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uhoh
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Oil

Post by uhoh » 13 Sep 2006 08:02

from today's Globe:
Oil Rout
Oil's rout deepest in 16 years

13/09/06

By Jonathan Leff

SINGAPORE (Reuters) - Oil prices have fallen as much as $16 from their peaks, their steepest reversal in 16 years, in a correction that traders say may be harder to shake off than past setbacks in the market's four-year rally.

In real terms Brent has fallen $16.02 since it hit a high of $78.65 on August 8. This marks its biggest decline from peak to trough since prices fell from $40 in October 1990 after Iraq's invasion of Kuwait to $16 in February 1991, when U.S.-led ground forces expelled Iraqi forces.

Brent is down more than 20 percent from its peak, meeting the technical criteria for the start of a bear market.

U.S. crude has dropped nearly $15 to hit a near six-month low of $63.50 a barrel on Wednesday, a fall only a hair shy of those in August-November 2005 and October-December 2004. In those cases, oil made new highs five to eight months later.

In percentage terms there have been bigger stumbles on oil's recent ascent, propelled steadily higher since 2002 by the war in Iraq, soaring Chinese demand, constrained oilfield and refinery production, devastating U.S. Gulf Coast hurricanes, and most recently fears of a disruption to Iran's exports.

But some say this latest setback -- triggered by easing concerns on Iran, a weak storm season and a refocusing on healthy consumer nation inventories -- may prove more lasting.

"Even though we've retraced certain percentages similar to this, it definitely seems that the market is different now," says New York-based ABN AMRO broker John Brady. "Other times I saw (the corrections) leading to great buy opportunities, but I don't necessarily think that this time."

Technical analysts who study past price action for future direction, say the drop through the 200-day moving average last week and this week's fall below a three-year trend line -- intact since mid-2003 -- both send worrying signals.
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Maciek
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Post by Maciek » 13 Sep 2006 08:43

Check out this related CNBC article from a couple days ago:

http://www.msnbc.msn.com/id/14044213/site/newsweek/

From the article:
July 26, 2006 - Could there be an oil "bubble''? Well, yes. In early 2002 oil sold for roughly $20 a barrel; now it's close to $75. The main cause lies in tightening supply and demand—and the fact that supply (as the present Middle East fighting reminds us) could be interrupted at any time. Old-fashioned speculation may also have played a role, and that raises the possibility of a bubble. But any bubble would be a peculiar beast, and if it burst and prices dropped significantly, we shouldn't delude ourselves into thinking that this might signal a new era of comfortable abundance. It wouldn't.
So what's this mean for Canada? Is trouble ahead for our producers? Might the extraction of oil from the tar sands become a bit too expensive if we're seeing the 'bursting' of a bubble?

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Post by AltaRed » 13 Sep 2006 11:01

Maciek wrote: So what's this mean for Canada? Is trouble ahead for our producers? Might the extraction of oil from the tar sands become a bit too expensive if we're seeing the 'bursting' of a bubble?
Probably a deferment and/or slowdown of pace of some projects which would be a good thing anyway. Too many project announcements with skyrocketing costs do not serve the taxpayer (you and I) nor the resource owner (Albertans) well.

I do not think it means cancellation of projects, at least not in the longer term. These things take a minimum of 5 and upwards of 8 years from conceptual planning to actual production and thus short term aberrations tend to just slow things down.
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Post by agape » 13 Sep 2006 21:34

Isn't there an election around the corner ? Oil and gold will bust out after November 7 , if not sooner, IMO.

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Post by Gus » 16 Sep 2006 14:43

Peak Oil adherents keep the faith
But Kenneth Deffeyes, a leading peak-oil theorist from Princeton University, has seen nothing that shakes his conviction. On the contrary, he said he can point to the precise month when global crude production peaked: December, 2005.

Prof. Deffeyes, a geologist who last year published Beyond Oil: The View from Hubbert's Peak, said short-term market fluctuations in price have absolutely no relevance to the debate over the life expectancy of the world's crude oil supply.

"This is 99-per-cent physical; 1-per-cent economics," he said in an interview. "There is only so much oil in the ground and we have now reached the peak of productive capacity."
[My emphasis]

The nonsense here is the 1% economics part: whereas economics may not have any influence on how much physical oil there is in the ground (although what we know about how much oil there is in the ground and where it is exactly, requires money and resources), the amount of oil producible is almost entirely an economic issue. The way in which the peak oil advocates dismiss economics is breathtakingly dumb.

I currently work with a couple of start-up oil companies. Their ability to raise capital (and thus to develop discoveries and explore for new fields) has been seriously crimped by the recent dip in oil prices. But, even if money was to become more freely available, certain of their projects would anyway get shelved if price forecasts stay low.

At least we have a date now for the start of the end of the world, last December.
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Post by worthy » 17 Sep 2006 11:36

A 20% slide in crude prices over a couple of months doesn't constitute a bursting bubble. Experts, I see, are coming firmly down on the side of "time will tell."

I'm counting on the Imperium to foment new wars in the Mid-East. We're a single successful terrorist attack away from $80 oil.
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Post by lystgl » 17 Sep 2006 12:27

Whether or not peak oil production has already or will occur doesn't matter. Like land, they're not making anymore. Two hundred years after the invention of the internal combustion engine, we still haven't come up with a viable alternative to fossil fuel use. The Israeli's are going to be forced to attack Iran's nuclear facilities and plans are probably already in place. Hopefully all that goes up is the price of oil - not the whole middle east. Oil is going nowhere but up in the end. A dip here, a dip there, but long term it's got to get dearer and dearer. I hope I'm gone before the world runs out. Going to get awful cold despite global warming.

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Post by Gus » 17 Sep 2006 13:17

lystgl wrote:Whether or not peak oil production has already or will occur doesn't matter. Like land, they're not making anymore.
Well, let's hope we run out of oil before we run out of land. :wink:

Less flippantly, I agree that oil prices will continue to rise, not because the resource base is limited but because ~90% of the reserves are in the hands of state oil companies that make Canada Post look like a model of free market efficiency. Also, outside of the big oil exporting countries, even though potential resources are large, most new oil is expensive to produce, the tar sands being an obvious example.
worthy wrote:A 20% slide in crude prices over a couple of months doesn't constitute a bursting bubble. Experts, I see, are coming firmly down on the side of "time will tell."
Agreed, but skittish investors don't see it that way. Nor, I expect ,would real estate investors if house prices were to drop by a similar amount over a similar period.
worthy wrote:I'm counting on the Imperium to foment new wars in the Mid-East. We're a single successful terrorist attack away from $80 oil.
Perhaps those of us with a vested interest in the oil business should echo the words of Colin Firth when asked to comment on the rumour that Hugh Grant was thinking about giving up acting:

"We can only hope and pray". :?
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Post by lystgl » 17 Sep 2006 14:20

Gus wrote:"We can only hope and pray". :?
For?

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Post by Springbok » 17 Sep 2006 15:36

This article is also of interest - Basically says stay in oil for long term

http://www.energyandcapital.com/edprint.php?id=258

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Post by gyrfalcon » 17 Sep 2006 16:33

The current correction, *to* *date*, is nothing new:

http://www.safehaven.com/article-5891.htm

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Post by Norbert Schlenker » 17 Sep 2006 20:29

lystgl wrote:Whether or not peak oil production has already or will occur doesn't matter. Like land, they're not making anymore.
Why does this matter in the long run? Oil gets more expensive and people find another way to do what oil does now. The end of oil - and no, "they're not making any more" is not a convincing argument that it will even come to pass - is not the end of the world.
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Post by worthy » 17 Sep 2006 23:17

I'm counting on the Imperium to foment new wars in the Mid-East.
And, right on Time, a major media prep for proles on the next exciting chapter in the most excellent Mesopotamian Adventures of Boy George, Dick and Don and their glamourous girl sidekick, the dusky, fit and funloving Condi.
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Post by lystgl » 18 Sep 2006 11:59

Norbert Schlenker wrote: Why does this matter in the long run? Oil gets more expensive and people find another way to do what oil does now. The end of oil - and no, "they're not making any more" is not a convincing argument that it will even come to pass - is not the end of the world.
"People" have had two hundred years to "find another way to do what oil does now" yet they haven't. Do you honestly think they will - or can?

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Post by AltaRed » 18 Sep 2006 12:29

lystgl wrote: "People" have had two hundred years to "find another way to do what oil does now" yet they haven't. Do you honestly think they will - or can?
They will when the economics look more promising. The watershed will be when oil (for ground transportation, heating and electrical generation) becomes prohibitively expensive relative to alternatives. Oil will always be available but in decreasing quantities and at higher cost over time.

Consumption will likely be shed first in electrical generating plants (nuclear and coal will take over), then passenger vehicles and home heating, and then eventually trains (electrified) and possibly a massive reduction in heavy trucking (back to trains). Home heating and passenger cars will migrate to electrical in some form and home heating may also come from geo-thermal systems from our own earth beneath us. I personally do not see hydrogen as a viable alternative due to costs of production.

Oil will always be needed for aviation and lubricants and I don't see oil quantities shrinking to those levels for maybe 100 years. The transition will be a lot smoother (with a few bumps and shocks) over a number of decades than any of us can imagine at this time.
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Post by Gus » 18 Sep 2006 12:32

lystgl wrote:
"People" have had two hundred years to "find another way to do what oil does now" yet they haven't. Do you honestly think they will - or can?
Other ways have been found and, where appropriate, used for for energy (e.g., I heat my house with wood and with electricity generated mostly by hydro; so hardly any "fossil" fuels are consumed by me and many BC residents for heating purposes).

The problem is finding an economical way of competing with oil for transportation fuels: the cheapness, convenience and abundance of oil over the last 150 years has certainly reduced incentives to find alternatives.

At the risk of repeating myself, I would recommend reading the book Winning the Oil Endgame (Free 2MB download). The book shows how transportation might be made much more efficient and how other sources of energy and fuels can be developed to supplement the use of oil and gas. What I like about this book is the way it promotes Green ideas without being moralistic.
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Post by lystgl » 18 Sep 2006 22:15

Gus, downloading it now. I realize for heating and electricity, there is wind and solar. If we're prepared to put up a wind generator on almost every usable and practical piece of land in North America and or cover the remaining with solar panels, we'll probably generate enough energy to heat and electrify our homes. Burning wood just isn't going to cut it and is definitely Kyoto unfriendly. I'm surprised you admit to burning it. You're absolutely right however that this isn't going to do it for transportation and this is where most of the fossil fuel use today is going. I just don't think that we have or will be able to come up with, a viable alternative to fossil fuels anytime soon. Not because the "will" isn't there: the technology isn't. I don't subscribe to all those conspiracy theories about "big oil' and or "General Motors" quashing the 100 mpg carbeurator" etc. et al. There's nothing 'waiting in the wings" to supplant oil when it does run out. We, unfortunately, aren't as smart as we (and the sci-fi Star Trekkies) like to think we are.

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Post by pitz » 18 Sep 2006 23:03

AltaRed wrote:Consumption will likely be shed first in electrical generating plants (nuclear and coal will take over), then passenger vehicles and home heating, and then eventually trains (electrified) and possibly a massive reduction in heavy trucking (back to trains). Home heating and passenger cars will migrate to electrical in some form and home heating may also come from geo-thermal systems from our own earth beneath us. I personally do not see hydrogen as a viable alternative due to costs of production.
I personally see a time coming, very soon, where the 'corporate' world is forced to, for lack of workers, adopt reasonable and realistic telecommutting policies. The traditional 'hour-long' drive to work will soon become a thing of the past, and for very good reason.

Seriously, Altared, I took a stroll through the offices of a big-5 accounting firm in a Calgary office tower last week, and was just astonished, when speaking with some of the more senior managers, at the extent that they permit telecommutting. Basically, they have decided to grow, double the size of their Calgary-based business without adding even an extra square foot of office space. IT is an integral part of that, obviously, and their employees are very happy that their employer is both saving money (so they get a raise), and letting them carry out their work outside the confines of an office.

I expect to see a lot more of this in the future. Lots of businesses that irrationally force their employees to make a physical presence on a daily basis will be forced to re-evaluate their policies, and this can only be a good thing. Younger workers understand the technology, can use the technology -- the only thing needed now is for the dinosaurs to move out of the way and allow the technology to be unleashed into viable solutions for providing the same level of service without extravagant wastes of energy.

Oil will always be needed for aviation and lubricants and I don't see oil quantities shrinking to those levels for maybe 100 years. The transition will be a lot smoother (with a few bumps and shocks) over a number of decades than any of us can imagine at this time.
I suspect oil needs to be 2-3X current prices before the 'masses' even start to make meaningful efforts at conservation. But businesses that are at the leading edge of energy conservation, whether through state-of-the-art controls and processes, or by simple measures such as telework and telecommutting, will be the most consistently long-term profitable businesses.

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Post by Wallace » 18 Sep 2006 23:04

Gus wrote:
Kenneth Deffeyes, a leading peak-oil theorist from Princeton University, has seen nothing that shakes his conviction. On the contrary, he said he can point to the precise month when global crude production peaked: December, 2005
At least we have a date now for the start of the end of the world, last December.
When Canada was being explored by canoe, the white pine were so plentiful and distributed over such a vast area that it was said that they would last forever. They lasted just 75 years. Maybe we can learn more about what's in store for the future of oil companies by studying what happened to the logging industry.

Probably past my investment horizon, though. :lol:
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Post by Gus » 19 Sep 2006 00:05

lystgl wrote: Burning wood just isn't going to cut it and is definitely Kyoto unfriendly. I'm surprised you admit to burning it.
At the risk of going off topic...

Burning wood for heat is one of my lesser environmental sins. If trees are planted to replace the ones that I burn then, in the long run, the CO2 produced should get sucked back out of the atmosphere - eventually. I burn about 2 tonnes of wood per winter, which produces just over 2 tonnes of CO2, although I should get a credit of about 50% for tree regrowth.

Wood burning does also create ash and particle pollution though and would not be viable, even if there was enough wood, if everyone did it in a big city. I live in a relatively lightly populated area so the solution to my - and my neighbours' - pollution is dilution.

I am much more culpable in the area of transportation since I own an SUV and a pick-up. I would appeal for a reduced sentence on the grounds that I do relatively few km per year. According toBP's website on offsetting carbon credits I would have to cough up about $50 per year to become "CO2 neutral" for the five or so tonnes that I produce annually.

Probably, my worst contribution to CO2 production and fossil fuel consumption is the mileage I cover flying on business and for pleasure. Last year I did about 100,000 km, which amounts to about 18 tonnes of CO2 emissions, just for me. Mea maxima culpa. Still, Al Gore and David Suzuki probably put in a lot more airmiles than that.
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Post by yielder » 19 Sep 2006 00:21

pitz wrote:reasonable and realistic telecommutting policies. The traditional 'hour-long' drive to work will soon become a thing of the past, and for very good reason.
Ontario's new Places to Grow policy attempts to deal, in part, with that problem in its new housing density requirements. To encourage businesses close to housing, employees of businesses within a housing development count towards satisfying the population density requirement.
Wallace wrote:Probably past my investment horizon, though. :lol:
What about your grandchildren? They inherit what we leave them.
Last edited by yielder on 19 Sep 2006 00:23, edited 1 time in total.

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Post by YogiBear » 19 Sep 2006 00:23

Gus wrote:At the risk of going off topic...

Burning wood for heat is one of my lesser environmental sins.
At the risk of going even more off topic ...

Taking our cue from New Zealand, perhaps we should all reconsider what emissions qualify as our "lesser environmental sins" :shock: :lol: :
The Guardian in 2005 wrote:New Zealand first to levy carbon tax

[snip]

In 2003 the government planned to impose a methane tax on farmers because flatulence of cows and sheep was responsible for more than half of New Zealand's total greenhouse gas emissions. But that was abandoned after criticism from farmers, who labelled it a "fart tax".

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Post by Norbert Schlenker » 19 Sep 2006 02:15

lystgl wrote:There's nothing 'waiting in the wings" to supplant oil when it does run out.
How do you know? A little over 100 years ago, there was the merest glimmer of something waiting in the wings that might keep city streets from being three feet deep in horse manure.

"We're running out of X" has been proclaimed many times before. Some clever person has always solved the problem, fired by the riches offered for clever solutions. Yeah, yeah, I know there's only so much oil in the ground and they're not making any more of it. So what? Imagination is more powerful than oil.
Wallace wrote:Maybe we can learn more about what's in store for the future of oil companies by studying what happened to the logging industry.
What? Are logging companies out of business? Has the world been clearcut? Have people been lying to me about more forested land in North America today than 100 years ago?
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Post by YogiBear » 19 Sep 2006 09:05

Norbert Schlenker wrote:
Wallace wrote:Maybe we can learn more about what's in store for the future of oil companies by studying what happened to the logging industry.
What? Are logging companies out of business? Has the world been clearcut? Have people been lying to me about more forested land in North America today than 100 years ago? [emphasis added]
This needs to be nuanced just a bit- more forested land (I've heard the same thing) does not mean that the newly reforested land is of equivalent quality in economic and environmental terms to the old-growth forest that was originally cut. To the extent that forestry companies must look to newly reforested lots for some of their supply, would there be an effect on their operations? (I'm not a forest industry expert, so this is not a rhetorical question ...)

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Post by lystgl » 19 Sep 2006 10:40

"How do you know?"

If there were, we'd ALL know about it by now. In '69 man (purportedly) went to the moon using less computing power than a Commodore 64. We won't (can't perhaps?) be going back until 2020. NASA is using 1980's shuttle technology and crosses all their fingers (and toes) each time they send one up fearing it mightn't come down in one piece and it's only going up about a hundred miles never mind the moon and back. They used to be on the cutting edge of technology and lots of what they came up with ended up in and for our daily use. Again, that's how it used to be. Perpetual motion, anti-gravity machines and the like are Star Trek fantasies only. Back here on earth, we're still stokin' the stove and there's no miracles in sight.

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