OPEC cuts oil production by another 2.2 million barrels per day

December 17, 2008 by · Leave a Comment
Filed under: Commodities News 

This will catch up with us at some point, these short term prices drops that people are so happy about will have long-term repercussions on the U.S. oil market.  The problem we face is that when oil drips this low, oil production is now being brought offline because they will not produce it as a loss.  Also we are seeing investment in renewable energy being reduced at the same time.

This will all create a hairy situation once demand picks up.  In oil production you can not just “flick a switch” and bring it online.  This lag effect is going to create a major price swing in the price in oil.  In other words, these oil prices are just a short term phenomena.

News:

The Organization of Petroleum Exporting Countries, in a bid to prop up falling oil prices, said Wednesday that it would cut production by 2.2 million barrels a day starting next month.

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OPEC may cut more production if the oil prices fall further

November 12, 2008 by · Leave a Comment
Filed under: Commodities News 

This is good news for the long-term scope of our energy transition.  If we let prices crash as they did in the early 90s, then we will see investment in the alternatives decline right when we need it for the future.  The problem lies when we do hit a hard production peak with demand increasing and the price skyrockets, if we do not have a new infrastructure in place or being built, it will make for a tough transition period.  

News:

OPEC may cut oil supplies again, possibly by the end of this month, if prices continue to fall and the world economy weakens further, OPEC President Chakib Khelil told Reuters on Wednesday.

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Saudi Aramco says a further fall in oil prices could hurt oil investments

November 9, 2008 by · Leave a Comment
Filed under: Commodities News 

No doubt that this is the double-edge of low oil prices.  Yes, it is nice that the price has fallen and consumption can rise.  The negative effect is the low price will reduce production and investments in exploration and investments in alternatives.  The market works great to respond to high prices by making other investments more attractive because they start to make economic sense.

News:

Oil supplies are “more than comfortable” given a global economic environment which is hitting demand, but low prices threaten investment to secure longer-term supplies, Saudi Aramco’s chief executive was quoted as saying.

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Russia interested in forming gas troika alliance with Iran

November 3, 2008 by · Leave a Comment
Filed under: Commodities News 

This is to be expecting going forward in the resource-centric era we have entered.  As important resources such as crude oil and natural gas dwindle, more we will see countries that have reserves of these resources consolidate their interests with other like minded countries.  This alliance alone, will unite 40% of the world’s proven natural gas reserves.  Next we should see actions that are consistent with maintaining an price that is elevated or near current levels.  We will just see production drop off significantly if the prices dip too low.  Countries that rely on petro-dollars have a vested interest to maintain a price level that does not collapse as we did  in the early 90’s.  The Financial Times even had a front page story last week that announced that the global annual decline rate was 9.1%.  That is no small amount of loss, we would need to double our fossil fuel production in around 10 years just to keep steady.  We need to start a massive spending program on renewables (focusing on wind & solar) right now so we can reduce our demand nationally.  We want to avoid friction between major powers at all possible during our transition periods.  

Reuters:

Russia is interested in gas swaps with Iran, Iran’s Oil Ministry news website reported on Saturday, in a fresh sign of efforts to deepen ties between two states who together account for 40 percent of world reserves.

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OPEC slashes oil production by 1.5 million barrels per day

October 24, 2008 by · Leave a Comment
Filed under: Commodities News 

They have to maintain a very fine balance during this economic crisis.  If they reduce production to the point where demand outstrips supply, we could see a huge price swing that could collaspe companies that require fuel to run thier operations.   On the other hand, if the price goes too low, it will hurt oil exporting countries and take the incentive away to buildout renewable energy sources before the oil situation becomes much worse.

AP:

 OPEC said at an emergency meeting Friday that it will slash oil production by 1.5 million barrels to stem the “dramatic collapse” of oil prices, but crude prices plunged 5 percent anyway as financial markets spiraled downward across the globe.

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