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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

Engineer-Poet

Rafael Seidl wrote:

Engineers, put on your thinking caps.

What do you think some of us have been doing?

fred@dzlsabe.com

Andrey-
Ill stick with my figures. Diesel technology advances mean smaller displacements, more power, less emissions, less fuel. Diesels are best for constant-use vehicles...I would never suggest theyre for everybody and their mother. Go to any automakers UK website(only place I can find pricing)and one finds that diesels are the same or less money. Additionally they seem to hold their value better(ie last longer) and maintenance is straight-forward. No igntion system...priceless. ULSD and biodiesel with catalytic and DPFs will continue to make this more attractive. The Japanese are diesel proficient and Detroit is also.
I suggest you do recheck dieselnet and dieseltech...there seems to be no lack of enthusiasm for diesels...it moves this planet today and will for the foreseeable future.
Your assertions about carcinogens and "millions"...will need references. I doubt anything meeting Euro3,4,5 is doing the damage you describe. In fact arent euro lifespans among the longest?
I agree that plug-in hybrid technologies, plus auto-stop, less/no idling, electric AC compressors are certainly the future...but again I just dont see diesel disappearing. CNG and propane?? Maybe in fleets.
The only thing "stupid" is to be short-sighted, thinking theres only one "right" way and not be aware of international realities.

d

A self-serving statement from these people? What a shock. "It's not our fault!"

Bodman is simply acknowledging what the oil producers still cannot bring themselves to say. Saudi Arabia claims they've spare capacity, that in fact they have crude on tankers looking for a buyer. They don't mention that that crude is heavy and sour and difficult to refine. They don't mention that output is down although rigs are way up. They don't mention the increasingly desperate measures taken to keep what output they can going. They won't say "It's not our fault" because they're too busy insisting "We're in control".

Richard

Gas consumption was actually up over the July 4th travel weekend. Why? Because gas is actually dirt cheap, that's why. It less a percentage of our GDP and personal budgets than it was 25 years ago. With the average car price of over $30,000 and engines getting bigger every year the false outrage over SUV's is actually kinda funny.

Joseph Willemssen

They won't say "It's not our fault" because they're too busy insisting "We're in control".

If they were to claim "we're in control", then they'd be admitting responsibility for high gas prices. Not that party, and certainly not in an election year.

=========

Gas consumption was actually up over the July 4th travel weekend. Why? Because gas is actually dirt cheap, that's why. It less a percentage of our GDP and personal budgets than it was 25 years ago. With the average car price of over $30,000 and engines getting bigger every year the false outrage over SUV's is actually kinda funny.

Do you ever tire of this sill routine of yours?

Andrey

Fred:

OK, time will tell. EPA/CARB do not prohibit diesel cars, they just demand that they should be as clean as current gasoline cars. When Europeans/Japanese will accomplish that, diesel cars/light duty trucks will be highly welcomed here in US/Canada. Some applications, like for towing or hauling, are way better served by diesel engines. For cars - I doubdt diesel will compete with direct injection gasoline with lean-burn catalytic NOx adsorbing converter, especially with hybrid drivetrain, CVT, and Atkinson cycle engine.

But still, ruthlessly forcing of other nations, which choose to breathe clean air, to adopt way dirtier and health damaging technology is immoral and rude.

Richard

Joseph, sorry to rain on your parade. Please point out where I am wrong.

Neil

“This is the first time in my professional lifetime that the suppliers of oil in the world have really lost control of the markets,”

????? I seem to recall that this has happened before several times, on the up side and the down side. OPEC has never had complete control of the market. I'm sure Bodman is older than I am.

fred@dzlsabe.com

Andrey-
When your gagging on the soot from the weekly start-up of another Chinese coal plant Ill be all ears on that "choose to breathe clean air" part.

Joseph Willemssen

Joseph, sorry to rain on your parade. Please point out where I am wrong.

You don't pull a data point out of thin air and then claim it means something. Trends are what matters, not blips. You specifically referred to 1981, which is when gasoline prices hit the top of a very large run up in prices.

But, even dealing with that data point, the reality is that the average household disposable income has increased 30% (in real terms) since 1981, whereas average real gasoline expenses have risen 27%. And those are the averages, and we've had since the 70s an essential flattening of real income on a good portion of income earners, so even if the average has gone up, it hasn't been a rising tide for all.

So to then call gasoline "dirt cheap" is ridiculous, since if you compared it to times before and after 1981, the numbers are going to be much different. Even compared to peak prices in 1981, we're still about where we were back then -- on average. For many people it's much worse.

Your comment about "false outrage" over SUVs implies that people being upset with a flattening in average fuel efficiency, among many of the bad effects of the changed US vehicle fleet mix, is somehow misguided. If the fleet were more efficient on average, the amount of gasoline consumed would be less, and because of decreased pressure on the demand side, so would fuel prices.

This doesn't even begin to account for the way gasoline prices push through to all sectors of the economy, so it isn't just pump prices for one's car which increase one's costs due to higher fuel prices. Heck, the inflaitonary pressure from stemming from fuel prices is so strong, that much of the Fed response in raising inerest rates is because of that. That raises borrowing costs, lowers household wealth (by decreasing home values), and increases the cost of financing public debt, as well as the push-through effects in an economy because of higher capital borrowing costs.

Leave your cheap talking points for some other forum in the future. People here are a lot more sophisticated than that.

Joseph Willemssen

When your gagging on the soot from the weekly start-up of another Chinese coal plant Ill be all ears on that "choose to breathe clean air" part.

I see - so if one part of the world is very dirty, we should just dirty our air, too.

Brilliant.

B100

Surprised no one has mentioned the use of Biodiesel fuel to clean up diesel emissions. Diesel is here to stay - already in majority use for transportation needs, and no need to replace when users can go directly fossil-fuel free, and cleaner, by using biodiesel. Plenty of waste fryer oils to make a difference in our fuel supply.

Joseph Willemssen

Plenty of waste fryer oils to make a difference in our fuel supply.

Really? How much is there compared to annual gasoline and diesel consumption?

anonymous

Diesel engine is the least efficient and creates the most pollution for short rides, 5-10 klicks. In North America many people have long commutes, at least 20 klicks and more. For them diesel engine is perfect. Moreover, small displacement engines (less than 1,000cc) need less time to warm up. Combined with the mover to lower weight oil (xW20) these engines can warm up fast and operate at peak efficiency.

As for their pollution, I am not familiar with the details, but I thought the current designs are much cleaner (TDI?).

Richard

Joseph, so you agree with me that gas is cheaper now than it was 25 years ago. Actually I didn't know the exact data but thanks for digging it up. The false outrage comes from the fact that in general people are buying bigger engines even when not in a SUV. So, Please keep your childish emotions to yourself. I am for the same goals as you I just take an adult way to go about it. I invest in hybrids and solar, you rant about prices, and ?

Joseph Willemssen

Joseph, so you agree with me that gas is cheaper now than it was 25 years ago.

Did you read what I wrote or simply not understand it?

The false outrage comes from the fact that in general people are buying bigger engines even when not in a SUV. So, Please keep your childish emotions to yourself.

And that's enough for me. I thought you were a troll and now it's confirmed.

fred@dzlsabe.com

Joseph-
Due to prevailing westerlies their air becomes our air. This IS stupidly about NOx emissions(everthing else being able to be met or beaten),my point being that .2 g/mile is reasonable for light-duty diesel with ULSD fuel just starting to show up nationwide. But .05 g/m is overly stringent. And when off-road & marine diesel, aircraft, foreign coal plants are largely given a pass it looks like something youd see on 3 Stooges, ie we are worried about a tiny crack while not noticing the gusher. The consequence being no LD diesel. BTW ALL on-road diesel amounts to less than 10% of total emissions and that number is going down. And whats with gram/mile...even in Canada and Mexico???? Isnt it time to scrap english weights and measures for good.

Joseph Willemssen

Fred, you'd need to post some statistics on NOx sources by contributing activity. There's a reason the standards have evolved.

fred@dzlsabe.com

Try http://www.dieselforum.org/california_files/Sierra_Research.pdf
Oh Im sure there are many reasons standards have "evolved"...but like shooting in the dark sometimes ya get lucky, most times ya dont

Richard

Joseph, nice try buddy on the troll comment no actually its very weak. Like I said I'm investing in the companies that are putting out products to make a difference. Certainly your not disputing the average engine size is increasing in sedans and trucks. Or are you?

Andrey

Fred:
NOx is precursor for photosmog, which is local pollution. Aircraft, ocean-going diesel M/V (while in open sea), or Chieneese coal-firing plants have nothing to do with photosmog covering big cities and impairing human health. By the way, NOx are formed naturally on quite big scale, for example during lighting storms, and are washed down to provide terrestrial vegetation with fertilizing nitrogen components. The problem is overly NOx concentrations in cities, where most of the people live.

HD diesel engines in US already have stringent regulation, and in couple of years it will be tighten even more, and for big cost, which we are agree to pay. Same with off-road diesel engines, coastal marine vessels, locomotives, etc. Coal and NG firing power plants and industrial users are paying great sums of money to have their NOx pollution reduced and dispersed to levels minuscule to contribute to local air pollution. No less then 30% of coal firing power plant is for emission control equipment, for example. LD diesel engines, as contributing directly to city’s air pollution have to comply with same standards as gasoline cars. This is the people’s choice on this part of the Atlantic.

P.S. I do not even touch diesel soot, really deadly stuff.

Joseph Willemssen

Joseph, nice try buddy on the troll comment no actually its very weak.

No, what's weak is tossing out poorly-thought bait, then getting a reasoned response to it, then insulting the person repeatedly instead of responding to what they took the time to write.

That, my friend, is the very definition of trolling, and that is the last time we will ever converse.

Joseph Willemssen

Oh Im sure there are many reasons standards have "evolved"...but like shooting in the dark sometimes ya get lucky, most times ya dont

I'm pretty sure a lot of very smart scientists have given their input on the standards. I highly doubt it could be characterized as "shooting in the dark".

Joseph Willemssen

Average MPG (all) 1980 2004 Diff % change
Passenger cars 16.0 22.4 6.4 40%
Light trucks 12.2 16.2 4.0 33%

New vehicle mpg 1980 2005 Diff % change
Passenger cars 24.3 30.0 5.7 23%
Light trucks 18.5 21.8 3.3 18%

Fuel consumed (million gallons) 1980 2004 Diff % change
Passenger cars 69,982 76,007 6,025 9%
Light trucks 23,796 62,626 38,830 163%
TOTAL 93,778 138,633 44,855 48%

VMTs (millions) 1980 2004 Diff % change
Passenger cars 1,111,596 1,704,982 593,386 53%
Light trucks 290,935 1,014,342 723,407 249%
TOTAL 1,402,531 2,719,324 1,316,793 94%

................................. 1980 2004 Diff % change
Fuel used if all passenger cars 88,165 121,290 33,125 38%
Savings 5,613 17,343 11,730 209%
% savings 6% 13%

Joseph Willemssen

Barrels of oil savings per year, 2004 889,378,205
per month 74,114,850
monthly imports from Persian Gulf, Apr-06 70,826,000

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