Oil supplies are down and alternatives not yet available

Financial Times ^ | 7/10/2007 | Editorial

[bruinbirdman]

A rule of thumb for the price of oil in the past five years has been to take the last digit of the year and add a zero: 2002 saw prices in the $20s; 2003 in the $30s; now oil is hovering around $70 a barrel. These high prices are desirable for steering the economy away from oil, but in the meantime they could also spell trouble. Oil companies need to adjust to this new reality and rethink their business model.

The latest report by the International Energy Agency warns of an oil supply crunch in five years. Demand is expected to rise at more than 2 per cent annually. Supply, the IEA calculates, will not be able to keep pace. Nations outside the Organisation of the Petroleum Exporting Countries are expected to add about 1 per cent to supplies per year. That puts most of the burden on Opec, in particular Saudi Arabia, which would face capacity constraints itself, the IEA says.

In many ways, the rising oil price points to a market at work: demand is up, supply is lagging and prices rise. That high price should fuel a search for alternative sources of energy and lead to more exploration and exploitation of oil supplies. Yet the IEA reckons that ethanol and other biofuels will not be ready to make a sufficiently significant dent in the market within five years.

The report also notes a disconnect between higher dividend payments to shareholders and little real change in exploration and production activities. On this analysis, oil majors are enjoying the fruits of past investments without providing adequately for their own financial future. This week, ConocoPhillips became the latest major to announce a share buy-back, on which it will spend $15bn.

These moves make some corporate sense now, given the mix of physical shortages and political risks: some regimes with cheap oil, such as Iran and Iraq, are unlikely to add capacity any time soon.

Yet the oil majors’ actions do not address the wider question of the world’s energy resources in future. This requires the majors to rethink their business model. National oil companies have most of the oil, but face production constraints. Many of the skills to extract that oil rest with the majors. Instead of focusing on developing their own resources, they should be willing to sell their expertise to state-owned firms that have the oil but lack some of the skills to get it out.

This approach will mean lower profit margins, but should help to avert the threat of a popular backlash against the oil majors. More importantly, it looks like the best hope of mitigating the looming energy crunch.

[OKIEDOC]

All this could have been avoided if the Moonbats like Al Gore and other environmental wackos had allowed drilling off our coasts and other areas.

[dbacks]

Absolutely true.

[endthematrix]

The report in the article refers to the IEA Medium-Term Oil Market Report - July 2007

[Nathan Zachary]

Al Gore and his newfound ‘rock star’ pals figure jetting around the world burning it as fast as they can will solve the problem.
They have the ‘carbon footprint’ they leave behind solved as well- a dollar from the sale of each ticket goes to make Al Ghoul’s inconvenient rock concert 'carbon neutral'.

I'm not quite sure how that works, do they burn those dollars and create some chemical counter effect on global warming carbon?

We would have plenty of oil if we took away Hollywierdo's private jets, yachts, and country estates in 5 countries, their fleet of cars and trucks, as well as limiting air travel for worthless washed up has-been RATS, as well as those who need bigger government jets to fly back and forth to whine and complain on the senate floor about the quality of toilet paper in the senate washrooms.

[bruinbirdman]

IEA Medium-Term Oil Market Report - July 2007 = $$

yitbos

[OKIEDOC]

I worked up in the North Slope area of Alaska one Summer university break.

The environmentalist seemed to be everywhere.

NBC News sent a national reporter up to our work place to film all of the environmental destruction.

A number of us were college kids doing the Summer hire.

When the reporter and her camera crew started filming, about 8 or 10 of us unzipped or pants and urinated on the ground.

The problem we had working on the slope was trying to do our job while keeping the animals from bothering us.

We had to constantly shoo the Fox and Caribou away from the camp.

I have been over to the Arctic National Wildlife and there is nothing there that couldn.t be preserved somewhere else.

The amount of land, 2000 acres that the oil companies want to use is infinitesimal when compared to the amount of damage that not using the land is causing to our country.

[OKIEDOC]

One other thought.

The world is in one hell of a boom and I wonder if this report took that into consideration.

What is going to happen when, not if the economies of the world take a sudden down turn.

With all the Globalization that is taking place it seems possible that it would only take a Middle East war or one or two countries economies spinning downward to cause a worldwide depression.

Hells bells every time the markets in Asia have a burp things go crazy on Wall and Broad Streets.

It could be that some day Exxon, Shell and others will be needing customers so bad they will start giving entire dinner plate sets just for a fill-up. LOL

[Son House]

Democrats and their supporters just keep burning fossil fuels, how un-ethical.

[ClaireSolt]

It seems to me that high prices have stimulated invested in every possible scheme. We should soon see a glut.

[NRG1973]

The writer concludes that the best path forward for the major oil companies would be to provide their service to the state owned oil companies who are are inferior in the ability to extract oil from their reserves. How can the writer recommend that path forward in light of Venezuela’s ridiculous demands on Exxon and Conoco/Phillips?

[never4get]

“The amount of land, 2000 acres that the oil companies want to use is infinitesimal when compared to the amount of damage that not using the land is causing to our country.”

Are you sure now? We don’t want to destroy some artic butterfly’s home now do we?

[OKIEDOC]

We wouldn’t want to disturb none of the snakes dens either.

LOL

[Taichi]

All we have to do to bring down the cost of oil is tell Gore and his environut followers where to stick It and start drilling off our coast and in Alaska.

[Edit35]

Geo-thermal —

There already is a company, listed on the US stock exchange, I believe, who will come to your home, drill down 5,000 feet, and extract the underground heat for use in heating your home.

This could be an almost unending supply of energy for American consumers.

[17th Miss Regt]

The amount of land may be relatively small, but the consequences must be clearly understood. Drilling in this area would cause defunding of the public schools, the re-establishment of slavery and the loss of a woman's right to choose. As well, a rising tide of homophobia and racism and the lowering back into place of the glass ceiling for womyn would occur. Finally, along with the preceding destructive effects on the parcels used for drilling, there would be additional pollution in the form of the deposition of pieces of the sky as it fell on the parcels. It should be noted that no satisfactory procedures have yet been identified for the mitigation and remediation of pollution caused by fallen sky pieces.

People, we must think clearly about this matter!

[RexBeach]

Energy supplies are going down, demand is going up, and the Democrats think exploration for more oil and gas is crazy. To say nothing about coal supplies. The US is positively lumpy with coal. But that’s bad, too.