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Plateau Oil meets 125m Chinese cars
Ambrose Evans-Pritchard, Telegraph/UK
... “Oil is already capturing a higher level of European GDP than in 2008,” said Francisco Blanch from Bank of America.
... Oil is not supposed to ratchet defiantly upwards in a downturn, which is what we have with the Euro zone facing a year of contraction in 2012, and much of the Latin bloc sliding into full depression. Japan‘s economy shrank in the fourth quarter.
Asia’s emerging powers of Asia - the key force driving the commodity boom of the last decade - are in various stages of “soft-landings” after hitting the monetary brakes last year to check property bubbles and curb inflation. China’s manufacturing has been bouncing along near contraction levels through the winter. So what happens when it recovers?
The unpleasant fact we must all face is that the relentless supply crunch - call it `Peak Oil’ if you want, or `Plateau Oil’ - was briefly disguised during the Great Recession and is already back with a vengeance before the West has fully recovered.
The IEA said non-OPEC production stalled in 2010 and 2011. There was no net increase. While there was a boost from Canada’s tar sands, and America’s shale-oil, and Brazil’s offshore rigs, this was offset by the relentless erosion of the North Sea fields and Mexico’s operations, a collapse in the Sudan, and Libya’s woes.
... Even so, the Iran risk premium in global crude prices is only $10 to $15. We must still face the overwhelming fact that global energy supply is on a knife-edge regardless of events in the Gulf - with no relief in sight.
... Two billion people in the emerging world are joining the global economy and competing toe-to-toe for scare resources with the West. Their rising demand - not our declining demand - will set oil prices.
... The West has the disquieting experience of watching crude soar even as we languish in stagnation. This never used to happen. If we faltered, energy costs would fall too, acting as a stabilizer. This harsh new reality is going to become uncomfortable when the emerging world enters a new cycle of growth, leaving us behind.
(5 March 2012)
All the signs point to a falling oil price – except supply
Eric Reguly, Globe and Mail
If you want a recipe for falling global oil prices, you would think this would do the trick.
The 17-country euro zone, which includes three Group of Seven countries, is back in recession. The shale deposits in the United States are gushing oil. Libyan supplies are coming back with a vengeance. Iran has not been bombed and, if the blathering Beltway pundits are right, will not be bombed before the U.S. election. The Strait of Hormuz is wide open. The latest generation of cars makes the fuel economy of your dad’s old banger look like the Exxon Valdez’s. European austerity-related taxes on gasoline and diesel are pushing down demand.
Why, then, are oil prices so high, to the point they threaten the tentative economic recoveries in debt-bombed Europe and elsewhere?
This week, oil prices went to their highest level since mid-2008, just before the collapse of Lehman Bros. triggered the same response in oil prices.
(2 March 2012)
Oil Gives Economy Both Barrels
Liam Denning, Wall Street Journal
Most drivers are familiar with the nagging refrain of "Are we there yet?" But with gasoline heading back to $4 a gallon on average, it takes on more urgency: Oil can't go much higher without derailing the economy.
Brent crude oil is back above $120 a barrel. Looked at on a 12-month rolling average, it is now 6% above its prior 2008 peak. U.S. gasoline demand is down almost 7% year-on-year. This year, Europe is forecast to consume 10% less oil than it did in 2008. Global demand is still forecast to rise, but only in emerging markets.
Oil's high price greases this transfer of demand from the West to the rest. While mature economies are forced to brainstorm efficiencies, emerging markets offset the pain with faster economic growth and, often, consumer subsidies.
At some point, though, oil prices overwhelm everyone. Efficiencies take time to develop: The faster way to lower consumption is recession. In emerging markets, high oil prices stoke inflation and make subsidies unmanageable.
There are signs of this already.
(4 March 2012)
For Europe, Costly Oil Could Be 'the New Greece'
Sarah Kent, Wall Street Journal
Concerns over the surging cost of Brent crude are growing as analysts warn that Europe could be at the center of an oil-price shock.
Rising oil prices have leapt ahead of the long-running euro-zone debt crisis as the most pressing problem facing the global economy, according to some analysts. HSBC labeled oil's remorseless climb "the new Greece," in a nod that worries over global contagion from Europe have receded for now.
Higher oil prices are expected to weigh heavily on the Continent's sluggish economy, while supply disruptions and resilient crude demand in emerging markets mean relief from lower prices will be slow in coming.
(4 March 2012)
Why Obama Is Wrong About Natural Gas
Jeff Goodell, Rolling Stone
... I want to highlight one sentence from [President Obama's speech yesterday] that is dangerously misinformed. It's about natural gas, a subject that Obama has been pretty high on recently. In his State of the Union speech in January, he blew a big wet kiss to frackers and shale gas drillers everywhere, while promising to "develop [America’s gas reserves] without putting the health and safety of our citizens at risk." Yesterday, Obama touted the economic benefits of investing in clean-energy technology: "Because of the investments we’ve made, the use of clean, renewable energy in this country has nearly doubled – and thousands of Americans have jobs because of it."
Then he said this: "We’re taking every possible action to develop a near 100-year supply of natural gas, which releases fewer carbons." By "carbons," I assume he is coining a new phrase for "carbon dioxide pollution." That’s O.K. He's the president; he can make up new words. But there are at least three other things wrong with this sentence.
1. It suggests that natural gas is a clean, renewable form of energy. O.K., he doesn’t say that explicitly, but the suggestion is there. So let’s be very clear: natural gas is a fossil fuel. It’s 350 million years old (give or take). It needs to be extracted from the ground, which, thanks to the fracking boom, we now know has many adverse environmental consequences, from contaminated wells to the industrialization of rural areas. It also needs to be burned to create heat or electricity, which creates air pollution. Compared to coal, which generates almost half the electricity in the United States, natural gas is indeed a cleaner, less polluting fuel. But compared to, say, solar, it’s filthy. And of course there is nothing renewable about natural gas.
2. It implies that 100 years of natural gas is a sure thing. It is not. The whole question of how much gas we have – or oil or coal, for that matter – is fraught with uncertainty.
(4 March 2012)