Roger Pielke, Sr. Quits Panel

The New York Times reports that climatologist Roger A. Pielke, Sr. -- father of the author of the blog Prometheus -- has resigned from a scientific panel with charges that said panel is ignoring minority viewpoints. (Pielke, Sr. has his own blog Climate Science.)

"When you appoint people to a committee who are experts in an area but evaluating their own work," he said in an interview, "it's very difficult for them to think outside the box of their research."

...

[The panel's] main focus is to explore why thermometers at the earth's surface, especially in the tropics, have measured more warming than has been detected by satellites and weather balloons in the troposphere, the layer of the atmosphere up to where jetliners cruise.

Dr. Pielke contends that changes in landscapes like the spread of agriculture and cities could explain many of the surface climate trends, while most climate experts now see a clear link to accumulating emissions of heat-trapping gases like carbon dioxide.

Pielke today has repudiated the Times account of his reasons for quitting the panel, saying the report mischaracterizes his work. His full reaction may be read here.

Bush An Enthusiastic Consumer Of Fuel

Between Air Force One, his fleet of limos, and the inevitable motorcades literally speeding him hither and yon, George W. Bush uses a bunch of fuel. Sweaters? Those are only for guys who don't get re-elected...

---

More on Republican fears about the next election:

"You can safely predict, with more accuracy than any TV weatherman, that the first blizzard of the year will be the blizzard of gas price legislation introduced this September when Congress comes back to town," said Stuart Roy, a former House GOP leadership aide.

But it is unclear what lawmakers can do to reduce gas prices in the short term — and whether voters will accept the argument that they have few tools to provide immediate relief.

"We should be nervous," said Kingston, vice chairman of the House Republican Conference.

Polls show that the public blames politicians — after oil companies and foreign oilproducing countries — for the high prices. A Harris Poll released Wednesday found that Americans ranked gas prices among the top five issues for the government to address. Compounding the problem for the GOP, Democrats are spotlighting fuel costs in their campaign to wrest control of Congress.

Republican candidates facing tough races in 2006 should be worried, said Tony Fabrizio, a Republican political consultant.

"If I were a guy in a marginal race, I would be all over the oil companies," he said. "I'd be getting ahead of the curve right now, hauling them before my committee, holding hearings throughout my state — maybe introducing legislation to cap their CEO salaries."

Rep. Christopher Shays (news, bio, voting record) (R-Conn.) predicted: "When [voters] start to see that this is not the end but the beginning [of high prices], they are going to be kind of harsh."

A split government -- heck, even a split house -- would be a step in the right direction.

A Few (Mostly) From MIT Technology Review

A few pieces today from MIT Technology Review. First this piece about the benefits of nuclear fission, citing the industry's good track record and the increasing number of nuclear power plants planned in Asian countries.

Second, while applauding the final selection of France as the site for the ITER reactor, Ian H. Hutchinson worries that ITER's construction budget will come from U.S. fusion research dollars, to the detriment of ITER:

The United States still has two world-renowned tokamaks--one at MIT, the other at General Atomics in San Diego--whose research will be crucial in helping to resolve and prepare for challenges that ITER faces. But U.S. leadership in fusion plasma science cannot be sustained without a renewed commitment of resources. The United States' present 10 percent share of ITER will call for peak expenditures of perhaps $150 million per year--mostly for industrial procurements, not for research.

If that money were taken from the existing federal fusion research budget, it would decimate U.S. fusion research. That is why the U.S. fusion community's overwhelming enthusiasm for ITER is predicated on strong domestic support for fusion and plasma physics research, plus additional funds for ITER construction. Even if the U.S. increased its funding for fusion research to $500 million per year, that would still be substantially less than it spends separately on high-energy physics, fossil energy research, and basic energy sciences, not to mention the recent budgets of the Missile Defense Agency ($9 billion) and NASA ($16 billion).

I missed this one earlier in the week, but a pair of Russian climatologists have bet that average global temperatures will be cooler in a decade.

Finally, David Appell questions the merits of the proposed CAFE standards, essentially calling them window-dressing. In a couple of related comments, Michael Giberson (who suddenly seems to have started posting again) calls the proposal Completely Absurd Fuel Economy Standards, noting that manufacturers were gaming the system well before this round and will continue to do so (and are even encouraged to do so by the structure).

File Under, "You're Not Paranoid If They're Really Out To Kill You" Dep't

I couldn't make this stuff up: Pat Robertson has called for the assassination of Hugo Chavez.

ROBERTSON: There was a popular coup that overthrew him [Chavez]. And what did the United States State Department do about it? Virtually nothing. And as a result, within about 48 hours that coup was broken; Chavez was back in power, but we had a chance to move in. He has destroyed the Venezuelan economy, and he's going to make that a launching pad for communist infiltration and Muslim extremism all over the continent.

You know, I don't know about this doctrine of assassination, but if he thinks we're trying to assassinate him, I think that we really ought to go ahead and do it. It's a whole lot cheaper than starting a war. And I don't think any oil shipments will stop. But this man is a terrific danger and the United ... This is in our sphere of influence, so we can't let this happen. We have the Monroe Doctrine, we have other doctrines that we have announced. And without question, this is a dangerous enemy to our south, controlling a huge pool of oil, that could hurt us very badly. We have the ability to take him out, and I think the time has come that we exercise that ability. We don't need another $200 billion war to get rid of one, you know, strong-arm dictator. It's a whole lot easier to have some of the covert operatives do the job and then get it over with.

Aaaand... this is Christian, how?

CNOOC Buys PetroKazakhstan

The New York Times reports that the Chinese oil firm has purchased the holdings of Canadian firm PetroKazakhstan for $4 billion.

PetroKazakhstan, based in Calgary, Alberta, but managed from Windsor, England, is a considerably smaller company than Unocal, and it does not have Unocal's extensive natural gas reserves or Unocal's reputation for high technology. It nonetheless commanded a price of $55 a share in today's deal, a premium of 21.1 percent to the stock's closing price on the New York Stock Exchange on Friday.

In the oil industry, "China has consistently been willing to overpay for assets; it's more of a security issue for them than the absolute price," said John Kuzmik, a partner and China specialist at Baker Botts, a big Houston energy law firm. India's Oil and Natural Gas Corporation reportedly bid $3.6 billion.

It doesn't appear to necessarily be a good deal, though, or at least a trouble-free one:

Today's deal, announced before the opening of trading in New York, represents a huge payday for PetroKazakhstan's investors and the company's chief executive, Bernard Isautier.

PetroKazakhstan used to be owned by Hurricane Hydrocarbons, which was bankrupted in 1999 by low oil prices. But the company still held one superb investment: its stakes in the Kazakh oil fields, purchased for just $120 million in 1996 when Hurricane bought Yuzhneftegaz, a Kazakh state-owned oil company.

After the bankruptcy filing, Mr. Isautier joined the business, led the company out of bankruptcy, bought 88 percent of a large Kazakh refinery for $51 million, and began investing $143 million to develop the oil fields.

As oil prices soared and the value of the Kazakh oil fields soared with them, PetroKazakhstan's relations with the Kazakh government deteriorated. The government and the company have been locked in extensive legal battles over issues like the company's flaring burning off -- of natural gas, which the government wants to see shipped to markets instead.

ClusterSomething Nation

Having started this blog with great concern and even fear over the coming declines in oil production, I have to wonder how encomiums like this one about Kunstler's The Long Emergency could come from anyone calling himself a professional scientist. In particular, reviewer David Ehrenfield grouses that "My only complaint about the book is that it lacks an index, which is inexcusable for a text so crammed with names and facts." Um, dude, here's a question: if there's no footnotes, how do you even know the things he says are facts? But of course: we see Ehrenfield's curriculum vitae on Google. He was predisposed to believe.

NYT On Peak Oil, And The Skeptics Response

I've had several commenters over the recent days point out this long New York Times piece on peak oil by Peter Maass. In it, readers of this blog will likely learn nothing new, as it touches on Matt Simmons' groundbreaking (and, probably, during the process of his investigations, backbreaking) work piecing together Saudi Arabia's oilfield production by reading technical journals and reassembling them to form a coherent whole view, as if a jigsaw puzzle. And then the predictable denials by Saudi higher-ups, and so on. One interesting angle I haven't seen anyone else bring up, though, is that a sudden downward revision in claimed reserves could be taken as a kind of mass fraud, which, since the Kingdom is so heavily petro-dependent, could have bloody ramifications:

The mere admission that Saudi reserves are not as impressively inexhaustible as the royal family has claimed could lead to hard questions about why the country, and the world, had been misled. With the death earlier this month of the long-ailing King Fahd, the royal family is undergoing another period of scrutiny; the new king, Abdullah, is in his 80's, and the crown prince, his half-brother Sultan, is in his 70's, so the issue of generational change remains to be settled. As long as the country is swimming in petro-dollars -- even as it is paying off debt accrued during its lean years -- everyone is relatively happy, but that can change. One diplomat I spoke to recalled a comment from Sheik Ahmed Zaki Yamani, the larger-than-life Saudi oil minister during the 1970's: ''The Stone Age didn't end for lack of stone, and the oil age will end long before the world runs out of oil.''

Of course, if you believe Simmons -- and yes, I do, else why bother with the blog? -- the situation for the Saudis becomes rather dire. Before, they could just open the spigots and drive down the price of oil. With the spigots operating night and day at top capacity, there's no room left for such manipulations, and so here we are:

Without the ability to flood the markets with oil, the Saudis are resorting to flooding the market with promises; it is a sort of petro-jawboning. That's why Ali al-Naimi, the oil minister, told his Washington audience that Saudi Arabia has embarked on a crash program to raise its capacity to 12.5 million barrels a day by 2009 and even higher in the years after that. Naimi is not unlike a factory manager who needs to promise the moon to his valuable clients, for fear of losing or alarming them. He has no choice. The moment he says anything bracing, the touchy energy markets will probably panic, pushing prices even higher and thereby hastening the onset of recession, a switch to alternative fuels or new conservation efforts -- or all three. Just a few words of honest caution could move the markets; Naimi's speeches are followed nearly as closely in the financial world as those of Alan Greenspan.

And thus to the retired Sadad al-Husseini, former head executive of Saudi Aramco, and probably the man who knows the most about Aramco's situation not actually in the company at the moment. He's a worried man:

We spoke for several hours. The message he delivered was clear: the world is heading for an oil shortage. ... ''You look at the globe and ask, 'Where are the big increments?' and there's hardly anything but Saudi Arabia,'' he said. ''The kingdom and Ghawar field are not the problem. That misses the whole point. The problem is that you go from 79 million barrels a day in 2002 to 82.5 in 2003 to 84.5 in 2004. You're leaping by two million to three million a year, and if you have to cover declines, that's another four to five million.'' In other words, if demand and depletion patterns continue, every year the world will need to open enough fields or wells to pump an additional six to eight million barrels a day -- at least two million new barrels a day to meet the rising demand and at least four million to compensate for the declining production of existing fields. ''That's like a whole new Saudi Arabia every couple of years,'' Husseini said. ''It can't be done indefinitely. It's not sustainable.''

...

Although Matthew Simmons says it is unlikely that the Saudis will be able to produce 12.5 million barrels a day or sustain output at that level for a significant period of time, Husseini says the target is realistic; he says that Simmons is wrong to state that Saudi Arabia has reached its peak. But 12.5 million is just an interim marker, as far as consuming nations are concerned, on the way to 15 million barrels a day and beyond -- and that is the point at which Husseini says problems will arise.

Well, of course, and those problems we know about: depletion, reservoir damage from overproduction, and so forth.

Not everyone is so convinced, of course; we have Daniel Yergin at Cambridge Energy Research Associates, who has recently predicted an increase in productive capacity to a worldwide level of 101 Mbpd by 2010, pointing to SEC rules that are based on 30-year-old technology and which fail to count things like Canadian tar sands and other nonconventional oil sources. In his recent Financial Sense interview, Matt Simmons called Yergin's work "a really flawed piece of analysis", which should maybe tell you something.

And no doubt that we're going to hear in the not too distant future a counterattack of a number of debunkers hoping to provide a counterpunch to this Times article. One such came in my inbox today, pointing to this Freakonomics article. Levitt and Dubner come out swinging, calling Peak Oil "the media's new version of shark attacks":

Oops, there goes the whole peak oil argument. When the price rises, demand falls, and oil prices slide. What happened to the "end of the world as we know it?" Now we are back to $10 a barrel oil. Without realizing it, the author just invoked basic economics to invalidate the entire premise of the article!

Well, sure, but then the Great Depression was just an "adjustment", too! Have the authors forgotten that just because supply and demand meet that it could still be a hardship? As odograph wrote in the comments,

Be careful that your prediction of optimism doesn't come to match someone else's prediction of pessimism!

Along these same lines, the other stalwart bear of oil prices, Michael Lynch, has bravely come out predicting $40/bbl oil by the end of the year, citing large numbers of new projects coming onstream, and -- hold on -- declining demand:

Lynch expects prices to drop to $40 a barrel by the end of the year, if not sooner. He's not alone: The Russian government has drafted its 2006 budget assuming that's all it will get for its oil. That would bring gas prices down in the range of $2 a gallon.

Well, bully for them, and I'm hoping they're right, sort of. But the bad news is that ultimately the oil will run out, something even CERA concedes, suggesting that peak production will hit around 2020. Whatever happens, though, you can be certain that the markets will let us know where the bottlenecks are. If allowed to function properly, alternatives will arise -- or else.

Are Oil Companies Still Relying On An Overly Pessimistic Price Projection?

The answer given by this Reuters story would seem to be "yes":

Oil firms are spending more than ever in the hunt for new reserves but their investment is dwarfed by the tens of billions of dollars they are handing back to their shareholders.

Record high prices are translating into record profits for big oil. Yet the rate at which the likes of Exxon Mobil, BP and Royal Dutch Shell are reinvesting their cash is falling, according to investment bank Goldman Sachs.

As a result the industry is now sitting on $500 billion -- money that French Prime Minister Dominique de Villepin has argued oil firms should use to satisfy consumer demand.

But when oil firms open their wallets, more often than not it is to hand cash to their shareholders in the form of dividends and share buybacks.

BP chief executive John Browne has pledged to distribute "100 percent of all excess free cash flow to shareholders". Last month, unveiling big profits, BP said it would buy at least $10 billion of its shares this year.

...

Part of the problem is that oil companies evaluate drilling projects using an oil price of around $20-25 a barrel. But oil has more than doubled over the past two years and hit a record $67.10 earlier this month.

"Although it is argued that oil companies are short of investment opportunities, they actually have more options available today at current price levels than ever before," Goldman Sachs said.

A Name To Remember

There's nothing much new to read about this Independent UK article about anthropogenic global warning, but I admit I do like the name of the reporter: Andrew Buncombe.

Goldman Sachs: $68/Barrel

Goldman Sachs, who previously suggested $105/barrel prices for oil would be required to nick demand, now says 2006 crude oil will hit $68/barrel, projecting oil will be in the $60-70 price range for years to come.

Crude oil rose for the first day in four after Goldman Sachs Group Inc. raised its price forecast for next year to $68 a barrel, saying oil will stay at around $60 for years to come.

Goldman's projection for New York crude prices for 2006 was boosted from $55 a barrel. The forecast for oil to stay at $60 after that was raised from $45 a barrel because of lagging investment in new oil projects, according to the Aug. 17 report by Jeffrey Currie and Steve Strongin.

Craig Smith: $5/Gallon Gasoline In 2006

Oil expert Craig Smith says five dollar a gallon gasoline is coming in 2006, and prices could go even higher if a terrorist operation hits an oilfield. His solution is to open up all the places currently offlimits to drilling (Colorado, offshore California, etc. are all mentioned), but I wonder what price will end (or neutralize) environmental objections to drilling?

The Perfect Political Storm

So the Republicans are worried that bad news from Iraq is going to kill them in the offyear elections in 2006? They should be. Imagine, then, what Iraq plus $80/barrel oil (maybe $4 gasoline in the U.S.) would do. Henry Kissinger likens Iraq to Vietnam and wonders whether the country can emerge whole from the insurgency. A better question would be: why hasn't the case for an Iraq war been made honestly? Could it be because there never was one?

Matt Simmons Interview

I'm not a big fan of they hysterics at Financial Sense, but they've got a good interview with Matt Simmons up. (Yes, I know, it's a little dated.) Matt's idea of a good future is a rather weird one -- who wants to pay a lot of money for energy? -- but it's worth reading simply because he's done so much work in this area.

William Buckley Wakes Up

I was bouncing around recently -- and I wish I could remember where I saw it, because it sounds like something Reason would have written about -- and noticed this William F. Buckley column about the prospect of oil rising to $100/barrel. Looking at Raymond Learsy's Over a Barrel: Breaking the Middle East Oil Cartel, he notes all the bad things likely to happen when (and I do mean, when) that threshold gets hit, includinging skyrocketing mortgage rates, economic malaise, and a whole host of other things he doesn't even get to, like the possibility of a military squelching of the Bolivarian Bozo, Hugo Chavez.

In response, like his once-upon-a-time libertarian-leaning magazine, the National Review (which he no longer has any influence upon), he goes all hard-government-nutcase on the situation, recommending ration cards and using the Strategic Petroleum Reserve to drop prices. This are, of course, the two dumbest things the government could do; the Reserve is for actual supply problems, not just to temporarily squeak the price of oil down a couple dollars a barrel for a week or so. Buckley in his dotage has gone as nutty as the neocons, who fancy themselves Wilsonian world-reconstructors. Like all such, he omits the fact that they have also failed in their quest, an armed version of the Underpants Gnomes:

1. Take over Iraq.
2. ??
3. Peace in the Middle East!

Charles Featherstone Challenges Peak Oilers

Charles Featherstone issues a challenge to peak oil advocates, and that is something along the following lines. Noting that oil futures actually diminish in price in the distant (read: six years away or so) future, Rockwell suggests that the markets actually know something that the rest of us don't, and that is that the present situation is based on structural bottlenecks such as refinery downtime, inadequate pumping and shipping facilities, and so forth. Thence, the challenge:

It's a simple challenge – if you think you know exactly when peak oil production will hit, down to either the year or even the month, then pool your money and invest in crude oil futures and options on the NYMEX or the International Petroleum Exchange (IPE) in London. Go long; that is, buy contracts or the ability to buy contracts to sell oil. In a world market that ought to be clamoring for crude as the gap between demand and supply widens, and when only Daniel Yergin is going short (if he's putting his money where his mouth is), you should be sitting pretty.

You'll make a killing. You'll have more money than you know what to do with. And you'll have taught us all a thing or two.

Now, I don't happen to buy his line of thinking, for the simple reason that he doesn't really bother to check what's happened to oil futures over the last six months; used to be, you could get oil for 2011 delivery in the mid-40's. Now, you can't get it anywhere near that price. But, he makes a good point further on down the road:

I know, a lot of you don't believe in free markets and profits. ... No, the truth is that too many of you peak oilers believe far too much in the efficacy and power of government. At some point you are all, even those of you who are demanding immediate action, going to have to give up on government. The various bureaucratic centralisms that govern the world right now – especially the Brussels and Washington varieties – don't have anyone's or anything's long-term interests at heart, regardless of what they say. Except maybe their own. If the disaster is as imminent as many of you fear, it is far too late for government to act anyway. There's no way to change that. Electorates in the industrialized world aren't going to vote for the technocratic governments of wise engineers and environmentalists that so many of you seem to believe is necessary to properly address the problem. I cannot imagine such a group leading a coup to seize power either.

Exactly the problem. I've wailed long and hard about the necessity of not having an energy policy; the problem with desiring one is the best-funded interests will always buy the most politicians. You can, as the Engineer-Poet has, complain that your favorite project gets cancelled because of the wishes of General Motors, or that this or that other project -- say, solar cells -- doesn't get enough subsidy or whatever. But the bottom line is that this is what you will always get when you get the government involved. It is simply unavoidable. The reaction, the proper thing to do, should be getting the government out of the energy business.

And business is what energy needs to be first and foremost. Minus the fiscal accountability needed in a business, money gets allocated by political fiat, not by whether something is likely to work. To that end, I close with a quote from Rockwell:

Have a little faith and work for the future you want, rather than grumbling about how everyone else – like me – who doesn't see things your way is an "idiot" and that we are all "doomed."

Couldn't have said it better myself.

Update: I incorrectly attributed this initially to Lew Rockwell. My apologies for the confusion.

Q: When Do Socialists Call For Tax Cuts?

A: When they're angling for votes in France, and the tax is the gasoline tax. A tankful of premium now goes for $69 in France, which has a 75% tax rate on gasoline.

On Friday, party leader Francois Holland denounced the government "for making consumers victims of a double sentence: the hike in oil prices" and a state tax on oil. The fiscal windfall is expected to rake in nearly $25 billion to the government's coffers in 2005 alone. That amounts to an 8 percent increase from the previous year.

But in an interview published in Brittany's Le Telegramme newspaper, Hollande denounced French authorities for "hypocrisy," charging the country's 75 percent gas tax had failed to cut France's soaring deficit. And he called for the return to a program authored by former Socialist Prime Minister Lionel Jospin, which would reduce gas taxes if the price of a barrel of oil increased over a certain level. The plan would restore the tax if the price subsequently dropped.

I expect this was being done with jaundiced eyes as they ogled the ballot box.

OPEC To Launch Research Center Of Its Own

Speaking of research, the World Tribune claims that OPEC plans on launching a research institute for the purposes of improving oil extraction and recovery.

"Our competitors, the alternative energy providers, are intensively pursuing research programs aimed at reducing the domination of oil and gas in the global energy market," Abdullah Salatt, Qatar's representative to OPEC, said. "Likewise, we should have our own independent programs." The R&D institute would be located in Kuwait and stemmed from a decision in 2001, Middle East Newsline reported. Officials said the institute would seek to develop technology that would ensure the fulfillment of demand by OPEC clients.

...

OPEC states have obtained a study carried out by the Oxford Institute for Energy Studies regarding the requirements of such an R&D center, officials said. They said the institute would not seek to replace oil exploration and development research by individual OPEC members.

It's Better To Be Pissed Off Than Pissed On, Right?

Well, maybe. Via Slashdot, an article about Singaporean researchers developing a urine-powered battery for medical tests requiring microchips and small amounts of power for short durations. Who says there's an energy crisis?

What's "Renewable"?

A thought that occurred to me while reading this Manila Bulletin story: what is a "renewable" energy source except one that's got a sufficiently large energy reservoir? That is, solar is just harvesting the potential energy of the unfused deuterium nuclei in the sun's core, which will eventually run out. Man-made fusion would just be relying on a smaller pool of deuterium available on the earth's surface. Likewise, oil, coal, and uranium are all just energy resources with smaller but readily available pools. In that light, "renewable" is a canard.

Bush Vows To Eliminate Oil Dependence

Of course, it could only be on the pages of the Onion:

WASHINGTON, DC—President Bush unveiled an aggressive initiative Monday that would make the U.S. free of petroleum dependence by the year 4920, less than three millennia from now.

"Our mission is clear," Bush said in a speech delivered at Fort Bragg in North Carolina. "We must free ourselves from dependence on fossil fuels within 85 generations. A cleaner, safer America is my vision. And it is our great, great—great-times-80 grandchildren who will realize that vision."

Bush promised a legislative package that would mandate severe cuts in oil-production subsidies and provide new funding for alternative-energy research and development. According to the timetable he presented, these bills could be introduced as early as 3219, and U.S. energy consumers could start to see radical changes by the early 42nd century.

"If we don't end our dependence on oil by 4920, when will we end it? 5580? By then, it may be too late," Bush said.

Bush called on both Democrats and Republicans living 1,200 years from now to work together to pass the program.

"It would be a shame if, by the 33rd century, these bills were still tied up in committee. I urge the 712th Congress to pass this legislation with minimal partisan gridlock," Bush said.

Econbrowser On Peak Oil

I got an e-mail the other day from James Hamilton of Econbrowser, whom I've added to the side bar. He's got a couple peak oil articles up, first "Limitations Of The Hirsch Report On Peak Oil", which is about exactly that (trees do not grow to the sky and demand isn't infinitely elastic, or see yesterday's post about Asian demand declines in the face of actual price hikes).

Second, he has a long discussion with Robert Kaufmann, professor of geography at Boston University. (The full transcript can be had here without a subscription, for a change.) It's a long discussion, and much of it you should have already read before elsewhere, but unlike some of the more paranoiac types, Kaufmann has a solid understanding of likely and unlikely prospects.

Those who have read Robert Schwartz's interesting comments about the coming struggle for control of Saudi Arabia will be interested to read Hamilton's discussion of oil's recent highs, and the attendant issues. Good reading to keep you going for the rest of the day.

The Oil Supply Glut You Didn't Know About

... or at least, I didn't know about. Via Reuters, it appears that price controls in Asian markets that have artificially kept prices to consumers low are being slowly raised to keep state tills from draining excessively. This has put a crimp in fuel use throughout many Asian countries:

"Asian demand was part of the justification (for higher prices) last year but now the focus has turned to Europe and the United States," said Colin Tang, senior oil trader at French investment bank Calyon in Singapore.

"We've demonstrated in the Far East that price does have an impact on demand, which is something that the West doesn't reflect as much, especially not the United States."

Instead of pulling in more foreign oil than last year, refiners across the region are finding there is not enough demand for their fuels to keep producing at full throttle, forcing them to reduce operations or to seek distant markets.

While flagging growth in world No. 2 consumer China and gradual weakness elsewhere have been evident for months, the trend has gathered pace in the past month, taking a toll on markets amid depressed Japanese gasoline use, a slump in Thai diesel consumption and widescale fuel switching, dealers say.

As the absolute price of diesel soars past $70 a barrel and fuel oil tops $280 a tonne, the spreads and differentials that better reflect the underlying market have languished.

"Every single oil product, except for low-sulphur diesel, is suffering from a supply glut in Asia," said one trader in Japan. "I simply cannot understand why oil futures are so high."

Chemist Tries To Solve World's Energy Problems, Film At 11

Okay, true except for the film part. Daniel Nocera is a busy man:

Daniel Nocera arrives at his office at the Massachusetts Institute of Technology by 7 a.m., goes home 13 hours later -- where he often reads papers or e-mails students much of the night -- and returns to his labs on weekends. Vacations? None, really, unless you count chemistry conferences.

After all, trying to save the world is hard work.

If you ever wonder about how the world will produce enough energy to supply 9 billion people by mid-century -- and whether that can be done without pumping off-the-charts amounts of carbon dioxide into the air -- meet one of the minds trying to produce an answer.

Nocera, 48, is trying to achieve an old, elusive dream: using the bountiful energy in sunlight to split water into its basic components, hydrogen and oxygen.

...

"This is nirvana in energy. This will make the problem go away," Nocera says one morning in his MIT office, where the Grateful Dead devotee has a "Mean People Suck" sticker on his window. "If it doesn't, we will cease to exist as humanity."

Lots of people have explored this challenge, but Nocera had a big breakthrough when he used light to coax multiple hydrogen atoms out of liquid. The key was figuring out the right chemical catalyst.

Nocera's 2001 paper on the process in the journal Science, written with graduate student Alan Heyduk, turned heads. Venture capitalists rang his phone off the hook offering to fund him in an alternative-energy company.

The achievement, and its revolutionary prospects, won Nocera this year's Italgas Prize, a $100,000 award given annually by an Italian utility to a top energy researcher.

"Dan is even-money (odds) to solve this problem," says Harry Gray, a renowned California Institute of Technology chemist who was Nocera's graduate adviser.

Mixed Messages From The Oil Majors

At Energy Bulletin, an archived Financial Times article noting the recent change in tone in advertising from two of the largest majors, Chevron and ExxonMobil, questioning whether the world has enough oil for everyone who wants it. (The change in Chevron's website I noted previously.) The money quote here:

One senior executive at an oil company not involved in the advertising campaigns speculated that his counterparts were attempting to buy themselves some slack to go after the messier, more expensive, dirty oil. Another executive said it may buy some sympathy for the difficulty many companies are having in growing developing their production and reserves.

...

In its advertisements BP touts new energy alternatives, while ExxonMobil, which has unapologetically abandoned alternatives that have not been profitable, says in one advertisement: “Wishful thinking must not cloud real thinking.”

But answering the concerns of the consumer, even about the possible shortage of oil, is not the primary job of an oil company. Its most important stakeholders are its stock shareholders, some of whom have been left perplexed by the advertisements after hearing [an] altogether different message at last week's earnings conferences.

Neil McMahon, analyst at Sanford Bernstein, said: “We think these messages are at odds with the comments normally made to investors regarding future oil prices and the ability of producers to meet demand, and we wonder if perhaps those messages are actually a better indicator of the companies' thinking.”

Exactly.

High Premium Prices Cause Drivers To Downshift To Regular

In the Washington Post, higher prices for premium blends of gasoline are fueling consumer downgrades to regular:

"It's not going to hurt anything," said Peter Gregori, service manager for EuroMotorcars, a Mercedes-Benz dealer in Bethesda. In fact, Gregori has been using regular gas in one of his own Mercedes cars for two years, and "it's perfect," he said -- even though Mercedes-Benz says owners should use only premium.

"I get better mileage with the regular than I do with the high-test, in this particular model that I have," Gregori said. Among cars that come in for service, Gregori said, he can't tell which have been sipping premium.

NEC Develops New Organic Battery

NEC has developed a new organic battery with power densities much higher than lithium-ion batteries but at a much lower cost, and with a longer lifespan. The battery has a substantially lower energy density, however, and so it reminds me a bit of the supercapacitors I mentioned back in January. The applications being cited for this product include emergency shutdown power for laptops.

New Energy Currents For August

John Atkinson of Chiasm has a buncha good stuff in his monthly New Energy Currents post at Winds of Change. As usual, I manage to get a couple links, and thanks for 'em, John.

Exxon's Lee Raymond Retires

Here, you go find some oil, Rex.

Total Buys Big Into Canadian Oilsands

Here's another Green Car Congress article on Canadian tar sands, this time indicating Total France has bought a large Canadian outfit, Deer Creek Energy, for CN $1.35 billion. The most interesting bit is at the end, where the article mentions how dependent the whole process is on natural gas to operate. To reduce -- eliminate, possibly? -- this dependence, Total is looking to work with Canada Fuel Systems to burn what appears to be producer gas from converted bitumen, something they call Multiphase Superfine Atomized Residue, or MSAR. (Here's a more expansive PDF on the process.) It's just another reminder that just because tar sands production is natural gas intensive now doesn't mean it has to stay that way indefinitely.

The Blindness That Requires Perfection

I was poking around a Google News search for the word "coal" and noticed this Seattle Post-Intelligencer article about a proposal for an IGCC powerplant in eastern Washington State:

Energy Northwest says the technology is economically competitive with other sources and has added environmental benefits in that carbon dioxide can be separated for eventual disposal without releasing it to the atmosphere.

But the technology and Energy Northwest's proposal are likely to meet at least skepticism from groups such as NW Energy Coalition, an environmental and conservation group.

Coalition spokesman Marc Krasnowsky said the technology might be appropriate for replacing "dirty coal" plants in the Midwest and Northeast, but "we really don't see any need for it in the Northwest," given the availability of renewable resources such as wind and the potential for reduced demand through energy efficiency and conservation measures.

If there were ever a way to make sure that the environmentalist movement were cancelled out -- vaporized, removed from the table at any serious political consideration -- here it is. There's never any "better", always their "best" and only utopian answer. Given the constant braying against wind, nuclear, and just about everything except solar, one wonders just how much longer they'll have any credibility at all.

Coup In Mauritania

Certainly, oil reserves are behind the recent coup in Mauritania. One wonders what the real story is, and how long it will take to get out.

The Costs Of Oil Subsidy Hits India

India, which sells oil through a government-supported price scheme, is now having to float bonds to make up for the difference between the world price and the price paid at the pump. The government proposes to issue bonds for Rs 5,762.85 crore (about $13.25 billion, unless I've gotten my conversion wrong). Man, that's a ton. Taxes are going up, that's for sure... Not sure if this is for sales before the Administered Price Mechanism discussed in the article was wound down or not.

CNOOC Abandons Unocal Bid

Via VOA. It would have been the largest acquisition by any Chinese company of a U.S. company.

Employee Shortages Fuel Russian Immigration To The American Oilpatch

A while ago I mentioned the importation of Chinese workers to help fill demands for American exploration companies. Now the Russians are the latest labor pool to be tapped:

Five years ago, Kris Grimland read a story about aerospace company Lockheed Martin Corp. hiring Russian computer technicians to bulk up its employee pool.

"I said, 'Hey, Russia has the largest oil field in the world,'" said Grimland, general manager of Maverick Stimulation Co. LLC, an Englewood-based oil and gas industry service firm that helps operators get natural gas flowing from the ground to the pipeline.

Maverick, which has offices in Colorado and Oklahoma, was growing rapidly but couldn't find enough workers, and had to leave several jobs unfilled for nearly two years. That's despite advertising in trade journals and local newspapers. Grimland thought Russians, experienced in oil field work, could solve his problem.

Two months later, in July 2000, Grimland was in Krasnyarsk, Russia, in southern Siberia, interviewing hundreds of men eager to pick up and move to the United States for work.

"It was 8 a.m. in the morning and the line was half a mile long of people wanting to talk," Grimland said. That year, Maverick sponsored six Russians on visas to work on its rigs.

"The language barrier is tough; our people don't speak Russian," Grimland said. "But we overcame it because our business is numbers and the numbers are the same. It doesn't take much to learn the word for pressure."

More On Fahd's Death/Abdullah's Ascension

Via Reuters, a piece speculating that Abdullah, himself an elderly man, may presage a number of rulers in short succession, each ruling for a brief period and dying thereafter. This will come about because the line of succession appears to be direct rather than having a first son lineage.

King Abdullah, who succeeded Fahd on Monday, and the new Crown Prince Sultan are both octogenarians and unlikely to be more than transitional rulers. In turn they could be succeeded by princes barely 10 years their junior.

"Abdullah and Sultan are not just old, they are very old. So their reigns will be short," said Simon Henderson, a senior fellow at the Washington Institute for Near East policy.

"The problem is going to be compounded because their successors are likely to be brothers or half-brothers rather than sons or nephews."

Only once has the Saudi throne passed from father to son, on the death of the kingdom's founder King Abdul-Aziz 52 years ago.

Since then five of his sons -- Saud, Faisal, Khaled, Fahd and now Abdullah -- have taken their turn and still more elderly princes are waiting in line, unlikely to surrender meekly their chance to rule despite advancing age.

Saudi Arabia's King Fahd Dies, Oil Hits Record

In the New York Times:

With oil traders, analysts and hedge fund investors on the lookout for any news of instability in Saudi Arabia, the world's top oil exporter, the long-expected death of King Fahd and the planned succession by Crown Prince Abdullah sent oil prices to a record high during trading today.

...

"For years, oil markets have reacted bullishly at every rumor of King Fahd's death," Mr. Bentz said. "The king finally died and markets reacted."

We shall see what happens.