greensleeves and the wotch
Oct. 17th, 2005 11:31 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
solarbirdFrom Marketwatch, we see:
OPEC sees demand for OPEC crude falling 200,000 bpd, while global demand is to rise 1.2Mbpd, a 1.4Mpbd supply delta needed from the rest of the world. Looking at the actual OPEC report, it turns out they're setting OPEC demand by taking anticipated global demand and subtracting production in other countries out from it. That strikes me as less reasonable than it might seem, at first; yes, the other producing countries are generally importers, but even importing countries export oil; a nontrivial portion of Alaska's crude, for example, goes to Japan. We have to import more from other sources as a result, sure, but the total shipping distance is reduced, which is good for everyone, and in a global market, the total trade balance delta is zero.
Still, it seems strange that it assumes a market bias away from OPEC countries. I'm not sure what to make of that.
It's also interesting that despite public (and in-report) statements of a 2mbpd production headroom now, and plans to add 5.5mbpd by 2010, that they do not seem to be anxious to take advantage of any of this new production growth despite record and near-record barrel prices. OPEC states outright that it does not expect oil prices to fall. Does this imply that they are worried about production rates on any of several key fields? Have various reclamation project schedules not been met? These are all state secrets, so there's really no way to know. But the indicators are curious.
All that said, the next question is: where is the delta supposed to come from? Several places, but the biggest contributor is the Developing Countries bloc, particularly Malaysia, Yemen, and Angola. Personally, I have to wonder if the actual biggest contributor isn't the usual OPEC quota cheating! But perhaps that's just me being cynical.
Meanwhile, Greenspan's comments in Tokyo last Tuesday (appearing on the net today) confuse me a bit:
The second important factor in both of these circumstances - from my standpoint, anyway - is that the replacement technology was, in each case, of higher energy density than that it was replacing. The new technologies (coal, oil) weren't just replacements - after the development phase, they were energy-density and versatility improvements - they were more versatile and more powerful. That's not the case with any of the technologies currently envisioned. Similarly, the scarcity in the previous cases affected subsets of societal energy which I suspect, but have not done the math to prove, were smaller percentage-wise than oil is today. On top of that, the costs of transition were pretty clearly much smaller.
Here's another statement making me wonder what statistics Greenspan has been reading, excerpted this time from here:
Finally, I have to note that there are several ways to read this final comment, some of which should be rather unsettling:
In a report Monday, the OPEC oil cartel forecast 2005 demand for the crude oil its members produce at 28.7 million barrels per day. That's up 500,000 barrels per day from 2004 but down 200,000 barrels per day from its previous forecast.(All emphasis marks added.)
For 2006, it sees demand for OPEC crude at 28.5 million barrels per day, down 400,000 barrels per day from the estimate in last month's report.
The cartel also lowered its estimate for growth in world oil demand by 240,000 barrels per day to 1.2 million barrels per day -- reflecting a year-on-year growth of 1.4%. It pegged the yearly average global oil demand at 83.26 million barrels per day.
OPEC sees demand for OPEC crude falling 200,000 bpd, while global demand is to rise 1.2Mbpd, a 1.4Mpbd supply delta needed from the rest of the world. Looking at the actual OPEC report, it turns out they're setting OPEC demand by taking anticipated global demand and subtracting production in other countries out from it. That strikes me as less reasonable than it might seem, at first; yes, the other producing countries are generally importers, but even importing countries export oil; a nontrivial portion of Alaska's crude, for example, goes to Japan. We have to import more from other sources as a result, sure, but the total shipping distance is reduced, which is good for everyone, and in a global market, the total trade balance delta is zero.
Still, it seems strange that it assumes a market bias away from OPEC countries. I'm not sure what to make of that.
It's also interesting that despite public (and in-report) statements of a 2mbpd production headroom now, and plans to add 5.5mbpd by 2010, that they do not seem to be anxious to take advantage of any of this new production growth despite record and near-record barrel prices. OPEC states outright that it does not expect oil prices to fall. Does this imply that they are worried about production rates on any of several key fields? Have various reclamation project schedules not been met? These are all state secrets, so there's really no way to know. But the indicators are curious.
All that said, the next question is: where is the delta supposed to come from? Several places, but the biggest contributor is the Developing Countries bloc, particularly Malaysia, Yemen, and Angola. Personally, I have to wonder if the actual biggest contributor isn't the usual OPEC quota cheating! But perhaps that's just me being cynical.
Meanwhile, Greenspan's comments in Tokyo last Tuesday (appearing on the net today) confuse me a bit:
If history is any guide, oil will eventually be overtaken by less-costly alternatives well before conventional oil reserves run out. ... Indeed, oil displaced coal despite still vast untapped reserves of coal and coal displaced wood without denuding our forest lands.Coal replaced peat in part because peat was being overproduced and becoming expensive; the high price helped lead to the development of technologies to more efficiently, cheaply, and (marginally) safely mine coal. No, this wasn't the progression everywhere, but it was where it mattered - where the technologies would be developed. And oil didn't become viable by replacing coal; it became viable by replacing whale oil, which had reached the equivalent of $90/barrel or more (according to some attempts to translate the gold currencies of the mid 19th century to modern terms, anyway). Again, the production transition and associated necessary technological development were supported by a very high resource price elevation produced by scarcity - rather the opposite of what Greenspan was suggesting. I'm bothered by that; if you're going to use history to support an assertion, get the history right - getting it wrong might mean that you have it exactly backwards.
The second important factor in both of these circumstances - from my standpoint, anyway - is that the replacement technology was, in each case, of higher energy density than that it was replacing. The new technologies (coal, oil) weren't just replacements - after the development phase, they were energy-density and versatility improvements - they were more versatile and more powerful. That's not the case with any of the technologies currently envisioned. Similarly, the scarcity in the previous cases affected subsets of societal energy which I suspect, but have not done the math to prove, were smaller percentage-wise than oil is today. On top of that, the costs of transition were pretty clearly much smaller.
Here's another statement making me wonder what statistics Greenspan has been reading, excerpted this time from here:
He noted that gasoline demand had declined "markedly" in the United States in recent weeks, "presumably partly as consequence of higher prices."This is as unwarranted a conclusion as I've ever seen him make. Yes, oil consumption spent on driving is down - 0.8% - but in a calendar period which normally has serious gasoline consumption declines already, and which in this case is following a pair of storms which reduced driving demands through a substantial portion of the gulf coast. I have a difficult time calling this decline "marked." One might go so far as to call it "disappointing," given the surrounding circumstances. But perhaps given everything, it's as much as he'd hope to see. After all - NPR ran commentary just today from an exurbian commuter talking about how his 70-mile commute was still a bargain at $3/gallon. In that light, maybe 0.8% could be considered "marked."
Finally, I have to note that there are several ways to read this final comment, some of which should be rather unsettling:
With real energy prices on the rise, more rapid decreases in the intensity of energy use in the years ahead seem virtually inevitable.As far as oil is concerned, I have to agree, and maybe that's what he was really talking about. But I certainly hope he's wrong about energy in a more general sense. For whatever it's worth, in the long term, I think he is.
