Peak Oil Review – Jan 11

This is source I found from another site, main source you can find in last paragraph

1. Prices and Production

Oil prices fell steadily last week. After touching a high of nearly $84 a barrel on Monday crude closed at $78 on Friday due to warmer weather, a stronger dollar, rising US inventories, and more bad economic news in the US and EU. For now, reports of a rapidly growing Chinese economy with prospects for increasing oil consumption were largely ignored.

Natural gas prices in the US finished lower due to lower withdrawals of gas from inventory and prospects for warmer weather during the rest of January.

The IEA reported that global oil supply rose by 270,000 b/d in December to 86.2 million b/d on higher OPEC and non-OPEC production. The Agency says that oil demand for 2009 averaged 84.9 million b/d, down 1.3 million b/d from 2008, and will average 86.3 million b/d in 2010, an increase of 1.4 million b/d from 2009.

The US’s EIA, however, foresees slower growth with demand reaching 86.5 million b/d by 2011. As could be expected, growth is seen as coming from China, India, and elsewhere in Asia while OECD demand is expected to be flat.

2. Record Asian Demand

China ended 2009 with oil imports averaging some 5 million b/d in December for the first time ever. Chinese demand is expected to remain strong in 2010. Foreign exchange reserves in China grew by 23 percent in 2009 to $2.4 trillion. Evidence abounds that China now is growing at an extraordinary pace. China says its banks loaned out nearly 10 trillion yuan last year, nearly double the government’s minimum goal and roughly 30 percent of the country’s GDP. Recent reports say the lending frenzy is continuing into January 2010 despite government efforts to clamp down on lending.

China’s sales of motor vehicles totaled 13.6 million units last year thanks to loose money and government tax incentives. Exports in December were up for the first time in 13 months, but exports were relatively low in December 2008 so the year over year increase is not as impressive as it sounds. Chinese imports, however, were up 56 percent as the country imported massive amounts of ores, coal, oil and other raw materials.

Fears that we are witnessing a gigantic bubble, particularly in China’s housing market, continue to grow. Some are forecasting a major economy-wide let-down; while others believe that Beijing can confine the problem to the overheated housing industry. With foreign exchange reserves continuing to grow, it is likely that Beijing can continue to finance its internal economic growth for some time, even without a substantial increase in exports. The key issue remains whether China can develop an increased domestic demand for consumer products if the OECD and global economy in general continue to stagnate.

World oil exporters are reorienting their sales towards Asia as US demand for imports stagnates. Record amounts of crude are going to Asia from Nigeria, Angola, Congo, and Equatorial Guinea. The Saudis have lifted restrictions on oil to Asia.

While Chinese and Indian demand for oil will eventually lead to higher prices, perhaps much higher, the key question is just how soon. Some respected analysts are saying that markedly higher prices, say in excess of $100 per barrel, will not come during 2010 due to lower demand in the west plus OPEC’s 5 million or so b/d of reserve productive capacity. Others, equally respected, are convinced that a recovery-wrecking oil price spike will occur within the next 6 months.

3. The Alberta Oil Sands

The province’s new Energy Minister, Ron Liepert, wants to examine the pace of oil sands development with a view to ensuring that future development stays within the capability of the provincial government to provide the infrastructure to support such growth. Environmental groups, which have long criticized the pace and environmental degradation that rapid development of the oils sands has caused, hailed the announcement as a major policy shift.

Long believed to be the solution to falling production of conventional oil in North America, the sands underwent a major increase in investments in the first half of 2008 when oil prices hit triple digits. New investment fell when oil prices plunged; many development projects are currently in hiatus.

Production of oil from the sands carries with it many serious problems ranging from high per barrel development costs and declining natural gas supplies to large green house gas emissions.

There are several ways the provincial government could slow future development, including restrictions on leases and delays in issuing new project permits. The government has been in a battle with oil sands developers over the issue of increased royalty payments.

As oil prices increase in future years and new drilling opportunities become scarce, their will be increased pressure to increase production from the sands. These pressures will probably come into conflict with the need for Canada to reduce emissions. While efforts are underway to develop lower-emission production from the sands, these are likely to be very expensive and will have to await much higher oil prices.

Quote of the Week

“We are pursuing intensive dialogue with the Chinese on the subject of energy security, in which we have raised our concerns about Chinese efforts to lock up oil reserves with long-term contracts. We will continue to engage them on this subject at very senior levels.”

— David Shear, US deputy assistant secretary of state East Asian and Pacific affairs

The Briefs (clips from recent Peak Oil News dailies are indicated by date and item #)

This is source I found from another site, main source you can find in last paragraph

Source : http://www.resilience.org/stories/2010-01-18/peak-oil-review-jan-18/

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