Oil, again

[Cyrus]

Some statistics your way :

Crude oil reserves, at the end of last year, stood at the equivalent of approximately 40 more years of production, if production remains at 2004 levels. You get that figure by dividing the total known 2004 reserves of crude oil by the 2004 production - which is 1,200 billion of barrels divided by 80.2 million barrels.

This reserves-to-production ratio (40 more years) actually fell in 2004 (it was 43 years in 2003) despite the fact that reserves continued to increase last year and are now some 17% above the 1994 levels. But production is now 20% higher.

Oil production increased by more than 3 million barrels daily in 2004, the largest increase since the mid-1970s. OPEC accounted for 2 /3rds of that increase.

Oil refinery capacity worldwide, despite the many closures and mothballing of the last decade (due to low or non-existent refinery margins), actually increased to 84.5 million barrels daily, up some 1% from the previous year. It was 75 million barrels daily in 1994. So capacity is up.

So is utilization of refinery capacity. Oil refineries operated, on average, worldwide, at 87& of their capacity, which is the highest level for at least the last 25 years. When you think of the unavoidable losses in utilization due to maintenance, accidents, etc, the figure represents something close to “full” utilization.

Oil consumption rose worldwide – you could say dramatically, although we will soon see higher increases than last year’s. In 2004, oil consumption was 80.7 million barrels daily. That includes all oil products consumed, both inland and internationally, ie bunkering and aviation, and also refinery losses (also crude oil used directly as fuel). The rate of worldwide growth in consumption was 3.4% which is the strongest seen since 1978. It was above the 10-year average in every region of the world. The Asia-Pacific region accounted for 50% of the growth on oil consumption the last ten years.

Detail : The products with the highest growing consumption (demand) were the so-called “middle distillates” which are mainly Gasoil. They accounted for half thr world growth in consumption, which China the main “culprit”, due to its phenomenally rising transport and power generation needs. Chinese mostly burn diesels.

The United States continues to be a voracious consumer of petroleum. The US produces some 7.2 million barrels daily and imports another 13 million barrels more, which brings its consumption level at a little more than 20 million barrels daily, easily the highest for a single country and more than the whole of Europe or the whole of Asia-Pacific (incl. Japan, China, etc).

So why are they not building more refineries ? Or getting refineries out of the mothballs ? Because either building a new refinery or re-starting an old one is a very costly affair. It does not make sense when you combine the above data of phenomenal demand with the current refinery gross profit margins, which (at between 4 and 6 dollars per barrel processed) are at the highest levels the refiners have seen for more than 15 years (if you exclude a 2000 spike in US refineries’ margin).

There are two answers and these you will not find in most analyses. One is “bad”, and the other is “good”. The “bad” explanation for not seeing a rush of new refineries getting constructed is that, well, the oil companies are all in cahoots! They want prices and margins to remain so high, since they can already meet worldwide demand, in order to continue to make out like bandits.

That’s the conspiracy theory. It is weak on many levels, one of which is that not even countries (as opposed to oil companies) are going for new refineries, not in any significant manner. Except for the “natural” development whereby Saudi Aramco opened up a refinery in China some years ago, there are not many new refineries around.

The “good” answer is the one you will more likely hear in the corridors – but you gotta take the elevator to at least the seventh floor : Oil companies do not expect the current high levels of prices and margins to last more than one or two years down the road. The reasoning behind that doubt is that demand is already been met, that prices are high also for “artificial” causes (Iraq, etc), that there is a big amount of speculation in the commodities markets, etc. Therefore, it does not make financial sense to build or re-open a refinery when the refinery margins, along with oil prices, are gonna revert to their “historical levels” – whatever these are.

That’s it.

...Now burn, baby, burn.

[adios]

I agree completely with all the points you made in this post and your information is spot on. Exxon-Mobil actually came out and stated that they expect production in 2005 to be flat or down a little. They're not making a lot of new investment in increasing their production. This indicates to me that Exxon views the risk as being too high given potential returns for their investments which means they don't expect prices to remain this high. We'll see if they're right. Demand from Asia will be the key IMO.

[FishHooks]

Oil was thought to be running out by the year 2000, and now most experts, which you are not say we have 80-100 years left. People really have no idea how much oil is left.

[vulturesrow]

[ QUOTE ]
Oil was thought to be running out by the year 2000, and now most experts, which you are not say we have 80-100 years left. People really have no idea how much oil is left.

[/ QUOTE ]

In Cyrus's defense (much as I hate to do that), that isnt what his post is about.

[Il_Mostro]

A few points
[ QUOTE ]
Crude oil reserves, at the end of last year, stood at the equivalent of approximately 40 more years of production, if production remains at 2004 levels. You get that figure by dividing the total known 2004 reserves of crude oil by the 2004 production - which is 1,200 billion of barrels divided by 80.2 million barrels.

[/ QUOTE ]
The problem with this number, be it 40 years or 80 years is that it's pointless. You can't produce at full speed until the well is dry. We will have oil for a lot more than 40 years, just a bit less every year (starting at some unknown year).
It's also somewhat intellectually dishonest to report numbers quoting "todays production" when demand is growing (not directed at you, Cy, more a general comment).

As for the argument on why not more refinerys is built, there are other explanations possible, more or less likely. But let's stick to yours. The thing I don't get, maybe someone can explain it to me, is that if we will have demand growing even more the coming years, as seems to be the forecasts, then why belive prices will come down? If we add demand but don't add supply, well, hardly a recepie for falling prices.
And if we belive in reduced demand, well, then we are thinking we'll see demand destruction, aka recession, right?

[sam h]

I don't know that much about this particular issue. An article I read a couple weeks ago somewhere highlighted another factor that could explain why more refineries are not being built, so I thought I would throw this out to see what you oil guys think.

Basically, the thesis of that article was that the truly important variable is the rate at which oil can be extracted from a given field without endangering the field itself. The former chief geologist from Saudi Aramco said this was the case - basically that if you took too much out at once, then the whole thing might collapse for some reason and trap the remaining oil in an unextractable position. Further, he said that there really weren't any technological fixes on the horizon for this. It was just a problem of geological structures.

So the article said that the oil crunch will come not because there isn't enough oil, but because there is a ceiling on the amount of oil that can be extracted annually worldwide without threatening major oil fields, and that demand will soon push up against that ceiling because of global economic growth, creating steady pressure for prices to keep rising in order to bring supply and demand into equilibrium.

If that model is true, then there is a simple economic explanation for why oil companies aren't building refineries. If annual oil production has a ceiling, then you don't want to build refineries that would bring annual oil refining capacity past that ceiling. Or, even if we don't know exactly where that ceiling is, it makes building refineries that much riskier.

Are the assumptions of this argument reasonable?

[TorpedoBreath]

Yeah, Reserve Life Index (RLI) is not good for practical purposes. It's an artificial minimum time limit for the reason Mostro explained as well as there being reserves added every year. There should be some substantial year over year reserves adds expected in the near future from lower quality bitumen/heavy oil/synthetic crudes as mega projects in the north kick in. XOM has got a piece there as well.

[FishHooks]

I think it will just result in alternative fuel which will be a good thing. Or maybe we will have to build some refineries or have our gas be refined someone else not in the US. I dont think it will lead to a recession unless it gets above $5-6/gal at the pump.

[FishHooks]

I personally think it has to do with the oil companies keeping the supply artifically low so they can sell for more money and have the supply last longer.

[superleeds]

[ QUOTE ]
Crude oil reserves, at the end of last year, stood at the equivalent of approximately 40 more years of production, if production remains at 2004 levels. You get that figure by dividing the total known 2004 reserves of crude oil by the 2004 production - which is 1,200 billion of barrels divided by 80.2 million barrels.

[/ QUOTE ]

This, (I'm assuming), assumes that the Oil producing countries and Opec in particular are being truthful about their oil reserves, something they have been known to increase, with no scientific backing, when politically/financeally beneficial.

[TorpedoBreath]

Because of Securities Exchange Commission guidelines for booking reserves there are lots of potentially recoverable hydrocarbon volumes acknowledged internal to all oil and gas companies. They just aren't allowed to tell you about their volumes unless they are "reasonably certain" they will produce them. Most interpret that to mean P90. So if you, like many humans think of likelihood of an event happening in P50 terms, then you'd come up will a much larger oil reserves number than the SEC will allow to be published in financial disclosure documents.

[ QUOTE ]
I personally think it has to do with the oil companies keeping the supply artifically low so they can sell for more money and have the supply last longer.

[/ QUOTE ]

That's not a very Republican thing to say, and it's likely false.

I tend to agree with sam h's explanation.

[Cyrus]

[ QUOTE ]
Crude oil reserves. The problem with this number, be it 40 years or 80 years is that it's pointless. You can't produce at full speed until the well is dry.

[/ QUOTE ]
When the well is getting near dry, you are producing at somewhat reduced capacity, that is true. But this effect is not the important point. What's important is to get a meaningful figure out to guide us. When the reserves-to-production ratio rises, that means something, as it does when it drops. And knowing that we have ahead of us "40 years" also means something.

At least, it should.

[ QUOTE ]
It's ... somewhat intellectually dishonest to report numbers quoting "today's production" when demand is growing.

[/ QUOTE ]
That's a standard compromise in finance. It's the same way you assess a company's performance at year's end : You take a snapshot which freezes the company's position at the 31st of that year and shows you receivables, payables, 12-month earnings, etc, at that point in time.

It's not perfect but it does the job.

Therefore, what one should do is take into account both the photograph (:current state of production) and the coming attractions (:forecasts of production growth).

[ QUOTE ]
As for the argument on why not more refineries are built, there are other explanations possible, more or less likely.

[/ QUOTE ]
I would really like to know about them. (I trust you are not talking about regional problems, such as environmentalists stopping the construction of a refinery.)

[ QUOTE ]
The thing I don't get is that if we will have demand growing even more the coming years, as seems to be the forecasts, then why [would Big Oil] believe prices will come down?

[/ QUOTE ]
I would tell you but then I'd have to kill you.

[Il_Mostro]

Yes they are.
It's not a secret that you can't produce at any rate you want to, you will damage the fields if you try. It has happened at a few places. And some (Simmons and others) argue that SA is basically at that point now, that the really can't increase production very much without seriously harming them.

[PorscheNGuns]

[ QUOTE ]
Oil companies do not expect the current high levels of prices and margins to last more than one or two years down the road.

[/ QUOTE ]

Steve Forbes agrees with you. http://heraldsun.news.com.au/common/story_page/0,5478,16441087^664,00.html

-Matt

[sam h]

Thanks Mostro.

Follow up question: If there may be a "hard" ceiling on annual worldwide oil supply, one that will clearly not be sufficient to meet demand without a major change in consumption patterns, then why do arguments for or against the idea of a pending oil crisis tend to focus upon the size of reserves? It seems like that is relevant, but kind of beside the point. As long as annual supply capacity has a ceiling that demand will outpace, the crisis (at least in terms of continued high prices or rising prices) is coming no matter how much is down there.

[Il_Mostro]

Allow me to speculate a bit..
Firstly, the ceiling is not known, and I would belive it is dependant on how large the reserve is, the larger the reserve, the faster you can pump it out without damaging the field. And reserves are not known, some argue 2 GB ultimately recoverable, some 8.
So much of the argument is that we cannot know( and therefore we should assume we are not near the ceiling).

The fact that the crisis is coming, in terms of higher prices, isn't really anything to doubt. But the timing of it is very much in dispute. But my belif is that whenever it comes, be it now or in 20 years, we will still be fundamentally unable to cope with it, since as long as oil keeps flowing it will be the cheapest liquid fuel source there is, thereby inhibiting any real effort to change. And when we really starts to see demand oustripping supply (I know, this is something an economist will cringe when reading) we will see higher prices, and relatively fast rising.

[Il_Mostro]

[ QUOTE ]
When the well is getting near dry, you are producing at somewhat reduced capacity, that is true.

[/ QUOTE ]
I'd argue it's a bit more than "somewhat". There are really two different problems here
1) Via advance recovery you manage to produce at almost full speed until the field more or less collapses, we have seen this at many fields lately, dropping 10%-20% in production in a single year. This is bad news since it's very quick and leaves little time to act.
2) The field is produced more carefully and will therefor have a long period of relatively slow decline. This is better, but not happening a lot, since a lot of these advance methods are used.
[ QUOTE ]
But this effect is not the important point. What's important is to get a meaningful figure out to guide us.

[/ QUOTE ]
I agree that there is a point in that too. The problem is that the second part of the guide is often droppen, it's not "we have 40 years of production in theory, in reality we will have longer but will face supply problems. It's "We have 40 years". But you are of course right in that even this should say us a lot more than it does. If we say, we have 40 years, and also say, it will take 20-30 years to find an alternative, best case. Well, that really should tell us something...

[ QUOTE ]
[ QUOTE ]

It's ... somewhat intellectually dishonest to report numbers quoting "today's production" when demand is growing.



[/ QUOTE ]
That's a standard compromise in finance. It's the same way you assess a company's performance at year's end : You take a snapshot which freezes the company's position at the 31st of that year and shows you receivables, payables, 12-month earnings, etc, at that point in time.

It's not perfect but it does the job.


[/ QUOTE ]
In some cases it does, in some it don't. I've seen argument for using liquefying coal that states that we have 200 years worth of coal (at present consumtion). But when looking more into it it turns out that if we increase the usage as much as the coal2oil would mean we only have 50 years, or 40. Just pointing out that one must be aware of the assumptions made.

[ QUOTE ]
[ QUOTE ]

As for the argument on why not more refineries are built, there are other explanations possible, more or less likely.



[/ QUOTE ]
I would really like to know about them. (I trust you are not talking about regional problems, such as environmentalists stopping the construction of a refinery.)


[/ QUOTE ]
I'm not, although that might be an issue as well.
But if oil-companys are having a harder time finding oil, a harder time getting good business opportunites to pump more oil than they are now, well, why build? After all, supply won't increase a lot.

[ QUOTE ]

I would tell you but then I'd have to kill you.

[/ QUOTE ]
watch it, I've got a black-belt in video-violence.

[natedogg]

I don't have the expertise to evaluate these two articles, but I found them interesting. The first from :
http://www.geotimes.org/june03/NN_gulf.html

[ QUOTE ]
Raining hydrocarbons in the Gulf

Below the Gulf of Mexico, hydrocarbons flow upward through an intricate network of conduits and reservoirs. They start in thin layers of source rock and, from there, buoyantly rise to the surface. On their way up, the hydrocarbons collect in little rivulets, and create temporary pockets like rain filling a pond. Eventually most escape to the ocean. And, this is all happening now, not millions and millions of years ago, says Larry Cathles, a chemical geologist at Cornell University.

"We're dealing with this giant flow-through system where the hydrocarbons are generating now, moving through the overlying strata now, building the reservoirs now and spilling out into the ocean now," Cathles says.

He's bringing this new view of an active hydrocarbon cycle to industry, hoping it will lead to larger oil and gas discoveries. By matching the chemical signatures of the oil and gas with geologic models for the structures below the seafloor, petroleum geologists could tap into reserves larger than the North Sea, says Cathles, who presented his findings at the meeting of the American Chemical Society in New Orleans on March 27.

This canvas image of the study area shows the top of salt surface (salt domes are spikes) in the Gas Research Institute study area and four areas of detailed study (stratigraphic layers). The oil fields seen here are Tiger Shoals, South Marsh Island 9 (SMI 9), the South Eugene Island Block 330 area (SEI 330), and Green Canyon 184 area (Jolliet reservoirs). In this area, 125 kilometers by 200 kilometers, Larry Cathles of Cornell University and his team estimate hydrocarbon reserves larger than those of the North Sea. Image by Larry Cathles.

Cathles and his team estimate that in a study area of about 9,600 square miles off the coast of Louisiana, source rocks a dozen kilometers down have generated as much as 184 billion tons of oil and gas — about 1,000 billion barrels of oil and gas equivalent. "That's 30 percent more than we humans have consumed over the entire petroleum era," Cathles says. "And that's just this one little postage stamp area; if this is going on worldwide, then there's a lot of hydrocarbons venting out."

According to a 2000 assessment from the Minerals Management Service (MMS), the mean undiscovered, conventionally recoverable resources in the Gulf of Mexico offshore continental shelf are 71 billion barrels of oil equivalent. But, says Richie Baud of MMS, not all those resources are economically recoverable and they cannot be directly compared to Cathles' numbers, because "our assessment only includes those hydrocarbon resources that are conventionally recoverable whereas their study includes unconventionally recoverable resources." Future MMS assessments, Baud says, may include unconventionally recoverable resources, such as gas hydrates.

Of that huge resource of naturally generated hydrocarbons, Cathles says, more than 70 percent have made their way upward through the vast network of streams and ponds, venting into the ocean, at a rate of about 0.1 ton per year. The escaped hydrocarbons then become food for bacteria, helping to fuel the oceanic food web. Another 10 percent of the Gulf's total hydrocarbons are hidden in the subsurface, representing about 60 billion barrels of oil and 374 trillion cubic feet of gas that could be extracted. The remaining hydrocarbons, about 20 percent, stay trapped in the source strata.

Driving the venting process is the replacement of deep, carbonate-sourced Jurassic hydrocarbons by shale-sourced, Eocene hydrocarbons. Determining the ratio between the younger and older hydrocarbons, based on their chemical signatures, is key to understanding the migration paths of the oil and gas and the potential volume waiting to be tapped. "If the Eocene source matures and its chemical signature is going to be seen near the surface, it's got to displace all that earlier generated hydrocarbon — that's the secret of getting a handle on this number," Cathles says.

Another important key to understanding hydrocarbon migration is "gas washing," Cathles adds. A relatively new process his research team discovered in the Gulf work, gas washing refers to the regular interaction of oil with large amounts of natural gas. In the northern area of Cathles' study area, he estimates that gas carries off 90 percent of the oil.

Ed Colling, senior staff geologist at ChevronTexaco, says that identifying the depth at which gas washing occurs could be extremely useful in locating deeper oil reserves. "If you make a discovery, by back tracking the chemistry and seeing where the gas washing occurred, you have the opportunity to find deeper oil," he says.

Using such information in combination with the active hydrocarbon flow model Cathles' team produced and already existing 3-D seismic analyses could substantially improve accuracy in drilling for oil and gas, Colling says. ChevronTexaco, which funds Cathles' work through the Global Basins Research Network, has been working to integrate the technologies. (Additional funding comes from the Gas Research Institute.)

"All the players are looking for bigger reserves than what's on shore," Colling says. And deep water changes the business plan. With each well a multibillion dollar investment, the discovery must amount to at least several hundred million barrels of oil and gas for the drilling to be economic. Chemical signatures and detailed basin models are just more tools to help them decide where to drill, he says.

"A big part of the future of exploration is being able to effectively use chemical information," Cathles says. Working in an area with more oil by at least a factor of two than the North Sea, he says he hopes that his models will help companies better allocate their resources. But equally important, Cathles says, is that his work is shifting the way people think about natural hydrocarbon vent systems — from the past to the present.

[/ QUOTE ]


and the next, from a recent futurepundit post:

http://www.futurepundit.com/archives/002981.html#002981

[ QUOTE ]
Shell Oil Shale Extraction Technology Economically Viable?

The development of an economically viable way to extract oil from oil shale would put a ceiling on oil prices and would extend the oil era by decades. It would also increase the odds of significant global warming. Well, in light of all that a variety of media outlets are reporting that Shell Oil thinks it can produce oil from oil shale at $30 per barrel using an in situ process where the shale is cooked without first mining it onto the surface.

They don't need subsidies; the process should be commercially feasible with world oil prices at $30 a barrel. The energy balance is favorable; under a conservative life-cycle analysis, it should yield 3.5 units of energy for every 1 unit used in production. The process recovers about 10 times as much oil as mining the rock and crushing and cooking it at the surface, and it's a more desirable grade. Reclamation is easier because the only thing that comes to the surface is the oil you want.

And we've hardly gotten to the really ingenious part yet. While the rock is cooking, at about 650 or 750 degrees Fahrenheit, how do you keep the hydrocarbons from contaminating ground water? Why, you build an ice wall around the whole thing. As O'Connor said, it's counterintuitive.

Shell is just now moving onto the next stage to decide by 2010 whether their process is commercially feasible.

Shell has received approval from Rio Blanco County, state and federal officials to conduct a $50 million, two- to four-year study of a groundwater freezing process, said Jill Davis.

“We’re still looking to decide if we’ll move on to commercial production by the end of the decade,” she said. “It’s been promising, so we want to take it to the next level with an environmental test of our ‘freeze wall’ process.”

Refrigerants, such as ammonia dioxide, are circulated through underground pipes to freeze the groundwater and earth to keep groundwater out of an oil-shale formation.

“We’ve tested the process in a circular pattern and this will be a football field-shaped rectangle in an area more like where commercial production could happen,” she said.

Some estimates for the amount of oil in shale range as high as 1 trillion to 1.8 trillion barrels. Assume that 1 trillion barrels could be extracted. The United States currently uses about 20.5 million barrels per day which is about a quarter of current world oil demand. World oil demand is projected to rise to 119 million barrels per day by 2025 or about a 50% increase. Suppose we take that 119 million barrel figure and round it off to 120 million barrels. Also let us assume that oil shale could yield 1 trillion barrels of oil. That oil shale would satisfy total world oil demand by this equation: 1,000,000 million barrels/(365 days per year times 120 million barrels per day) which equals only 22 years at the projected year 2025 consumption rate. Even oil shale can delay the end of the oil era by a couple of decades. Still, we could use those decades to develop technologies to lower the cost of nuclear and photovoltaic solar power.

A recent RAND corporation report with lead author James Bartis argues the US government should add oil shale to its energy research portfolio.

Since the future prospects for oil shale remain uncertain, the RAND report recommends that the federal government refrain from major investments in oil shale development until the private sector is prepared to commit its technical, management and financial resources. However, the report recommends a few low-cost efforts that can begin in the near future to move oil shale development forward.

The report by the RAND Environment, Energy and Economic Development program says that between 500 billion and 1.1 trillion barrels of oil are technically recoverable from high-grade oil shale deposits located in the Green River geological formation, covering parts of Colorado, Utah and Wyoming.

The mid-point of the RAND estimate – 800 billion barrels – is three times the size of Saudi Arabia's oil reserves. This is enough oil to meet 25 percent of America's current oil demand for the next 400 years.

The benefits of a competitive oil shale industry are substantial. For an output of 3 million barrels per day, the study estimates direct economic benefits of about $20 billion per year. Federal, state and local governments would receive about half of this amount in the form of lease payments, royalties and taxes.

Production at 3 million barrels per day also could likely cause oil prices to fall by 3 to 5 percent, saving American oil consumers roughly $15 billion to $20 billion annually, according to the report. A multimillion-barrel per day oil shale industry could also create several hundred thousand jobs in the United States.

The in situ process may avoid many of the environmental problems that arise from oil shale mining.

Another technical development that has been taking place involves heating the oil shale while it is still in the ground – a process called in-situ conversion. Mining is not required. Instead, electric heating elements are placed in bore holes, slowly heating the shale oil deposit. The released liquids are gathered in wells specifically designed for that purpose.

In contrast to surface mining, in-situ conversion does not permanently modify land surface topography and may be significantly less damaging to the environment. Small field tests conducted by Shell Oil involving an in-situ approach appear promising. While larger scale tests are needed, Shell anticipates that this method may be competitive with crude oil priced below $30 per barrel. RAND has not developed an independent estimate of the price level needed to make in-situ conversion competitive.

On the environmental side, adverse land and ecological impacts will accompany oil shale development no matter which approach is used. Oil shale production will also result in airborne and greenhouse gas emissions that could severely limit oil production levels.

Colorado has the largest oil shale deposits and some deposits have more oil per ton of rock.

Steve Wiig, geologist for the Rock Springs BLM office, said Wyoming oil shale, on average, would produce 15 to 30 gallons of oil per ton of oil shale rock. He said the Colorado and Utah deposits could produce 30 to 40 gallons, with some sites capable of producing 60 gallons of oil per ton of oil shale.

Another company says it can produce oil from shale even more cheaply using a more conventional approach.

For example, one of the star witnesses of Gibbons' hearings was Jack Savage, president of Utah-based Oil-Tech Inc. He said the company is ready to start cooking oil out of shale with a retort it has built near Vernal, Utah.

"We have been working on this for 15 years," Savage said. "Now we're ready to go."

Savage, once president of companies that manufactured golf bags and other sporting goods, said he can turn shale into oil for $10 to $22 a barrel, depending on market conditions. Savage pushed for an accelerated federal leasing program, but he's already leased 38,000 acres of state land in Utah and says he's working on a research-and-development bid to continue work on his project.

The biggest problem with mining oil shale comes as a result of heating oil shale rock. The rock expands in size and then can't just get put back where it was excavated.


[/ QUOTE ]

[Cyrus]

If the thesis of the article was that there is just not enough crude oil to go around, I disagree. Crude oil production is not the issue -- refining is. As the stats show, refineries are operating at close to full utilisation in 2004 and 2005. (Which, come to think of it, is amazing when you factor in the numerous shut-downd around the world, when refineries were closing down temporarily to upgrade their products' specifications.)

There has been a huge surge in demand, with Asia-Pacific (read: China) leading the way.

OPEC could double the daily production of crude oil tomorrow (a strictly theoretical argument) and the price of oil products would be affected only slightly.

[ QUOTE ]
If annual [crude] oil production has a ceiling, then you don't want to build refineries that would bring annual oil refining capacity past that ceiling.

[/ QUOTE ]
The world is currently pumping out all the crude that the refineries need. But the refineries do not produce enough of what the world needs.

[Cyrus]

Interesting articles; I will print and read them.

Some quick remarks: Oil shale has been kicking around for years, especially every time "the price goes up". The now-oblivious Sheikh Yamani used to advocate high production, in general, which meant low prices, in order to discourage any serious search for alternative fuels.

In any case, all these things are no more than auxiliary features, of secondary importance. We should have been moving towards alternative sources of energy a long time ago, before the Asian economies picked up.

The free market is no help in such an endeavor. (One of the many factors why the price "ain't right" is the market's total discounting of future damages.) The western nations have to pull together and prepare the proper scientific framework which will allow us to move on - because, so far, no alternative source of energy is economically viable. Such an effort should be led by the United States, provided its leadership is able to look beyond small, petty objectives (eg "American Century", etc).

Answer in white : <font color="white"> Nuclear energy. </font>

[frizzfreeling]

OPEC members are not governed by the SEC. We have nothing other than their "word" stating how much they have in reserves. What is fishy to many people about this is the huge jump in the 80's of reported reserves by these countries. This came around just after OPEC decided to alot production of its members based on their reported reserves. So, if you are a member of OPEC and want to pump more than your fair share of oil, you just have to report higher reserves. Look at a graph of reserve history for OPEC countries and you will see this little "anomaly".

[Il_Mostro]

I'd say it's really a combination. OPEC has repeatedly said that it is producing at full speed, that there is no spare capacity.
Especially SA says that they will add a lot of capacity, but they have said many times over the last few years that they will increase production, and yet they have not done so.

[MtSmalls]

[ QUOTE ]
They're not making a lot of new investment in increasing their production.

[/ QUOTE ]

I'm sure glad the Adminstration just gave them a ton of tax breaks to do just that!

[adios]

Obviously not enough /images/graemlins/smile.gif. The new energy bill gave alternative energy production tax breaks too and also gave tax breaks to those who use energy effecient vehicles. Are you against these tax breaks as well? Whether or not government should use taxes to encourage domestic oil production is a matter open to debate (as well as using taxes to encourage alternative energy production and energy effeciency) but let's be fair about the tax breaks. Far be it from me to enthusiastically endorse the recent energy bill. The effects of that bill will probably raise gasoline prices in the short term due to the environmental issues that the bill addresses. So going back to my post awhile ago, emission standards raise the price of gasoline as well and this is a regressive tax that hits the less affluent the hardest. You don't have to be dirt poor to be less affluent and from all the hand wringing from the left wingers around here about how the middle class and below are losing ground to the most affluent citizens, I would think that it would become painfully obvious that the costs of clean air emissions in gasoline (automobiles as well) is hurting more and more people. Why aren't the left wingers screaming about how more and more people are getting hurt by these extra costs? Some might even state that this is an example of elitism /images/graemlins/smile.gif.

[Triumph36]

You are being facetious, correct?

Even according to free-market dogmatists it's possible to argue that emission standards are clearly beneficial - the external costs of not having them are potentially far worse, for everyone. Pollution standards are not just for the sake of suburban liberals having open spaces to stare at.

[adios]

[ QUOTE ]
You are being facetious, correct?

Even according to free-market dogmatists it's possible to argue that emission standards are clearly beneficial - the external costs of not having them are potentially far worse, for everyone. Pollution standards are not just for the sake of suburban liberals having open spaces to stare at.

[/ QUOTE ]

Classic non sequiter. I didn't say that external costs of not having them didn't exist. I stated that the extra cost of gasoline due to clean air emissins standards is a regressive tax on the less affluent.