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Bodman: Oil Suppliers Have Lost Control of the Markets

Toronto Star. In Canada for a tour of the oil sands, US Energy Secretary Bodman remarked on Friday that the world’s oil suppliers have lost control of the markets, ceding that power to traders and giving rise to greater volatility in crude prices.

After hitting an intraday high of US$78.40, the price of crude for August delivery settled at US$77.03 US a barrel on the New York Mercantile Exchange Friday.

“This is the first time in my professional lifetime that the suppliers of oil in the world have really lost control of the markets,” Bodman said during a two-day trip to Western Canada where he toured the rapidly developing oil sands region in northern Alberta.

“They are unable to turn the spigot and increase supplies, and therefore are unable to control oil prices.”

Also on Friday, OPEC issued a statement blaming geopolitical factors beyond its control for the recent price volatility.

Geopolitical developments, over which OPEC has no influence, have been behind this sudden rise in volatility, and these have come at a time when the market was already out of line with today’s supply and demand fundamentals, with speculation playing a significant role in driving up prices.

Bodman also said that the current run-up in crude prices is directly related to geopolitical instability in key energy producing countries around the world, adding that he hoped prices would recede once things calmed down.

However, earlier in the week, Dr. Ali Samsam Bakhtiari, who recently retired as a senior advisor for the National Iranian Oil Company in Tehran, warned that the world’s oil industry has started to reach its peak production rate.

In a speech in Sydney, Australia, he said that the oil industry had hit a peak production of 81 million barrels per day, which would decline to 55 million barrels per day up to 2020.

We are consuming, world-wide, 30 billion barrels of oil every year. It is an enormous amount. But what is the industry finding? It is finding something between four and six only. So every year that passes, that we have passed in this century, we had a deficit on consumption versus finds.

I hope that the oil industry will not go into Antarctica but, today I am not so sure, you know, because when the price will be $200 or $300 per barrel, then anything can happen.

—Dr. Bakhtiari

Comments

fred@dzlsabe.com

Im sure a lot of very smart scientists have given their input also...its just not reflected in todays regulations. Like theyre tied up and gagged somewhere.
1980-2004? How bout 1980-87-2004?
Cherry-picking, spinmeisterin....U2 are lobbyists?

NBK-Boston

Richard:

Engine size doesn't much matter over the long term. Improvements in technology have allowed for greater power and efficiency out of engines that are no bigger (and sometimes smaller) than previous engines.

What matters is that average fuel economy rose considerably in the late 1970s and early 1980s in reaction to oil prices and CAFE, and have basically stayed put ever since. Improvements in technology have mainly been spent on increasing power, performance and vehicle weight without suffering economy penalties, and also without experiencing any overall economy improvements.

What matters is that cars remain in the fleet for a good ten year life span, on average, and a car bought several years ago on the unspoken assumption that fuel would remain at a certain price level can no longer be operated affordably.

What matters is that U.S. gasoline prices have basically doubled in the space of about two years, and such unexpected volatility can legitimately cast a clould on anyone's parade.

What also matters is that, in inflation-adjusted terms, gas prices are about as high as they've ever been, and seem to be staying there for longer than usual.

What also matters is that such information is about three mouse-clicks away, yet you claim not to have seen the data. Anyone who doesn't do such simple homework before chiming in with an opinion here should be called lazy, or made to show a very good excuse.

I don't think that our outrage is at $3 gas per se. Our outrage is at being blindsided by a rapid and difficult-to-adjust-to rise in prices. It is at the sinking feeling that we could have collectively prevented the pain and disruption through better policy planning in advance. It is directed at our elected leaders who should have probably used government's unique powers to help create a mechanism to reduce the impact of such a disruption on us, but who didn't. Among others.

allen Z

Nice, 52 comments...At $200-300 a barrel, it becomes extremely lucrative for anyone with a large reliable source of high quality fuel. Perhaps it will finally drive us off fossil energy and onto direct/indirect solar*.
_
*Direct solar turns solar energy into electricity/fuel/ work usually via photovoltaic or thermosolar processies.
Indirect solar energy turns the energy into various forms like hydro, biomass, wind, etc. which can be harnessed.

Joseph Willemssen

Im sure a lot of very smart scientists have given their input also...its just not reflected in todays regulations. Like theyre tied up and gagged somewhere.1980-2004? How bout 1980-87-2004? Cherry-picking, spinmeisterin....U2 are lobbyists?

That wasn't directed to your comments.

John

Let's hear it for the speculators. I already have 4kw of solar panels on the roof. That's plenty to keep the air conditioner running during a power failure, and even put some back on the grid to help keep it from going out in the first place, but not (yet) enough to power transportation to and from work.

Fortunately I also have a brokerage account that I'm not afraid to use. So far this year I've made enough by investing in oil futures to expand that 4kw by 12% at current prices for panels - and the hurricane season has barely even started!

All I need now is a plug-in HEV and a few more panels. Oh, and a little more roof space. :)

mike

Please keep in ming that "Diesel engine" we mean compression ignition, not necessarily Diesel fuel.

fred

JW,Andrey-
Ill stick with my figures and thoughts...happy to dbate anytime.

Adrian

The only big impact I see is Europe and the US falling in the poop.
poop = recession and general badness

The tiger economies will pay any price for the oil. They have trains of stashed trade resources and their renouned slave labour on offer.
And unlike Europe and the US they have no moral boundries. They neither care about their own citizens or the impact to the rest of the world.
And if oil runs out they'll buy all the bio diesel or alcohol from wherever it is available at whatever price.
The rest of the world is not competing on a common playing field here. And although the long debate about the US being the devil is sampunt, at the end of the day the US is just inneficient because it is a cultural thing to live big and wasteful there, and they're quickly learning their lesson. But they don't lack moral responsability. The average US citizen just like the Brit or the French man still ask you if you're alright if you trip over and fall on your face. Not so for the others.
So in conclusion the danger for humanity's future is the moral immaturity from the emerging Tiger economies as they suck up all available resources to accomodate their rapid expansion, and not the US who is learning the hard way what expensive fuel in big vehicles means.
All the wars instigated by the US are just a panick fest because they know they need to buy time to avoid the poop thats quickly flying their way.

oil real price is $386 per barrel gasoline $19-20 per gallon

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