Is Oil Heading for $100 a Barrel?

[sintax]

Is oil heading for $100 a barrel?

Instability in the Middle East and bottlenecks in refining are driving prices higher

Larry Elliott, Heather Long and Samira Sohail
Wednesday August 17, 2005
The Guardian


Britain and the United States heard a faint echo from the 1970s yesterday as the escalating cost of a tank of petrol contributed to higher inflation. And with tension in the Middle East providing another reminder of life three decades ago, the message last night was that consumers can expect more of the same over the coming months.

The rising cost of energy over the past 18 months has come as a shock to almost every commentator. When a barrel of crude reached $40 (£22), it was assumed the price would quickly halve. When it reached $50, the expectation was that the bubble would quickly burst. Today, with crude above $65 in the futures markets, the talk is a bit more cautious.

<snip>

"This crisis, we know, is likely to last. All the factors have come together for oil to remain expensive in the years and decades to come," he said. "Our refining capacity is saturated and cannot adequately cope with French demand

<snip>

nterestingly, the markets take a less sanguine view. "The futures curve suggests that the price of oil will remain around its current level for the next few years," the Bank of England said in its quarterly Inflation Report last week. As the Bank went on to say, the probability that the price of crude will follow the exact path suggested by the futures curve is very small. But the bets being laid by those speculating in oil futures tell a different story from some of the energy optimists. The data, according to the Bank, "suggest that financial markets believe that there is a greater chance of a large rise in the price of oil than a large fall. Currently, market participants judge that there is roughly a one in 20 chance that oil prices will be $100 or higher in August 2006."

http://www.guardian.co.uk/business/story/0,3604,1550443,00.html

[funflower]

1. Oh. Right. It's all about refining problems. Once they get those

refineries fixed, it'll be back to $15/barrel.

:sarcasm:

[krkaufman]

5. Gotta whine about refining capacity...

... in order to get the gov't to subsidize the unnecessary construction of add'l light crude refineries.

[OKthatsIT]

29. The US Govt should build its on refineries...

its a national security issue, RIGHT??

Americans are such idiots.

[joeunderdog]

30. Ask your Republican friends why Our Leader isn't talking about this?

He's talking about Social Security. He feels it's important. Why doesn't he feel OIL $$$ is important? Why don't we hear him talking about how unfair this is? Doesn't he know how this affects mall businesses, food prices, energy and economic growth? Aren't these isses important to good republicans?

He never mentions it. How come?

[kysrsoze]

31. Howsabout oil companies build new refineries with their record profits?

Naw. Even though the capacity is SUPPOSEDLY strained, they can't do that without 100% backing from the govt. There will be no new refineries built. No profit motive in it for them.

[FloridaPat]

2. There are no refinery problems, as the above person pointed out.

[sintax]

6. Yes but we must blame something other than

gluttonous Western consumers and industrial society.

geology isn't adhering to the laws of the financial fundamentalists.

Seeing things and remaining quiet about them will change nothing, not even ourselves. But saying things - having the courage to testify to our own forbidden knowledge - could be the way the world changes.

[Strelnikov_]

14. "Geology Isn't Adhering To The Laws Of The Financial Fundamentalists"

Classic. That about says it all.

"All we need to do is get down on our knees and pray to the God of Supply and Demand for salvation, my brothers."

Thing is, the God's of Depletion and EROEI (Thermodynamics) are about to kick Supply and Demand's ass.

[HadItUpToHere]

7. Actually, yes there are...

We're actually having to import 10% of our gasoline, due to limited refining capacity.
the refineries that are online are running full bore...and when you do that for too long, you start having problems. and in a refinery, many of the problems cause explosions and such.
we also don't have enough refineries that can handle heavy crude, which sells for about $14/bbl. less.

http://abcnews.go.com/WNT/story?id=1042788&page=1

[sintax]

9. limited refinery problems is the symptom not the problem

we use WAY TOO MUCH particularly US Military which is destroying the planets fragile ecosystem with much help of Western consumers which require so much oil.-Global Warming

growth for growths sake is the fundamental operating principle of the cancer cell

Industrial Society needs to be lanced

[Bushwick Bill]

11. Bingo

The fact that there is virtually no exploration or refinery construction means that the majors understand clearly that there is no more significant oil to find and their investments would never be paid off.
http://www.fromthewilderness.com/free/ww3/012505_ftw_maps.shtml
If the actions—rather than the words—of the oil business’s major players provide the best gauge of how they see the future, then ponder the following. Crude oil prices have doubled since 2001, but oil companies have increased their budgets for exploring new oil fields by only a small fraction. Likewise, U.S. refineries are working close to capacity, yet no new refinery has been constructed since 1976. And oil tankers are fully booked, but outdated ships are being decommissioned faster than new ones are being built.
http://www.technologyreview.com/articles/05/02/issue/review_oil.asp?p=0

As for price, here is some disturbing news from Matt Simmons:

So we have actually now created a pending domestic embargo, and we’re going to be lucky to get through the Summer without some periodic shortages. We probably will, but the odds are probably as high we will have some shortages, and then if we get through the Summer we have a fabulous respite from Labor Day to Thanksgiving, until we hunker to try to figure out how the world gets through the Winter of 2005 and 2006 because oil demand globally could easily go to 86-88 million bpd during the Winter, and that could easily exceed supply by 2-5 million bpd.<38:53>

JIM: If that was to happen we would almost be looking at $75-80 oil, I suspect.

MATT: No, no, no. Oil prices could easily go up 5-10 times.
http://www.financialsense.com/transcriptions/Simmons.html

[barb162]

20. And I agree with a lot of this. We need new refineries for the

cruder crudes, but why should an oil company spend a billion bucks when oil wont be around that much longer. And they aren't looking for new fields as they have already basically explored and know there isn't any more. The oil companies will be diversifying out of oil

[barb162]

19. I agree, no refineries built in the US in 30 years

and they are all operating at 100%. If one goes down, we end up with shortages.

[funflower]

35. Welcome to DU, HadItUpToHere! Great "name"!

:headbang: :headbang:

[karlrschneider]

3. I will get flamed for this, but I hope it does.

Because I don't know any other way to force alternate energy research.
Nobody (with enough money) seems to wanna do it but the naked truth is this: one day the last drop of economically producible oil will dribble from a pump somewhere...this may have actually already happened, it MAY be that from here on it could take more energy to extract the remaining petroleum reserves than the stuff yields. We will know a lot more about this scenario in the next 2 years.

[Joebert]

21. Unfortunately, before we force alternate energy...

We'll just go take Venezuela.

[FloridaPat]

28. It happened in the 70's. Long lines. High oil prices. Big scramble

for alternative ideas. When things eased up, the American mind went blank. Out came the SUV's.

[funflower]

36. No flame here. The Forces of Nature are with you. Just hope it happens

soon enough to avert the collapse of the rest of the environment due to fossil fuel pollution.

[al bupp]

4. In a word...

yes, and sooner than most people think, I'm afraid.

[lovuian]

8. I'll say the Dirty Word here RATIONING!!!

It may get that even the rich can't get it!!!

[Bushwick Bill]

13. Won't be long until it happens.

July 18, 2005 1000 PST (FTW) -- In previous stories, reprinted from the Financial Times, (April 16, 2005, IEA Calls For Emergency Plan), and Al Jazeera, (March 24, 2005, IEA Wants Brakes on Fuel Consumption) we commented on how the International Energy Agency had apparently dusted off plans for rationing to be imposed (with the full authority of government and the UN) in nations which had signed the original UN treaty in 1974 or joined later.

The IEA plan is here. As of today, IEA Member countries include: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Republic of Korea, Luxembourg, The Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom and the United States. (Source: http://www.iea.org)
http://www.fromthewilderness.com/free/ww3/071805_rationing.shtml

[funflower]

37. There was an article posted recently by WILLIAM F. BUCKLEY that suggested

a voucher system! So much for the wild and free market!

[hedgetrimmer]

10. create a market and watch the bull run wooohaha....

supply and demand baby... run the prices high... peak oil my ass gonna make a buck on gas... food prices going through the roof... watch the middle class go poof...

[funflower]

38. PO is real, but we'll also see the market manipulated to favor the

oligarchs around the world. Scary to think of how the middle class developed in conjunction with cheap fossil energy.

:scared:

[daleo]

12. If refining capacity was the problem, new refineries would be built

There would be large profits to be had in selling extra refining capacity, blah, blah, blah - standard classical economics explanation. The fact this hasn't happened tells you something.

[Strelnikov_]

16. Yep. They Know Something

Like about the time the refineries are built, oil supply will be dropping at 3% per year.

[olddad56]

15. The dollar is heading for 1/100th of a barrel of oil.

[CrazyForKucinich]

17. How much would it be at the pump if it hit $100/barrel?

If over $4 I swear there'd be riots in the streets. You'd need police at every gas station to stop pump and go drivers.

[Strelnikov_]

18. Nymex Crude At $66/bbl, Gasoline (Wholesale Futures) At $2.00/gal

today.

Therefore, $100/bbl crude results in $3.00/gal (wholesale) gas assuming direct proportion.

Gas at the pump would probably be $3.90/gal to $4.50/gal per the above, depending on where you are.

Of course, refinery outages can push it even higher.

[buddysmellgood]

22. Can anyone think of a scenario whereby oil get cheaper, longterm?

[mccoyn]

32. Someone invents a cheap, effecient solar cell?

Something that converts most of the sunlight, doesn't require exotic materials and can be made and sold cheaply. As these replace oil for energy the demand for oil drops, a lot and prices fall.

[wli]

23. there's no ceiling, really

It'll keep going up until it's an expensive curiosity for scientific study and nothing else. This is Peak Oil.

[Mr Rabble]

24. We have a winner.

[fortyfeetunder]

25. Time to build stables and get a horse or two

Back to the past! If great-granddad can do it, so can I!

[theearthisround]

26. Were running out of oil for the 5th time!! Quick give up all your rights!!

In other news, Exxon Mobil's second quarter earnings jumped 35 percent over last year, Royal Dutch Shell rose 34 percent, ConocoPhillips shot up 51 percent.


Oil Companies' Profiteering to Blame for Gas Price Spike, Says FTCR
http://www.rednova.com/news/display/?id=208584&source=r_science

[bpilgrim]

27. rising cost of energy over the past 18 months has come as a shock to M$MWs

" The rising cost of energy over the past 18 months has come as a shock to almost every commentator"


http://media.globalfreepress.com

psst... pass the word ;->

peace

[eyepaddle]

33. While refining problems in America may cause transient price spikes

of refined products It would not cause the proce of crude to rise! In fact it'd sort of go the other way. As a refinery stops producing products their tanks fill up and they stop purchasing.

There has been no drop in amount of crude purhcased--which is why the price contiues to rise. If we aren't buying it someone else is (China and India)

This is a supply problem. And likely one with NO easy way out. There used to be a great website called noesis that was excellent for examining enrgy industry trends. Granted it was completely from an oil industry viewpoint--but if the crude tanks are empty they are empty and we can draw our own conlcusions. I'm not sure why the plug got pulled on that one. I'm (mercifully) no longer involved in the oil business so I didn't check it for a few years.

Here's my crystal ball prediction. After an intial and intense panic when Americans realize that $2.75/gallon gas is the good old days we will cast about for solutions in frantic manner. While Americans as a rule are incredibly short sighted we are also pretty clever--when we are given NO other choice. We are already seeing the initial stages now with the soaring demand for hybrids. We could easily (though not pleasntly) reduce gasoline consumption by a million barrels a day. That'd be the equivalent of about seven average large refineries. Please note I said GASOLINE consumption, and since only babout half of a barrel of crude readily becomes gasoline this would have a fairly dramatic shifft on demand for crude.

If it were up to me the amount of reduction would be MUCH larger and we would address global warming concerns as well. Either way the days of the SUV are numbered. Hnag on to your hats folks, this should be "intersting."

[Ms. Clio]

34. Amazing how once again Osama bin Forgotten will get what he wants

Bin Laden's Latest Tapes Stir Arab Media Debate

WHAT's interesting about Osama Bin Laden's recent tapes is that they didn't trigger debate among religious scholars but rather among Arab economists.

Unlike Western media, which focused on Bin Laden's call on Iraqis to boycott the scheduled elections, Al Jazeera highlighted his sudden interest in economics.

Similarly, Al-Quds Al-Arabi, a London-based independent newspaper, says the latest Bin Laden tape is significant because it suggests a specific strategy to cause maximum damage to the American economy.

In the tape aired on Al Jazeera on Dec. 27, Bin Laden reiterates his call to supporters to target oil installations in Iraq and the Gulf as a way to foil American plans to control and profit from them.

And in another tape on Dec 16, Bin Laden uses economic concepts to explain why the price of oil should be $100 a barrel.

http://www.namibian.com.na/2005/January/columns/0588FD2672.html

[alfredo]

39. Osama wants oil to hit $100 a barrel, and he always get what

he wants. I'm sure bush will do what he can to help Osama's dreams come true.