Tag Archives: Crude Oil

G20 Leaders must create new Reserve Currency… or face decade of hardship.

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That is one of the recommendations from a European Think Tank “LEAPE20/20″ in an open letter published last week. (hattip: The Oil Drum).

Your next summit takes place in a few days in London; but are you aware that you have less than a semester to prevent the world from plunging into a crisis that will take at least a decade to resolve, accompanied by a whole series of tragedies and ferment? Therefore, this open letter by LEAP/E2020, who saw the arrival of a « global systemic crisis » as early as three years ago, intends to briefly explain why it happened and how to limit further damage.

Until now you have merely been concerned with the symptoms and secondary effects of this crisis because, unfortunately, nothing prepared you to face a crisis of such an historic scale. You thought that adding more oil to the global engine would be enough, unaware of the fact that the engine was broken, with no hope of repair. In fact, a new engine must be built, and time is running out, as the international system deteriorates further each month.

LEAP’S THREE STRATEGIC RECOMMENDATIONS

1. The key to solving the crisis lies in creating a new international reserve currency!

2. Set up bank control schemes as soon as possible!

3. Get the IMF to assess the US, UK and Swiss financial systems!

Basically they’re telling the G20 to dump the US Dollar as the defacto reserve currency… which it has been since the gold standard was dropped in the 60s/70s.

There is no doubt this recommendation is as much a way to limit exposure to rising crude oil prices as well… because if the US Dollar goes into hyper-inflation due to the trillions of dollars spent bailing out the financial mess, then so will the price of crude, and the world will spin into an even deeper depression.

The US Dollar and economy are no longer capable of supporting the current global economic, financial and monetary order. As long as this strategic problem is not directly addressed and solved, the crisis will grow. Indeed it is at the heart of the crises of derivative financial products, banks, energy prices…

he solution to this problem is well-known, it is about creating an international reserve
currency (which could be called the « Global ») based on a basket of currencies corresponding to the world’s largest economies, i.e. US dollar, Euro, Yen, Yuan, Khaleeji (common currency of oil-producing Gulf states, to be launched in January 2010), Ruble, Real…, managed by a « World Monetary Institute » whose Board will reflect the respective weight of the economies whose currencies comprise the « Global ».

Would it help? Maybe…

Likely to happen? I certainly don’t think so.

For all of the good and proactiveness of President Obama in some respect… overall, he is still the cut from the same cloth as every other politician. He is a reactionary. Change like this will not happen on a global level until the we all have suffered immensely and there really is no other choice.

That is why it is so important for us, as citizens, to make these types of changes in resiliency *locally*. *We* must set the example for our governments to follow. www.transitiontowns.org

Are the US Financial Networks propping up the US Economy

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And are they finally losing their grip?

CNN, CNBC, Bloomberg, FoxNews… one wonders… if this was 1929 would the psychology of the crash have happened?

Go read this link from Financial Sense.com:
http://www.financialsense.com/fsu/editorials/willie/2008/0702.html

Now the Intl Monetary Fund has decided to conduct an investigation into the financial management of the US banking system! This is totally unprecedented. The German journal Der Spiegel wrote that the IMF had informed US Federal Reserve chairman Ben Bernanke of its plans for a general examination of the US financial system. The IMF board of directors has ruled that a so-called Financial Sector Assessment Program is to be carried out in the United States. This, according to the German journal, “is nothing less than an X-ray of the entire US financial system… No Fed chief in US history has been forced to submit to the kind of humiliation that Ben Bernanke is facing.” For some reason, the entire story escaped the intrepid lapdog US press network system.

An Open Letter on Gas Taxes to BC – Canadian Taxpayers Federation

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Dear Ms Bader,

(B.C. director of the Canadian Taxpayers Federation)

I recently read your column titled “Say No to Gas Tax Hike” published by Westcoaster.ca

http://www.westcoaster.ca/modules/AMS/article.php?storyid=2668

Your views are shared by many, but as with many major societal changes, change comes slowly, and reluctantly. My purpose is not to argue about man-made climate change, scientific proof will be many years in the future.

CO2 emissions are simply a symptom of a much greater and fundamental problem. The Human Race transitioned to fossil fuels in the 18th century…. the reason why oil prices are so high and we are building giant Natural Gas import plants is because we are nearing the end of our fossil fuel endowment which we started using 200 years ago.

According to Natural Resources Canada, take away the Oil Sands, and Canadas conventional oil supply is already past its “peak” production and Natural Gas will peak within 4 years. After being some of the largest exporters in the world, Mexico, the UK, Indonesia are also declining in their production, and exports… Russia is set to decline within 5-10 years, and Saudi Arabia, the largest of all… may have peaked this year. Now if you say ‘we have oilsands’, you’re right… but it takes millions of cubic feet of NG… in fact the energy from a barrel of tarsand synthcrude is only 2:1 compared to the energy used to produce it. Conventional crude is about 16:1. And our 3 million barrels a day by 2020 will only satisfy 3% of projected world demand by then.

The bottomline is that $80 oil is only the beginning… crude oil is 70% of the price of gas at the pump. So when oil hits $100, $125 (equal to the ’70s high), or $150… in the next 5, 10, 15 years, how much will gas be then? The Loonie will rise right along with it… hitting our exporters even harder. 1% more in gas taxes will be nothing in comparison, even raised more overtime. Our economy, if it is still completely dependant on fossil fuels for its energy needs, will suffer every step of the way…

If on the other hand we gradually raise gas taxes, yes there will be economic hardship… but
IF INVESTED PRUDENTLY, those taxes and other incentives can be used to wean our economy off of fossil fuels and increase our efficiency drastically…. while at the same time leaving that much more for us to export to other needy oil importers (mainly the US).

It is my hope that the Canadian Taxpayer federation will be one of the champions of this strategy because in the end… the less fuel we use, the less tax we pay, both to the gov. and to our Environment.

The basis of my argument is not scientific consensus, it is mathematical certainly. For more on this phenomenon, and specifically how it affects oil exports from the worlds largest supporters, please go here:

http://graphoilogy.blogspot.com/2007/09/declining-net-oil-exports-temporary.html

Sincerely,

Chris Alemany

http://www.alberniweather.ca

http://www.murkyview.com

Natural Gas Supplies Extremely Tight in 5 years

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Says the International Energy Agency (energy tabulator for the “rich” OECD countries).

Not only does oil look extremely tight in five years time, but this coincides with the prospect of even tighter natural gas markets at the turn of the decade.

The above quote is from an article on the CBC.

But the full report has so much more.

Download it here.

You could read the entire thing and while you might come away a bit more knowledgeable of energy markets, you’d likely be bored to death with numbers.

Lucky for us, or perhaps not, the very first paragraph has plenty of food for thought… so here it is (emphasis added):

Despite four years of high oil prices, this report sees increasing market tightness beyond 2010, with OPEC spare capacity declining to minimal levels by 2012. A stronger demand outlook, together with project slippage and geopolitical problems has led to downward revisions of OPEC spare capacity by 2 mb/d in 2009. Despite an increase in biofuels production and a bunching of supply projects over the next few years, OPEC spare capacity is expected to remain relatively constrained before 2009 when slowing upstream capacity growth and accelerating non-OECD demand once more pull it down to uncomfortably low levels.

If you are familiar at all with my blog, then you would have read this sort of thing here before.

What makes this difference is the source. This is, truly, a ground breaking prediction for the OECD. With oil prices currently near their all-time highs, the general consensus from most governmental sources has been that either demand will subside with increased cost, and/or supply will eventually catch up.

Apparently now, the IEA, which remember advises the worlds richest countries on these issues, believes that

  1. World Demand will continue to rise steadily for the forseeable future
  2. Supply, especially in Non-OPEC countries, simply won’t keep up

Why the supply problems?

Well… production from the North Sea has peaked… soon, the UK will be an importer, not exporter of NG and crude oil. So to has Mexico, their largest field had declined substantially (over 5%) in the past 2 years. Russia is currently the largest exporter, and it is currently raising production, it is doing so very slowly, and many question how much longer it will be before that rise is reversed.

And that is “non-OPEC”… OPEC has it’s own problems…Iraq is a terrible problem… as long as things continue there, it, and the world’s 3rd largest reserves, are basically a non-issue… and the longer they’re offline, the less difference it would make. And then, of course, there is Saudi Arabia. No one knows their reserves exactly… but, they have no ceded their largest world exporter label to Russia, and questions abound on how far they can push their reserves. Their largest field is one of the oldest in the world, and many expect it to start to decline within the next 1-5 years.

So what about the Oil Sands? And Biofuels? And Offshore Drilling? and ANWAR? and all those other “it’s OK, we have XXXX”…

well, the problem is, they are a drop in the bucket (or the barrel?) compared to these massive, historic oil fields. Where Ghawar in Saudi Arabia or Cantarell in Mexico can produce much more than 1 million barrels a day of oil… These other sources truly struggle to realise that target.

So you see, it’s not about the oil in the ground… it’s more about how fast it shoots out of the ground. The IEA is starting to tell us that soon, we may not be able to pump the oil fast enough to drive our cars as freely as we do today.

(oh ya, and then there is that first quote at the top… about Natural Gas… did you know currently only 5% of Natural Gas supplies worldwide crosses overseas? Think about that for a second…. how do *you* heat your house, or cook your food, or dry your clothes?)

Build Wind Energy, develop Pacific oil/gas… or fight wars?

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This was a comment by someone I talked to a few months ago.. unfortunately, it was so long ago, and I started this post so long ago… that I no longer have my notes about WHO that person was… so lets just call him John Doe.

Let’s take that $300 billion figure for the Iraq war and break it down in terms of energy supply.

First of all, we could increase our domestic electricity generating capacity by 50%, as follows:

Assume $1million/megawatt as standard cost for building nuclear and wind. This figure I know well, having worked on engineering design for utility generating projects. It was the design target for financial viability, and our detailed cost breakdown for the project came in at just about that number plus or minus a couple of percent. (Yes, for real: I did not screw around with the numbers to make the finance guys happy.)

Present US electrical consumption is 3.656 trillion KWH / year according to CIA World Factbook.

To increase that by 50% we have to build capacity for about 260 GW (gigawatts) of new generating capacity. If we assume the standard ratio of 20% wind, 80% nuclear, and an average 2 MW wind turbine, and an average 800 MW nuclear reactor, we end up with about 26 million new wind turbines and 260 new nuclear plants.

At 80% uptime (a reasonable figure for nuclear and wind), this capacity will produce 1.821 trillion KWH / year, which is about 50% of total US electricity consumption.

So far our total cost is $260 billion, so we have about $40 billion left over.

With that “left over” money, we can take two million of the worst gas guzzlers off the road by replacing each of these with a 50-mpg hybrid, at approx. $20k per new vehicle.

We could have GIVEN the entire $300 billion away to utilities, independent power producers, and automobile owners, and gotten to that point.

Or we could have used it as loan guarantees to those constituencies, and thereby gotten all of that wind, nuclear, and efficiency benefit while retaining the $300 billion on the books as an ASSET rather than as part of the out of control budget deficit.

Instead we end up with a huge disaster that has weakened American military and intel capabilities, strengthened our real enemies, and destabilized a region of the world that the entire world depends on.

Great job, Mr. President.

This was in reply to my post on wind energy…

There is also interesting news on the Wind front coming out of the UK. Apparently they are set to deploy one of the first deep-water wind turbine installations.

Andris Piebalgs was speaking after a visit to the Beatrice oilfield where two of the largest turbines in the world will be installed in the next few weeks and begin producing electricity by the end of September.
The 280ft towers will stand in up to 150ft of water and will generate sufficient power to operate the oilfield which pumps 3500 barrels of oil a day. The five-year pilot scheme is the first step towards establishing a 200-turbine farm on the site which could meet 20% of Scotland’s total energy needs.

For those of you in Canada, especially in BC.

If we could install offshore windfarms, would that make you more or less inclined to develop the offshore oil/gas fields currently under moratorium?

Obviously the continental shelf off of the Pacific is significantly deeper than 150ft… but if you can anchor a gigantic oil platform out there, why not a wind turbine as well!? Make it part of the package… oil companies want to develop that gas? Then they’d better do the studies to assess turbine efficiency and install them as well. In the grand scheme… and at the prices that we are now looking at for crude oil… the economics of this should not be very far from reality… if they aren’t already in the “black”.