Energy / Crude Oil

• How to Live in a World with Declining Oil Production

  We don’t know precisely how oil supply will work out, but if it declines quickly, we need to think about how we can deal with such an outcome. A quick decline could come if some combination of events starts oil production on a downward spiral. For example, Middle Eastern revolutions could take a significant amount of production off-line. As a result, oil prices could spike, leading to recession and debt defaults in many countries. The resulting financial crisis could make it difficult to maintain the current level of international trade, and could lead to a sharp reduction in oil supply…

• What will Saudi Arabia do?

  One key question in determining the impact of instability in Libya and elsewhere on world oil markets is how much other countries can and will increase production to offset the shortfall. Here I review the critical role of Saudi Arabia in past disruptions and discuss the current situation. Prior to the First Persian Gulf War in 1990, Iraq and Kuwait between them accounted for almost 9% of world oil production, which was essentially completely knocked out by the military conflict (see the black line in Figure 1). Fortunately, Saudi Arabia had substantial excess capacity, and their increased production amounted to…

• Oil Production Fears Increase as Unrest Spreads to Oman

  There are reports that the unrest in the Middle East has spread to the Sultanate of Oman. While at the moment there have been only one or perhaps two deaths, small in number relative to the larger number of fatalities in countries like Libya, such a milepost, nevertheless, is sadly likely to indicate that the situation will get much worse. Oman lies east of the United Arab Emirates (UAE) South of Saudi Arabia, and north of Yemen. It is therefore within the region that is now in turmoil. And as the consequences of the unrest begin to compound, the consequences…

• Peak Oil, The Middle East and Western Civilizations Sandy Foundations

  Political tensions in the Middle East once again remind us of the fragile dependency of the Western nations on imported petroleum, which have driven the price of a barrel of crude oil to above $100, as was the case prior to the world economic crash in 2008. British motorists and owners of haulage companies flinch nervously in the face of rising prices at the pumps for fuel, feared to reach £2.00/litre if events fail to calm down, since supplies of crude oil from Libya, already cut by 500,000 barrels per day from 1.6million bpd, may fall to zero, leading to…

• Despite Huge Resources Only a Small Amount of Oil is Recoverable

  The world holds a huge amount of oil resources. Besides liquid oil, there is very heavy oil in various forms. There is also liquid oil trapped in oil shale, oil in very deep water, and oil that in not yet fully formed (still kerogen) in shale oil. Some would like us to believe that eventually, all of this can be extracted, so there is no issue with peak oil. How do we explain that this cannot really happen? The way I think of the situation is that our resources are of varying “quality”, or ease of extraction. If we order…

• Oil Supply Disruptions in The Middle East Now Becoming Evident

  The impacts of the disruptions in the Middle East are now starting to become evident as supplies no longer flow into the delivery pipelines that carry fuel from countries such as Libya to their European customers. It is now considered likely that the 1.6 mbd that Libya delivers to the world market will not be available for some time. Ireland, for example, which has had other problems with the banks in the recent past, is now faced with the loss of perhaps 23% of its fuel supply, which while only 14 kbd is, for that country, likely to be very…

• America’s Role in the Global Oil Market

  It's pretty easy to sum up America's role in the global market for oil: We need it, they got it. Here are the numbers, via the U.S. Energy Information Administration for 2009 (last year data available). U.S. oil consumption: 18.8 million barrels per day (MBD) U.S. oil production: crude oil: 5.36 MBD; all oil (including liquids from natural gas, etc.): 9.14 MBD. 48.6% of consumption Oil exporters sell us: 9.67 MBD 51.4% of consumption Where we get the oil from (top 15 suppliers to the U.S.) World oil production: 85.5 MBD World oil consumption: 85.6 MBD Percentage U.S. consumption of…

• Investors Jumping On-Board the Colombian Oil Bandwagon

  Carlos Slim announced in early February that he would increase his investments in Colombia, particularly in the oil sector. This week he backed up his statement by having his Grupo Carso purchase a 70% stake in Tabasco Oil, which is exploring in the “LLA 56” area in Colombia. Slim is far from the only investor jumping on the Colombia bandwagon. Eike Batista, Brazil’s richest man and the eighth richest man in the world, is said to be investing about $5 billion in Colombia’s oil and mining sector. According to Reuters, he plans to raise at least $1 billion in an…

• Forget Libya, The Smart Money is Eyeing Developments in Saudi Arabia

  The smart money has their eyes on Saudi Arabia. Will the protests there turn ugly?All the drama seen on the streets, from the unnecessary deaths to Muammar Gadhafi’s rhetoric –  its only importance is to gauge how the Saudi citizenry react. Reuters called a Saudi oil disruption “unthinkable,” and the WSJ claimed “Saudi Arabia is well-shielded from a full-blown uprising of the kind seen in Libya.” Think again. This is the world’s second largest oil producer and has promised to fill the gap if Libya totally shuts down. It can’t very well keep such promises if Saudis are involved in…

• Libya's Role in World Oil Production, Past and Future

  Libya is a relatively new country, having declared independence in 1951. For the last 39 years, the country has been ruled by a single man, Colonel Muammar al-Gaddafi. Over the years, the identity of this leader and his exquisite sense of style have mingled with the identity of the country itself. Libya joined OPEC right after its creation, and played a pivotal role in the 1973 oil crisis. For the next three decades, Libya endured tense (and sometimes belligerent) relations with western countries. In recent years, as international oil prices have been rising, Libya has been able to re-institute itself…