coalition of militant groups announced a cessation of attacks until the end of June and released 13 foreign hostages as a gesture of good will. In return, the government released militant leader Dokubo-Asari who it had been holding on treason charges. Returning to a hero’s welcome, Dokubo announced that he was opposed to hostage taking, but would continue to fight for a fairer distribution of oil revenues.
In the meantime, the situation on the ground continues to deteriorate. Kidnap-for-ransom gangs seized another group of foreign workers; government forces killed a boatload of militants; the UK advised its nationals to leave the Niger Delta; Shell is planning to cut costs $110 million by letting go local staff; fuel-tanker owners have stopped delivering gasoline and cooking kerosene in many areas; and finally a general strike to protest a variety of government policies is due to start this week.
The key question is whether the new President has the will and power to channel more of the oil revenues to the Niger villages or whether he is simply a captive of the elites that put him in office. The IEA noted this week that at times during May as much as 1 million b/d of Nigerian oil production was shut-in due to the unrest. The next few months may determine whether the social/political situation has gone over a tipping point that will result in further decreases in oil production or whether conditions will stabilize.
In response to BP’s assertion last week in the Statistical Review of World Energy 2007 that the world has enough oil to continue producing at current rates for another 40 years, a major British newspaper, The Independent, ran a front page story entitled “A World Without Oil”. The story says “scientists led by the London-based Oil Depletion Analysis Centre say that global production of oil is set to peak in the next four years before entering a steepening decline which will have massive consequences for the world economy and the way that we live our lives.” The Independent’s story was rerun in numerous British Commonwealth newspapers, and in the US even got a link in the Drudge Report.
In a similar development, the US Weekly Business Week, which has been a firm disbeliever in the concept of peak oil, ran a guest column beginning “with global oil production virtually stalled in recent years, controversial predictions that the world is fast approaching maximum petroleum output are looking a bit less controversial.” Business Week ran the usual disclaimer that views are solely those of the contributor.
The battle in both houses of Congress over the shape of energy legislation continued last week. In general the majority of the Democratic majority favors increased fuel economy, renewable fuels, energy efficiency, carbon capture, and as a sop to the voters, an anti-price gouging law. Opposition to these principles, however, is everywhere. Detroit is dead set against increased fuel efficiency, claiming it will cost an additional $6,000 per car and has brought along many Democrats from industrial states.
In general, Republicans oppose increased government regulation of fuel efficiency and will
support “renewable” fuels only if nuclear power and “clean” coal are included. The White House is threatening a veto over the price-gouging issue. There is also a mid-west/south (ethanol and cars) vs. the coasts (clean air, global warming) split shaping up.
So far the debate is framed mainly in terms of a response to global warming with a touch of
“energy security” thrown in. There seems to be almost no sense that a major response to
declining world oil supplies will be needed shortly, so the Congress continues to adhere to the perceived interests of its constituents and party ideology.
Given the current situation, it seems unlikely that meaningful legislation to reduce oil
consumption will come out of this year’s Congress. In the house there are only 144 co-sponsors for a bill that will require 218 votes to pass. It seems that only much higher gasoline prices and shortages will drive home the message that there is a major problem just over the horizon.
There is a growing recognition that exports from oil producers to importing countries may
decline more rapidly than actual production due to a larger share of production being absorbed by internal markets. This is obviously a topic of vital interest to countries such as the US that imports nearly two-thirds of its petroleum. Last week Rembrandt Koppelaar of ASPO-Netherlands published a new study of oil exports.
Kopplaar concluded that:
ASPO-USA is a nonpartisan, proactive effort to encourage prudent energy management, constructive community transformation, and cooperative initiatives during an era of depleting petroleum resources.