Wednesday, October 31, 2007

Alberta Royalty "Adjustments".

If you haven't already heard, Alberta wants to raise the royalties oil and gas producers are paying in the Canadian province. The theoretical fly in the ointment for the government is that several producers, among them the largest producers from oil sands, Suncor and Syncrude, have contracts that extend until 2015 or so that stipulate their royalties. [I believe Canadian Natural Resources also has a deal.] But as the energy minister of Alberta makes clear in this video, while there won't be unilateral adjustments to these contracts by the government, they are going to figure out a way to get their money one way or the other.

The clear message of this and the various other adjustments being made around the world: If you choose to invest in oil and gas producers, spread your money around. And note that as royalties rise, development hurdles usually get higher, some projects become potentially uneconomic, timelines extend, etc. This is thus bearish for some affected producers, but may be bullish for others elsewhere, as well as for oil prices in general.

Bloomberg Video: Knight of Alberta.

Monday, October 29, 2007

It's not easy being printing the green.

Come on Jim, tell us what you really think..

Bloomberg Video: Jim Rogers.


"I would urge everybody listening to your show to figure out ways to start getting money out of the US dollar.."

"We now have a madman at the head of the Federal Reserve.."

"... now America's given him the printing presses, and he is running them as fast as he can."


I'm not sure Bernanke has much choice. We've got a leaning tower of Pisa: too much debt, sliced and diced into too many derivatives, slipped into too many places. Jim Rogers advocates no more rate cuts, and a recession to clean out the mess. [Which is a heck of lot easier to advocate when you're not a working stiff.] He's looking for a Fed head with the backbone of Volcker, but I'm not sure you can be a Volcker, or even a demi-Volcker, in this highly visible media age.

The flipside of the lower dollar is it makes our exports more competitive. Exports seem to be the likely explanation why the whackage in housing hasn't taken the toll so far one would expect.

Somebody wake up Hicks.

Via The Oil Drum, a link to a copious set of notes from the recent ASPO Conference in Houston. The associated slides from the presentations are here.

P.S. The quote is from Aliens.

Friday, October 26, 2007

Porsche. Oil. There is no [easy] substitute.

This is a very interesting article and research paper on energy alternatives. The stock market clearly supports solar and doubts ethanol, and the data in these support those views. We're a long way off from the vision of solar charged vehicles on a mass scale though.

MSN Money: Shuck the ethanol and let solar shine.


New research by a University of California petroleum engineering professor suggests that worldwide crude oil supplies will start to run so low over the next nine years that resource-blessed countries like Saudi Arabia will begin to hoard them for domestic use instead of exporting -- and states with large reservoirs of natural gas, like Montana, will seek ways to avoid sharing with less-advantaged neighbors like Oregon.

Attempts to forestall the political and economic damage by turning aggressively to agriculture for "renewable" transportation fuel in the form of ethanol will prove futile, according to professor Tad W. Patzek, as new calculations show that the entire surface of the Earth cannot create enough additional biomass to replace more than 10% of current fossil fuel use.


One better solution is solar energy created at the municipal level by massive photovoltaic cell facilities, at the street level by home-based grids and at the transportation level at lots where electric vehicles' batteries can be charged. Photovoltaic cells lose only about 80% of the sun's energy to dissipation, making them at least 100 times more efficient than ethanol after the fuel cost of growing and refining the biomass feedstack is accounted for.

Saturday, October 20, 2007

Deffeyes: It's here.

I have to give credit where credit is due: Kenneth Deffeyes' book "Hubbert's Peak" was my first introduction to peak oil. And what an eye opener it was!

Below is a recent lecture where he makes the case that we're right at the peak.

Whether he's got the timing right or not, we won't know for a bit, but thank you Kenneth Deffeyes for bringing it to our attention.

Kenneth Deffeyes: "Peak Oil: Here and Now".

Friday, October 19, 2007

Boone Pickens: $100 before $80.

Quite simply:

With production now of 85 million barrels of oil a day, and a 5-6% a year production decline going forward, Boone Pickens says we're going up until price kills demand.

Fox Business: Pickens on Oil

Wednesday, October 17, 2007

$87 Oil? Still kinda cheap.

When you compare to the 'alternatives', it makes you aware of just how valuable oil, and by extension natural gas, really is.

WSJ: Ethanol's Water Shortage.


Ethanol plants consume roughly four gallons of water to produce each gallon of fuel, but that's only a fraction of ethanol's total water habit. Cornell ecology professor David Pimentel says that when you count the water needed to grow the corn, one gallon of ethanol requires a staggering 1,700 gallons of H2O. Backers of the Senate bill say that less-thirsty technologies are just around the corner, which is what we've been hearing for years.


Ethanol's big environmental footprint is not limited to water, because biofuels like ethanol are highly inefficient. In September, the Chairman of the OECD's Roundtable on Sustainable Development released a report entitled, "Biofuels: Is the Cure Worse than the Disease?" Authors Richard Doornbosch and Ronald Steenblik compared the power density of different energy sources, measured in energy production per unit of the earth's area. Oil -- because it requires only a narrow hole in the earth and is extracted as a highly concentrated form of energy -- is up to 1,000 times more efficient than solar energy, which requires large panels collecting a less-concentrated form of energy known as the midday sun.

But even solar power is roughly 10 times as efficient as biomass-derived fuels like ethanol. In other words, growing the corn to produce ethanol means clearing land and killing animals on a massive scale, or converting land from food production to fuel production.

Party On, Kurt.

McDep.Com: Peak Oil is Here. [PDF]


"A peak in world oil production under 85 million barrels daily (mbd) now looks like fact.."

Tuesday, October 16, 2007

Party On, Marion.

CNBC Video: Oil on the Rise.


"Longer term, these [oil] prices are going higher, and this is kind of a wake up call, based on this whole peak oil theory that we're really starting to see come to fruition."

(BTW: Marion Hubbert King.)

Wednesday, October 03, 2007

Tightening the screw.

CNNMoney: America's top oil suppliers tightening taps on exports: CIBC World Markets.


Six of the largest oil suppliers to the US are poised to cut their global exports by nearly 2 million barrels a day by 2012, ramping up pressure on supply and price, and intensifying the focus on one of the last great deposits open to private investment: Canada's oil sands.

The projected cut, amounting to seven percent by Mexico, Saudi Arabia, Venezuela, Nigeria, Algeria and Russia, reflects the growing struggle in these countries to grow production and manage their own soaring rates of oil consumption, says Jeff Rubin, chief market strategist and chief economist, at CIBC World Markets, who will discuss his latest findings at the firm's Industrials Conference in New York City.

The trend of oil producing countries becoming major oil consumers extends beyond the top US suppliers, says Mr. Rubin. When similar conditions are factored in among the other major oil producers including OPEC, the supply crunch deepens to 3 million barrels a day, or an eight percent cut in global exports. "Soaring domestic demand is cannibalizing export capacity, and will increasingly do so as productions plateaus or declines in many of these countries."

Last year, OPEC members, along with independent producers Russia and Mexico, consumed over 12 million barrels of oil a day, roughly 60 percent more than China and slightly more than all of Western Europe says Mr. Rubin. As a group, they now are second only to the U.S. in terms of market size. Much of the demand in these countries is driven by heavily subsidized prices that keep a barrel of oil down to a cost of between US$10 and US$20. "The cheap supply is fuelling some of the fastest growth in domestic demand anywhere in the world," says Mr. Rubin.