2005 Oil Outlook: Is This The Year When Demand Outstrips Supply?

[chlamor]

Matthew Simmons recently wrote this article which gives an overview of the prospects for oil supplies and gives insight into the ongoing problems in the oil industry other than just dwindling supplies.



" What was the biggest oil story in 2004? I posed this question to all the Simmons & Company oil experts this year. The suggested list of topics varied enormously, which spoke to how many key oil events occurred last year. Oil prices in 2004 were on almost everyone's list. The "scandal of proven reserves" also got many votes. Dwindling spare productive capacity, sky-rocketing tanker rates, historically unprecedented spreads between light/ sweet crude oil and heavy/ sour oil, soaring oil demand and simply "China" and "Yukos" all got votes, along with flattening non-OPEC oil supply and even "Peak Oil"- a topic that received more media attention, during 2004, by a substantial margin than ever before."

"What this myriad of stories actually represents is part of a far bigger mosaic for what is emerging in global oil markets as 2005 gets underway. It appears that we are entering a new oil era that could bear little resemblance to the behavior of past oil markets."
<snip>
"If any spare wellhead capacity still exists, it is for crude that is both heavy and sour. The refineries that are equipped to refine this type of crude are currently operating at 100% capacity. Compounding this problem is the fact that the world's light sweet crude supply is also in decline. Almost 90% of new oil projects produce oil that is either sour, heavy, or both."
<snip>
"The fleet of high-quality drilling rigs is now close to 100% utilized, even though utilization remains soft in drilling markets like the Gulf of Mexico, Venezuela and the North Sea. A high percentage of the offshore drilling fleet is approaching an age that used to signal obsolescence, yet the global capacity to replace even 10% to 15% of the existing fleet over the next five years is almost non-existent. Many of these capacity bottlenecks can be corrected over time, assuming sufficient investment is made. The industry must begin replacing the aging rig fleet, but fleet expansion is also required to drill more wells and fight the growing decline curve."
<snip>
"Oil inventories have also moved so close to "just-in-time" supplies that any sudden interruption can send prices spiraling upward. In the fall of 2004, Hurricane Ivan crossed the Gulf of Mexico with enough power to destroy much of the production infrastructure, but in the end delivered only a glancing blow. However, the small amount of damage incurred by Ivan still required several Gulf Coast refineries to borrow oil from the US Strategic Petroleum Reserve to remain operational."

The entire article can be seen at:
http://www.worldoil.com/Magazine/MAGAZINE_DETAIL.asp?ART_ID=2486&MONTH_YEAR=Feb-2005

[BlueEyedSon]

1. Yeah, this year or next.

[Coastie for Truth]

2. I don't even think my Prius will save me from moments of

gas shortage panic.

I test drove a Mini Cooper (or whatever it's called) :( -- Stick with my Prius but use Bart and CalTrain and VTA Light Rail more.

I'm glad I live in a "Transit Village"

[robertpaulsen]

3. Dale Allen Pfeiffer says 2007, obviously Peak Oil is coming SOON!

Peak Oil: Current Situation & 2005 Projections
by Dale Allen Pfeiffer

This past year we have seen how volatile the oil market has become as the world approaches peak oil production. But the recent softening of oil prices demonstrates that we have not yet peaked. What we are experiencing right now is a tight oil market. Production can still increase, but not by much and only with difficulty. The good news is that we are producing more oil than ever before. The bad news is that production is barely keeping up with consumption, and the decline is still ahead of us.

In this tight situation, anything which disrupts oil production around the globe has an effect on prices. This year oil prices were driven up by the triple whammy of the Iraq invasion, civil unrest leading to production disruption in Nigeria, and hurricanes in the Gulf. Production could not increase enough to cover all of those shortages. But now the hurricane season is long over, and Nigeria is back in business. Barring further disruptions - such as the horror of a 9.0 earthquake in the Indian Ocean - prices should remain soft for the short term.

2005 Energy Picture

In fact, oil prices might drop back below $20/barrel before 2005 is over - depending on circumstances. Several new large fields should come online this year, adding extra capacity. These are the last of the 500 million barrel mega fields, since none has been discovered in the past few years. Eighteen new mega projects are due to start producing this year, followed by eleven more is 2006. However, 2007 will see the opening of only three new projects, followed by three more in 2008. This will not keep up with declining production in older fields, much less the increase in demand.

ODAC has announced that world production is now seeing a 1 million barrel/day depletion rate. It remains to be seen whether the new production slated to come online this year and next will be sufficient to make up for that depletion rate. And should Ghawar collapse within the next year or two, the loss of production from this one field might cancel out all gains from new fields.

more scary shit inside...

http://www.energybulletin.net/3792.html

[Deja Q]

6. I've heard 2007 as well. But let's look at the good side to this:

Better have our fun with drugs and sex, because without the means to grow crops, the bulk of us will die and the survivors might start envying the dead.

[robertpaulsen]

7. I'll take that advice!

:hippie:
:smoke:

[EVDebs]

4. Now combine this demand chart with a supply chart showing

about 1 trillion barrels of oil in proven reserves and do the math

1,000,000,000,000/80,000,000 = 12,500/365 = 34.25 years

Please note that I used 80 million barrels per day...and that growth in demand is rising, so actually less than 34 years remain, assuming no big changes in conservation etc.

[applegrove]

5. Buy Oil stock!!