Morning Memo: Deborah Yedlin {slashing oil demand}

Calgary Herald ^ | March 13, 2009 | Deborah Yedlin

[thackney]

In a report released early Friday morning, the International Energy Agency joined the U.S. Energy Information Administration in slashing its oil demand forecast for the 2009. Both organizations now forecast demand in the 84.5 million barrel a day range.

The Paris-based IEA also took the opportunity to weigh in on the impact of the lack of investment by countries that are not part of the Organization of Petroleum Exporting Countries, drawing the conclusion that the consequential drop in production will result in the world being more dependent on OPEC for its oil.

With the world’s largest oil producing fields declining at a rate of about nine per cent – or 7 million barrels a day - the lack of reinvestment even with global demand at current levels is another marker setting the stage for a sharp rise in oil prices when an economic recovery begins.

It’s this decline rate, which isn’t being offset by the discovery of new oil producing fields that is causing energy watchers the greatest concern. The IEA estimates non-OPEC production will fall by 380,000 barrels a day while the EIA said earlier this week that production will remain flat for this year, having grown at 570,000 bbls/d between

2000-07 and 300,000 barrels a day last year. It will be the first time since 1998 – the last time there was a collapse in oil prices – in which production was not boosted.

While the OPEC cutbacks have resulted in the creation of more than 5 million barrels a day in excess capacity, when netted out against the decline rates it is clear that global oil supply is at risk.

Still, with oil prices continuing to be stuck below levels where companies are unwilling – and unable because of the continued dysfunction in the credit markets – to commit the big dollars needed to go after the more costly plays, the prospect of non-OPEC supply increasing in the near future is slim.

All this presents an interesting dilemma for OPEC as it meets this weekend. If it chooses to cut production beyond the 4.2 million barrels a day, the consequence will be higher prices. Higher prices might give companies the confidence to boost reinvestment but could also compromise the pace of an economic recovery. It won’t be an easy decision.

[2banana]

While the OPEC cutbacks have resulted in the creation of more than 5 million barrels a day in excess capacity, when netted out against the decline rates it is clear that global oil supply is at risk.

What a poorly written sentence...

[St. Louis Conservative]

The One’s idiotic energy policies will restrict oil exploration and production, thereby making us MORE dependent on OPEC oil.

Then, when the price gets high again because of his policies, he’ll demagogue the issue and wag his finger at the oil companies and slap windfall profits taxes on them.

[Sequoyah101]

Meanwhile, the petroleum industry faces one of the most uncertain business climates in its history. Budgets are being slashed and people will come next as they have already in some areas.

The industry lost 450,000 people in the 90s. It isn’t that big an industry to start with in terms of numbers of people.

The losses in experience and productivity were devastating.

[thackney]

people will come next

The industry has already begun laying off and started many months ago.