Matt Simmons, the chief advocate of Peak Oil, died of an apparent heart attack last night. The original theory was developed by M. Hubbert King. Has the theory held up?
For some background on Peak Oil, it can be reviewed by clicking this recent piece: http://markostake.blogspot.com/2010/05/peak-oil-update.html.
Recent statistics from the International Energy Agency (IEA) bear out Hubbert's predictions. Growth in worldwide oil demand has slowed but continues to grow. Currently, the planet uses approximately 86 million barrels per day (mbd). This is projected to grow to 88 mbd by late 2011. Of course, an intensifying downturn in the global economy is likely to ensure that this forecast will not be met.
Peak Oil, however, refers to the production side. It anticipates a growing shortage as existing oil fields commence an inevitable and accelerating decline, while the alternatives are still very slow in being developed. According to the IEA, world production averaged 86.6 mbd in 2008 and fell to 85 mbd in 2009. It has rebounded in 2010, but has fallen in the 2nd quarter.
OPEC, which produces just less than 40% of global supply, averaged 28.9 mbd in June, down by 65 kbd from May. A lull in OPEC crude capacity expansion is expected between now and year-end 2011. Non-OPEC supply is expected to rise by a modest 0.4 mbd in 2011 to 52.8 mbd, following a 0.8 mbd growth in 2010. Increases from Brazil, global biofuels, Azerbaijan, Colombia, Ghana and Oman are expected to offset declines from Mexico and the North Sea during 2011.
The imminent "Double Dip" will undoubtedly have a major bearing on future production, especially if prices decline to possibly much lower levels in the intermediate term.
Peak Oil is significant for a variety of reasons. For one, it undoubtedly was a major factor in the invasion of Iraq. It has a bearing on future potential military actions against Iran. Was there a connection to British Petroleum and the infamous oil spill and U.S. policy on offshore drilling? They don't call it "Black Gold" for nothing.
Another "Windfall Profits Tax" seems a virtual certainty in light of the out-of-control budget deficit. Our roads are paid for by Gasoline taxes. Virtually every industry is affected by oil prices. The automobile industry, the transportation industry, the mining industry and the military are all affected by oil. So is foreign policy. Global Warming? Cap and Trade? Yeah, I'd say "Peak Oil" is important.
Unfortunately, profiting from a knowledge of "Peak Oil" is most difficult. The chief beneficiaries, shareholders of ExxonMobil, Chevron, British Petroleum and Conoco-Phillips will not be allowed to enjoy the profits which are politically unpopular. So, the only way to invest is in alternatives, or to own royalty trusts whose cash flows rise and fall with oil prices. That is, assuming they will be exempted from future legislation.
The most viable response for the average American is conservation. If one can afford a hybrid or install solar panels, great. But, most people can't. All most of us can do is turn down our thermostats and burn wood in the fireplace. I hope I never see another line at the gasoline pump again. But, unfortunately, I suspect that vestige of the 1970's will return.
Marko's Take
Showing posts with label ExxonMobil. Show all posts
Showing posts with label ExxonMobil. Show all posts
Monday, August 9, 2010
Thursday, June 3, 2010
Oil Spill Exploited For Political Gains
The tragedy in the Gulf of Mexico is bad enough. The reaction, or OVER-reaction by the political community, is the real crime.
Let's take an objective look at the situation. The worst oil spill in history has been nothing short of an ecological disaster. First, was the death of the 11 platform workers when the well exploded. Then came the destruction of wildlife, whose cost is immeasurable. What should the Obama Adminstration do?
Punish British Petroleum (BP)? The marketplace has already taken care of it. Currently trading at $38 per share, BP has lost nearly $100 billion dollars in market capitalization since news broke of the spill in just a few weeks. The stock has lost more than 40% of its value. Could any penalties imposed by Washington do anything more than merely pandering to all the constituents calling for BP's death?
Add to that the tremendous public relations hit that BP is taking, and, for that matter, the entire oil industry. It's easy to hate oil companies. In the view of the public, oil companies make obscene profits, manipulate energy prices, block the creation of alternative fuels and enter into deals with governments that sponsor terrorism.
Oil companies are owned by shareholders like you and me. So, punishing them just places economic costs on a different set of constituents. Of course they are after profits. So, are the shareholders. So am I. So are you. They have never claimed to be altruistic any more than Big-Pharma, the auto companies or the financial sector.
The other response has been to call for severe restrictions on offshore drilling. What would that accomplish? Higher energy prices and higher profits for all the OTHER oil companies! Less supply for Americans. More dependence on the Middle East. Bad approach.
But, we have to do SOMETHING! Really? Why? Uncle Sam can't cap the well. Uncle Sam has been a miserable failure when it comes to interfering in the energy business. Remember the "Windfall Profits Tax"? That was an unmitigated policy disaster which only drove oil prices higher and led to the famous gasoline lines in the 1970's.
Politicians everywhere are using the public outcry to gain political footing by creating a policy issue where none exists. It's politically popular to wring your hands and claim that things should have been handled differently. How would you have prevented this, Mr. Senator? Mr. President? Mr. Candidate?
The liability for the damage, which will easily run into the tens of billions, clearly belongs primarily to BP and Transocean Ltd. (RIG). Since the explosion on Transocean's platform on April 20, the company has lost nearly HALF its value, or $15 billion.
Undoubtedly, each of these companies carries insurance which will be employed to cover some portion or the majority of the costs.
Regulate future oil drilling activity? Not necessary. The entire oil industry has taken a hit. Even stalwarts such as ExxonMobil (XOM) have suffered massive losses in value in anticipation of a much less friendly business environment. XOM's market value has dropped by 10% or about $30 billion. If one were to factor in the entire oil industry including drillers, the losses would certainly exceed an additional $100 billion.
Clearly, any company NOT involved is working overtime to make sure a similar disaster does not occur in one of their wells. The last thing any oil company wants right now is to be responsible for some other disaster while the world's microscope is analyzing every step they take.
There is no place for public policy here, despite the cry for penalties, regulations and restrictions. The marketplace has imposed HUGE penalties, as has the forum of public opinion. We can either choose, as a society, to encourage more oil supplies at the cost of an occasional disaster, or we can reduce the probability of this kind of problem by imposing massive costs on society. Oil is highly combustible, therefore, we can not possibly eliminate the risk in this industry any more than we can eliminate traffic deaths by imposing more penalties on the automobile manufacturers.
No solution to this situation exists. You want more nuclear? Prepare for the occasional reactor radiation leak. You want less production of oil here? Prepare to be more beholden to Saudi Arabia and other nations that sponsor terrorism.
What we have to understand is that life comes with trade-offs. These can't be legislated away despite the self-serving proclamations of our elected officials and those that seek to be elected. Cry about it, but don't make it worse by over-reacting. Let the market take care of it.
Marko's Take
Our 7-Step solution to fixing the ponzi scheme called Social Security is now available on You Tube. Entitled "Social In-Security: The Solution", the video can be accessed by clicking here http://www.youtube.com/markostaketv#p/u/0/7Rl6XtobFpE.
Let's take an objective look at the situation. The worst oil spill in history has been nothing short of an ecological disaster. First, was the death of the 11 platform workers when the well exploded. Then came the destruction of wildlife, whose cost is immeasurable. What should the Obama Adminstration do?
Punish British Petroleum (BP)? The marketplace has already taken care of it. Currently trading at $38 per share, BP has lost nearly $100 billion dollars in market capitalization since news broke of the spill in just a few weeks. The stock has lost more than 40% of its value. Could any penalties imposed by Washington do anything more than merely pandering to all the constituents calling for BP's death?
Add to that the tremendous public relations hit that BP is taking, and, for that matter, the entire oil industry. It's easy to hate oil companies. In the view of the public, oil companies make obscene profits, manipulate energy prices, block the creation of alternative fuels and enter into deals with governments that sponsor terrorism.
Oil companies are owned by shareholders like you and me. So, punishing them just places economic costs on a different set of constituents. Of course they are after profits. So, are the shareholders. So am I. So are you. They have never claimed to be altruistic any more than Big-Pharma, the auto companies or the financial sector.
The other response has been to call for severe restrictions on offshore drilling. What would that accomplish? Higher energy prices and higher profits for all the OTHER oil companies! Less supply for Americans. More dependence on the Middle East. Bad approach.
But, we have to do SOMETHING! Really? Why? Uncle Sam can't cap the well. Uncle Sam has been a miserable failure when it comes to interfering in the energy business. Remember the "Windfall Profits Tax"? That was an unmitigated policy disaster which only drove oil prices higher and led to the famous gasoline lines in the 1970's.
Politicians everywhere are using the public outcry to gain political footing by creating a policy issue where none exists. It's politically popular to wring your hands and claim that things should have been handled differently. How would you have prevented this, Mr. Senator? Mr. President? Mr. Candidate?
The liability for the damage, which will easily run into the tens of billions, clearly belongs primarily to BP and Transocean Ltd. (RIG). Since the explosion on Transocean's platform on April 20, the company has lost nearly HALF its value, or $15 billion.
Undoubtedly, each of these companies carries insurance which will be employed to cover some portion or the majority of the costs.
Regulate future oil drilling activity? Not necessary. The entire oil industry has taken a hit. Even stalwarts such as ExxonMobil (XOM) have suffered massive losses in value in anticipation of a much less friendly business environment. XOM's market value has dropped by 10% or about $30 billion. If one were to factor in the entire oil industry including drillers, the losses would certainly exceed an additional $100 billion.
Clearly, any company NOT involved is working overtime to make sure a similar disaster does not occur in one of their wells. The last thing any oil company wants right now is to be responsible for some other disaster while the world's microscope is analyzing every step they take.
There is no place for public policy here, despite the cry for penalties, regulations and restrictions. The marketplace has imposed HUGE penalties, as has the forum of public opinion. We can either choose, as a society, to encourage more oil supplies at the cost of an occasional disaster, or we can reduce the probability of this kind of problem by imposing massive costs on society. Oil is highly combustible, therefore, we can not possibly eliminate the risk in this industry any more than we can eliminate traffic deaths by imposing more penalties on the automobile manufacturers.
No solution to this situation exists. You want more nuclear? Prepare for the occasional reactor radiation leak. You want less production of oil here? Prepare to be more beholden to Saudi Arabia and other nations that sponsor terrorism.
What we have to understand is that life comes with trade-offs. These can't be legislated away despite the self-serving proclamations of our elected officials and those that seek to be elected. Cry about it, but don't make it worse by over-reacting. Let the market take care of it.
Marko's Take
Our 7-Step solution to fixing the ponzi scheme called Social Security is now available on You Tube. Entitled "Social In-Security: The Solution", the video can be accessed by clicking here http://www.youtube.com/markostaketv#p/u/0/7Rl6XtobFpE.
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