NYT: OPEC Set to Open Oil Taps Full Blast

[DeepModem Mom]

OPEC Set to Open Oil Taps Full Blast
By JAD MOUAWAD
Published: September 20, 2005


VIENNA, Sept. 19 - OPEC delegates said Monday that the group planned to allow its members to provide up to two million barrels a day of additional crude oil if the market needs it. But oil traders brushed aside the move and instead sent oil prices higher on worries of another possible hurricane....

***

The latest hurricane warnings helped push oil prices up on the New York Mercantile Exchange, and they closed Monday at $67.39 a barrel, up $4.39. Natural gas futures hit a record on Monday, closing at $12.663 per thousand cubic feet, up $1.519.

Forecasters issued a hurricane warning for parts of Southern Florida and said that by early Saturday, Rita, the 17th named storm of the Atlantic season, could make landfall near Houston, an area that is a major port and home to many refineries and petrochemical plants....

***

OPEC's highly unusual decision to put on call an extra 7 percent of its production is expected to be formally announced Tuesday at the end of the group's two-day meeting in Vienna. Some oil ministers said the Organization of the Petroleum Exporting Countries wanted to show it was doing all it could to lower oil prices even as they blamed refining shortages for the current situation.

Under the proposal, which members have been discussing in meetings since Sunday, OPEC producers would provide as much oil as refiners and other buyers asked for, without regard to previous production limits or quotas. The production ceiling, now set at 28 million barrels a day and shared by all 11 members except Iraq, would theoretically remain unchanged....


http://www.nytimes.com/2005/09/20/business/worldbusiness/20opec.html

[brokensymmetry]

1. The Texas Railroad Commission did this in the 70's. Guess what?

That marked Peak Oil in Texas.

And if this means Peak Oil in Saudi Arabia and the Middle East, things are about to get very interesting indeed!

[halobeam]

4. Interesting times.. hmmmmm indeed...

I'm thinking they should start giving mandatory classes in the schools, maybe called "Human Survival"...

course description: Living off the land, purifying water, making tools:hunting, construction, first aid equipment... building skills: shelter, boats... solar power, ham radio instruction, first aid: plants that heal. Hunting.

I think there aren't enough boy scouts to support the community, if push came to shove.

Interesting times, indeed.

[reprobate]

34. And one other necessary skill: Flintknapping.If your gonna hunt ....

your gonna hafta knapp. Once the firearms ammunition is gone.

[Barrett808]

18. Word. n/t

[okieinpain]

22. If they've got ethanol cars in brazil, I want them here. NOW!!

[Jackpine Radical]

33. Oh, God, don't start one of those ethanol arguments again.

Soon hordes will descend upon you to inform you that ethanol is not an energy-efficient alternative because we burn almost as much oil energy making a gallon of ethanol as we get out of the ethanol.

[Deja Q]

35. They won. Who needed their macho embargos during the 1970s again?

[hatrack]

2. They've been saying the same thing for months now - for MONTHS

And what will happen at the end of the day?

Increased production of sour Arab Heavy - the industry leader in the "Least Wanted Oil Grade" category.

[ozymandius]

3. And then... what is one to do with sour crude if the refineries are shut?

Should Rita prove to be as intense as Katrina, the whole Gulf refinery operation will be idle. That's not much help for a nation addicted to gasoline.

[hatrack]

6. Plus most US refineries can't handle conventional heavy crude

To say nothing of nonconventional heavy oil a la Venezuela.

[Justyce]

7. A few maybe, but they've shut

down so many of our refineries anyway, don't know how big of an impact it would really be - though they'd tell you it was anyway I'm sure. I live in a town whose main industry was working in the refineries -- most of those have either shut down or dwindled to a skeleton crew. Thousands have slowly moved from our area due to job losses over the years. I've heard from people who work there that they drill our oil, ship it overseas to be refined cheaper, and then ship it back here and basically just use the refineries for the storage tanks. It's pathetic.

[Delphinus]

19. Thank you.

My first thoughts were, "yada, yada, yada" - they've been saying this how many times over this year? And they've yet to do it. Seems like Matthew Simmons is right.

[hadrons]

5. key phase: "the group planned to allow its members ...."

they are ALLOWING, not saying they can PRODUCE two million barrels a day of additional crude ...

[Eurobabe]

8. Sure glad I got gas yesterday, only paid $2.87 for premium

Today I knew it would be jacked up over $3

[YapiYapo]

9. There is no problem with oil

We can keep increasing production,keep consuming.

[DeepModem Mom]

10. Good one! nt

[jwcomer]

11. Solvable crises

Interesting times, sure. But this is solvable. Give me one good reason why over the next ten years we cannot built out the infrastructure necessary for coal gasification and liquefaction? South Africa already produces 25% of its oil from coal. Sure Sasol does this using natural gas deposits to drive the Fischer-Trophe reactions but that is a matter of efficiency not necessity. Coal burning could replace the natural gas part of the process. What we need are cleaner coal burning and fuel synthesis processes; and strong leadership from the administration to alter regulations and help steer capital investment accordingly. We've got enough accessible coal for hundreds of years. So there isn't going to be any long term energy crises. The only crises is short term and it isn't going to be nearly as bad as the alarmist make out. It baffles me why this isn't better understood. Its almost as if the powers that be thought that a scared public might be docile toward an oil campaign driven foreign policy, hmmmmm. Food for thought!

And as for alarmist, I don't know what to say, we are around the millennium still, how long does millennial psychology last, anyone know?

[YapiYapo]

14. It's all about energy ratio

You can't compare the energy needed to extract 1 barrel of oil and the enery you need to produce 1 barrel from coal.
There are some local answer possible to peak oil but there is no global answer.
Ask any serious scientists,they will tell you they have been unable to answer this problem for the last 20 years.

http://en.wikipedia.org/wiki/Peak_oil

[jwcomer]

16. I must only know the joking scientists.

The technology was originally developed by the Nazi's to solve their gasoline shortages. With cheap oil it hasn't been economical in the global market until recently. Sasol is a special case, because of apartheid energy trade restrictions on South Africa. They took Nazi technology and improved it. So through a bizarre set of circumstances, it looks like Nazi and Apartheid technology will delivery us from this 'oil crises'. Maybe that stigma is one reason you never hear about it.

You are right about the existence of barrel of oil verses coal energy efficiency issues. However, the only important thing is that the energy balance of digging coal and delivering it and burning it remains positive. Even if the energy balance from using coal synfuel was negative (it isn't), it doesn't matter, because you would be able to drive the process from energy positive coal. Liquid fuels are about convenience. The important thing is that you have at least one long term positive energy balance fuel. And we do, it's called coal. There is no crises! You have been led astray by the misinformed and duplicitous. Now you know. People's efforts would be MUCH better spent by lobbying to develop clean coal burning technologies. Coal is considered an anathema to many environmentalists, perhaps this is another reason why you have not been hearing about coal synfuels.

Reread your article and you will see that there is nothing in it which contradicts what I have said.

[YapiYapo]

21. Still one problem

Quantity, how much coal do we need to produce 84.5 millions barrels per day ?

How long coal will last at that rate ? Considering a good part of it will be needed to produce the energy to create those 84.5 millions barrels.

[jwcomer]

25. Not a problem

A couple of things to consider.

Of that 84.5 million barrels, only 32% is going into gasolines and another 12% into fuel oils. The rest is is going into other non energy related petroleum products; plastic, tar, etc. Coal may not be the most logical substitute for those fractions; and their value to society might change as their marginal costs go up.

1) Let's assume that we only need to replace 50% of that with the equivalent of liquefied coal.
2) Also the liquefaction process is going to waste around 33% of the coal.
3) 7.33 barrels per tonne of oil.
4) 1.5 tonnes of hard-coal to 1 tonne of oil (energy equivalent)
5) 3 tonnes of lignite to 1 tonne of oil.
6) 480 billion tonnes of hard coal (world proved reserves)
7) 430 billion tonnes of soft coal (world proved reserves)

To replace the required oil from #1 we need 15 billion barrels per year. Or 3.2 billion tonnes of coal per year for liquefaction (oil equivalent). We currently use 2.7 billion tonnes of coal per year (oil equivalent). So we would need a total of 5.9 billion tonnes of coal per year( oil equivalent). 460 billion tonnes of coal (oil equivalent) in proved reserves.

Which works out to about 80 years of coal economy. That buys us plenty of time to work out the kinks in tar sand conversion infrastructure. There are around 4 trillion barrels of oil equivalent tar sands reserves and additionally another 1.7 trillion barrels of oil equivalent shale oil. By the time we start running out of those (120 years), we ought to have the technology to tap into the clathrate deposits. The methane clathrate deposits are estimated at greater than 100 trillion barrels of oil equivalent (more than 1000 years worth.)

I see some short term supply problems with our energy infrastructure in the near future as we transition off of oil. But I don't see any long term problems that cannot be solved for 10's or even 100's of generations.

Could there be some short term economic disruptions? Of course. But there is no reason to panic.

[YapiYapo]

31. Great explanation ,thanks

I guess we may get some global answer to the problem but the thing that scare me the most about peak oil is the human factor.Like war for ressource and people panicking as soon as they realise they will have to change their livestyle(at least for a while).Or like we have seen in the past when the economy get problem,some leaders may take advantage of the situation.

If that happen we may not be able to find the ressource and investment needed for the transition from oil to coal- oil.

[Psephos]

29. We have triple the reserves of Saudi Arabia in US shale oil

Maybe even more. Estimates range from 750 billion bbl to 1.8 trillion bbl of oil locked in Western shale. (Saudi Arabia has about 260 billion bbl of reserves.) There are some *very* interesting developments the past few years on how to extract that shale oil in situ without mining. Extraction cost currently looks to be around $30/bbl, at an energy-out/energy-in ratio of about 3.5 to 1. In other words, very attractive in current oil markets.

Here's a general-interest article from the Rocky Mountain News about it:
http://www.rockymountainnews.com/drmn/news_columnists/article/0,1299,DRMN_86_4051709,00.html

FuturePundit also has a good post:
http://www.futurepundit.com/archives/002981.html

Shale oil recovery is not ready for prime time yet, but when talking about coal gasification it certainly deserves mention as another contender.

Peace.

[YapiYapo]

30. From what i found about oil shale :

"Consequently, at least 12 and possibly more years will elapse before oil shale development will reach the production growth phase.
Under high growth assumptions, an oil shale production level of 1 million barrels per day is probably more than 20 years in the future, and 3 million barrels per day is probably more than 30 years into the future."

http://www.rand.org/pubs/monographs/2005/RAND_MG414.sum.pdf

By 2025 ,we would need at least 20 millions barrels of alternative source (That's an optimistic restult)



Seem oil shale will come too late.

[jwcomer]

32. Indeed, the US is sitting pretty going forward

Most likely we will see 5-10 years of oil shock while we ramp up coal gasification/liquefaction infrastructure. Shale oil will likely come online in a serious way on the 20 year+ horizon as will tar sands. The coal recovery is very mature technology and the gasification/liquefaction are proved technologies. Hence we are likely to see them as the more immediate solution to the coming oil shock. We will also see a big shift in how we use oil and petroleum products because the shock could last nearly a decade.

The end result is going to be entirely different than what all the 'oil eschatology' sites are predicting. I've yet to find a single doom and gloom site which dealt with coal in an honest way. A lot hand waving, unfounded assertions, and ignoring economically proved technology. I find the psychology of eschatology fascinating. What makes people want the world to end so badly? Do they just want to see mankind punished for its sins? Is it a reflection of our powerful need to be in on a horrible secret?

[Psephos]

38. All your posts in this thread are informative and insightful

Energy is the single most important resource of all, and technologically, we'll do whatever it takes.

I believe we're not at Peak Oil, but at Peak Cheap Oil. The mental shift required to drive us into alternative energy sources is already starting to gain serious traction.

I also have wondered about the question you ask above at the end of you post: why is there almost a sense of glee among so many people that the world might end badly or that humankind will be "punished"? A strange emotion indeed for a progressive.

Peace.

[NickB79]

15. Because coal is one of the most noxious fuels around

You can't make a conventionally-fired coal plant clean-burning, no matter what GE says on their commercial, so how can a coal-gasification plant be clean? Every year millions of tons of burnt coal ash is dumped in landfills. Here lead, mercury, cadmium, uranium and a host of other toxic metals and chemicals build up and leach out into the groundwater. Converting coal to oil would require that you extract all these contaminants and store them somewhere, no?

Then you have to take into account that, to access hundreds of years worth of coal, you have to strip-mine entire mountains to get it.

Coal is much more energy-intensive to extract and convert to oil as well. Coal-derived gasoline would be far more expensive than even the $3/gal conventionally-pumped gasoline we're used to today.

Also, those filters don't remove CO2, the leading causitive agent for global warming. We increase our fossil fuel usage, rather than decrease it, and global warming only increases.

We're caught in a no-win situation if we insist on using fossil fuels. If we run low on oil without alternative energy sources, our economy collapses. If we replace oil with coal, global warming will kill hundreds of millions over the next century.

[jwcomer]

17. Then we will have to find solutions

I agree that coal burning plants are horrible polluters. I trust you can provide me with solid reasons why this problem cannot be solved. The solutions may not always be appetizing. For example, we might have to dump the metals into very deep parts of the ocean; etc. Heavy metal pollution is horrible but it a different global crises.

You are right that we will have to strip-mine entire mountains. The alternative is for billions of people to literally starve to death. After all the green revolution runs on petroleum products. Destroying the natural beauty of the earth and its local ecologies is abhorrent but it is a different crises.

You are also right that coal is more energy intensive. However it is energy positive. I trust you can provide calculations showing that coal-derived gasoline would sell for over $3/gallon; I think it would be around that price maybe even a little less with economies of scale. But nearly unlimited energy at moderate prices isn't a crises at all.

I agree that we will need to find a carbon sink for all the CO2. And that this will quite likely continue to drive global warming for the foreseeable future. I trust you can show me why there is no future carbon sink solution. But that is a different global crises.

The energy crises doesn't exist. Global warming, metals pollution, carbon pollution, and ecology destruction are real crises. It's important to separate these crises so that efforts are well spent. It is well and good to tie them together and say we should live in a friendlier economy like Cuba's. But it isn't going to happen that way. And it would require starving off billions of people to boot.

[Texifornia]

20. Sir Isaac Newton is why

EROEI (energy return on energy invested). We would have to consume coal at minimum of an order of magnitude than we consume oil and gas today.

Coal gasification returns barely over break-even while light sweet crude returns nearer to 15 to 1.

No panacea. The Nazis could not do this effectively enough to run their war so they set their sites on SE Europe and the Caspian Sea region.

No snap your fingers an everythings O.K. Unfortunately, Reagan killed the Carter energy policy which had, among other things, a mandate to create a methodology for energy accounting. That is, how many (BTU, Therms, watts, pick your unit) it takes to build a thing. We would know what the EROEI is for everything.

Wind looks best now, although it is difficult to determine precisely how many BTUs went into the manufacture of a wind turbine.

I can see coal gasification in the distant future as a means for making jet fuel. Liquid hydrocarbons are the only fuel with enough energy density to power aircraft, but it will never, ever, replace conventional oil.

[jwcomer]

24. Newton was an alchemist not a chemist.

It's true, nearly of third of Newton's writings were on alchemy. If alchemy had proved true in practice he would be the father of alchemy as well as physics/calculus. Pretty wild, eh.

He had no notion of chemical energy, so your reference is off a little. You'd have to look to Joule, Watt, Gibbs, et al. for thermodynamics and chemical energy. Anyway, what you are saying may be true but doesn't invalidate what I've said.

It doesn't matter that coal gasification and liquefaction are barely break-even (btw, the technology works more efficiently today than under the Nazis.) The EROEI may not be the 15-1 of sweet crude. It is more like 9-1 for coal burning, US average. I believe it comes out to around 3-1 after liquefaction. Even if that 3-1 were 1-3, it would be fine so long as the average EROEI across all coal uses remained positive. That point is subtle but it is extremely important to understand. The balance for liquefaction doesn't have to be positive simply because gasoline represents a minor portion of overall energy consumption. The important metric is the weighted average EROEI over all energy consumption.

[RPM_BU]

23. Actually, that is not entirely correct

"Also, those filters don't remove CO2, the leading causitive agent for global warming. We increase our fossil fuel usage, rather than decrease it, and global warming only increases."


Of man-made contibutions to greenhouse gasses, carbon dioxide is indeed in the lead. However, of all greenhouse gasses, carbon dioxide is not even a close second. The absolute largest amount of greenhouse gas is water vapor. Wator vapor accounts for over 95% of all greenhouse gasses.

[rman]

39. To bad our leaders don't acknowledge the crisis

Let alone do anything to solve it.

Of course there are other sources for oil. But those to are finite and more importantly: they don't provide cheap oil as we have had in the past. So while economic growth has been dependant on an increasing availability of cheap oil, that availability will start to decline, and keep on declining.
To really solve the problem we'll have to switch to renewable energy sources and get serious about energy efficiency. The technology will have to be developed further but it is basically there. What is lacking is political and public will.

What you call a short-term crisis may well last for a generation or so and cost countless lives.

[Zynx]

12. If they haven't been producing every single drop they can I would be....

shocked.

[wallwriter]

13. Nah. Oversupply drives prices down... But things will be

much different in the post-peak world...

[Zynx]

27. Evidence is that they have been smashing their quotas.

Oil supplies are so tight that they would not create over supply. Rather they sell another couple million barrels per day at $65 each.

[GOPAgainstGW]

26. BFD - We Have ZERO Refining Capacity in the U.S.! n/t

[underpants]

36. Sorry not buying it

A couple of months ago there was a huge fire at a Galveston refinery were the mix higher octane gas. Oil execs were falling all over themselves saying that this would NOT affect the pump price. Okay how is that? We hear about 100% capacity but a whole refinery shuts down for at least 12 hours and it has no effect? Did the oil companies absorb the cost? :eyes:

There has also been some evidence that refineries were purposely pulled back from full capacity.

Not buying it at all.

[IDemo]

28. The burden of proof lies with those who defend coal and other solutions

"coal burning plants are horrible polluters. I trust you can provide me with solid reasons why this problem cannot be solved."

This is specious and convoluted. The burden of proof lies with the proponents of coal burning powerplants, not with those who question them based upon current real world facts. I trust you can provide us with solid reasons why the pollution problem of coal-fired powerplants will be solved.

You cannot separate the pluses and minuses of future energy solutions as easily as creating a separate column in an Excel spreadsheet. Attempting to divide out the ecological and economic issues simply as problems to be dealt with another day, or by another generation, is simplistic and wrong-headed.

[rman]

37. Meaning OPEC will be at 100% capacity by the end of this year -

no more spare capacity beyond that.

And the 2 million/day they are going to add isn't that much compared to 80 million/day consumption, which is growing 3% per year on average.

Demand will continue to rise as economies grow, especially those of China and India - but then there's no more production capacity.