In reviewing BP’s latest Statistic Review of World Energy, the big story for world oil last year was obvious: the USA’s third straight record-breaking increase in average annual production. Just over 75% of the net increase in world oil production during 2014 came from the USA; add in Canada and 90% of the total increase came from North America. Throw in Brazil’s first significant increase in three years and you have all the world’s net gain in world oil production accounted for by three non-OPEC players. Production from all other producers combined was flat. So the question for 2015 is straightforward: will we see a repeat of those gains…and the flat-liners?
Tom Whipple is the editor of ASPO-USA’s two flagship publications, Peak Oil News and Peak Oil Review. Tom is a former senior analyst for the Central Intelligence Agency (CIA). Since retiring from the CIA, Tom has become a well-known researcher and writer on energy and oil issues. Tom writes a weekly column on peak oil for the Falls Church News, a daily newspaper based in northern Virginia. Tom holds degrees from Rice University and the London School of Economics.
Crude oil prices were little changed last week, with New York futures trading around $60 a barrel and in London around $63. As has been the case for several weeks, the global oversupply of crude, the Greek debt crisis, and China’s weak economy have kept downward pressure on the markets. Trader hopes that the summer driving season will soon push up the demand for gasoline and expectations of an economic rebound continue to support oil prices. The uncertainties of the Iranian nuclear negotiations cut both ways with an agreement likely leading to a large increase in available crude, while failure of the talks would lead to increased tensions or worse in the Middle East.
“I am now more convinced than ever that 2015 will see the peak in world crude oil production. I have very closely studied the charts of every producing nation and my prognosis is based on that study. I see many nations in steep decline and most every other nation peaking now, or in the last couple of years, or very near their peak today. These include the world’s three largest producers, Russia, Saudi Arabia and the USA.”
–Ron Patterson, peakoilbarrel.com
“New scientific models supported by the British government’s Foreign Office show that if we don’t change course, in less than three decades industrial civilization will essentially collapse due to catastrophic food shortages, triggered by a combination of climate change, water scarcity, energy crisis, and political instability.”
Nafeez Ahmed, investigative journalist
“The debt that fueled the US shale boom now threatens to be its undoing. Drillers’ debt ballooned to $235 billion at the end of the first quarter, a 16 percent increase in the past year, even as revenue shrank. The problem for shale drillers is that they’ve consistently spent money faster than they’ve made it, even when oil was $100 a barrel. The companies in the Bloomberg index spent $4.15 for every dollar earned selling oil and gas in the first quarter, up from $2.25 a year earlier, while pushing U.S. oil production to the highest in more than 30 years.
“The question is, how long do they have that they can get away with this,” The companies with the lowest credit ratings “are in survival mode.”
Thomas Watters, oil and gas credit analyst at Standard & Poor’s in New York
After the usual amount of volatility that we have seen for the last three months New York oil futures closed at $59.61 per barrel on Friday, down 35 cents for the week. London futures, which have been drifting generally downwards since the beginning of May, closed at $63.02, down $1.24 for the week and about $4 a barrel in the last ten days. If the major energy watchers are correct, the oil markets remain oversupplied by about 1 or 2 million b/d, which is setting the trend, but with numerous factors ranging from the Greek debt crisis to the US rig count influencing trader decisions, oil prices continue to be volatile with the markets reacting to the day’s news.
For the last two months Brent crude has been trading in a $7-8 range between $62 and $69 a barrel. New York futures have been trading about $6-7 below Brent. Much of the volatility has come in sudden jumps as the markets interpreted and reacted to news relating to the oil market. Many traders seem to be convinced that prices are still too low and that one day there will be a rebound into triple digits despite market fundamentals – oversupply of crude and generally weak economic conditions – that seem to say that prices have rebounded too much from the lows seen last winter.
Oil prices fell last week with New York futures closing Friday at $59.31 a barrel, down 1.9 percent for the week. London closed Friday at 63.31 down 3.4 percent for the week. The debate over whether prices will climb or fall in the short term continues, with optimists citing various bits of good news about the global economy and the falling US rig count to support their case. Pessimists cite the estimated 2 million b/d of global overproduction and expectations of increased exports from the Middle East as reasons prices will decline. Much of the decline last week was due to a stronger dollar occasioned by the ongoing Greek bailout crisis.
“This week, Georgetown University’s board voted to sell off its investments in coal, and Norway’s sovereign wealth fund, the largest pool of investment money in the world, announced it would do the same…Divestment won’t move Exxon Mobil directly — that’s impossible; the company is dug in, and someone else will simply buy the stock when it’s sold. But divestment will undercut the industry’s political power…Divestment is one tool to change the zeitgeist, so that the day arrives more quickly when the richest and most powerful can no longer mock renewable energy and play down climate change.”
–Bill McKibben, distinguished scholar at Middlebury College, founder of the group 350.org (in the Washington Post)
Oil prices fell through Thursday last week, but rebounded 5 percent on Friday after Baker Hughes reported that the US rig count had resumed falling; the EIA reported a larger drop in US crude inventories than analysts had been expecting; and the dollar which had been climbing recently turned lower. At the close Friday, New York futures were at $60.30 a barrel and London was at $65.56, about where they were at the beginning of the week. New York prices climbed 1.1 percent during April and London fell 1.8 percent suggesting that the recent price increases are peaking out.
“From Capitol Hill to the Motor City, marble statehouses to mud strewn shale plays, lawmakers, policy wonks and industry leaders repeatedly invoke U.S. government energy forecasts to call for more drilling, more fracking and more nuclear plants. These predictions are made by the Energy Information Administration. They are ostensibly apolitical, certified with a federal seal of approval and are ripe fodder for the journalists, analysts and government agencies responsible for painting a picture of the country’s energy future. But in truth, some experts say, we’d have better luck calling Miss Cleo [than using EIA forecasts].”
–Alan Newhauser, US News & World Report [Note: Miss Cleo is an American psychic]