Oil at $66 a barrel
Oil at $66 a barrel
(OP)
This is an interesting article but make of it what you will.
http ://news.in dependent. co.uk/busi ness/comme nt/article 305640.ece
It comes as a surprise to find that todays high oil price is demand driven not supply and that demand is from the developing countries.
It also comes as a surprise (this information seems to be concealed from us lest we get complacent, and there was an iteresting comment on "brainwashing" in universities that is probably a topic for a different site) to discover that while the USA and the Uk are amongst those blemde for "gas gussling" that in the UK oil dependence has dropped from 60% to 40% of energy needs and similar is suggested for the US economy.
http
It comes as a surprise to find that todays high oil price is demand driven not supply and that demand is from the developing countries.
It also comes as a surprise (this information seems to be concealed from us lest we get complacent, and there was an iteresting comment on "brainwashing" in universities that is probably a topic for a different site) to discover that while the USA and the Uk are amongst those blemde for "gas gussling" that in the UK oil dependence has dropped from 60% to 40% of energy needs and similar is suggested for the US economy.





RE: Oil at $66 a barrel
Oil tops $67 as US demand soars is news item on BBC news.
http://news.bbc.co.uk/2/hi/business/4144246.stm
The effect of this in India is petrol will cost Rs50/litre(Approx 1.2USD), and diesel Rs 37/litre (approx 0.86USD). There is sure going to be some problem for our government if the hike is implemented.
RE: Oil at $66 a barrel
RE: Oil at $66 a barrel
The price of oil is going up because demand is outstripping supply temporarily. That will balance out eventually.
-The future's so bright I gotta wear shades!
RE: Oil at $66 a barrel
----------------------------------
One day my ship will come in.
But with my luck, I'll be at the airport!
RE: Oil at $66 a barrel
Short-term shifts in futures prices in all commodities are always a knee jerk reaction to immediate news. An oil-well fire in Lybia (before embargos started to be lifted) would raise futures prices in the US even though very little Lybian oil found its way to the US. A huricane in the Gulf can disrupt supplies and if you haven't locked in a price before the supply is disrupted then you'll pay for it. Futures dealing is much stronger on Oijia Boards and Tea Leaves than on hard cause-and-effect.
ScottyUK,
Blame? If an owner of resources chooses not to sell them until his target price is reached, he's just looking out for his own interests. We've had 20 years of people who couldn't hold out for better prices going out of business in the low product pricing since 1986. If it costs $10/bbl in direct costs and $5/bbl in indirect costs (frivolous things like research and development), and you keep selling into a $12/bbl market the only possible outcomes are to cut indirect costs or go out of business. The industry did the first with a vengence and thousands of companies did the second. Today R&D are dim memories and the new challenges are being met hapazardly (for the most part).
From the producer standpoint, we need something like $105/bbl to get back to 1986 prices (in constant dollars). The record profits being recorded by the oil companies today are a reflection of the seige mentality of the industry after the 1986 depression. Overhead is so low right now that many companies are getting into trouble with regulators for not observing the complex rules--the guy that used to ensure compliance is now selling used cars and the companies don't have a clue what he used to do. Sustained prices this high will eventually cause some companies to add R&D, Engineering, and Administrative staff to allow supply growth to try to meet demand growth.
Right now when I ask a client if they prepared a Storm-Water filing for a pipeline job (for example) I generally get a deer-in-the-headlights stare that doesn't bode well.
David
RE: Oil at $66 a barrel
Until then, the oil price is mainly a way to sell newspapers and soap powder.
Cheers
Greg Locock
Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.
RE: Oil at $66 a barrel
Transportation of materials will become a major part of the price of the product and local manufacturing will become more attractive. Business will return to the US. It won't happen overnight but I believe this will happen. I have seen Japan was the supply country of choice in the 80's and now they are some of the highest paid people in the world. Automated manufacturing is the method of choice where labor becomes a non-issue.
Keep raising those prices, innovation will kick in and force us to do what we should have done for the last 20 years. Solve our energy problem, not with new oil research but other energy sources, wind, sun, geo-thermal, fusion, and even fission.
RE: Oil at $66 a barrel
Manufacturing coming back to US may not happen as the will and skills have eroded. You need to alter your labor and OSHA which is not posible . The whole mindset is about a spending community with huge cars and other energy guzzling devices.
RE: Oil at $66 a barrel
Maybe I am giving them more credit than is due, but I am pretty sure that commodity traders have enough on the line that they are not making stupid decisions based on stuff like that.......
-The future's so bright I gotta wear shades!
RE: Oil at $66 a barrel
I totaly agree with the statement that the news guys "just make stuff up".
I've known a few commodity traders (all were in some facet of energy trading) and they all started their day with a stack of newspapers (one said that the National Inquirer subscription was a holdover from his predecessor, but it was always on the top of the stack). A couple of them had a clipping service that went through the papers for them. The end result was that they would add or subtract from their bid prices for stuff like (these are real): (1) the U.S. President was visiting Moscow (one guy dropped his offer-ceiling because he thought the president would somehow remove barriers to Caspian production, another raised his cieling because he thought the plane might crash); (2) a tropical storm heading generally toward the Gulf of Mexico; and (3) election day in Mexico. I have a hard time making all of these connections, but they were very real to these guys. One of them told me that the Wild-West cattle drive analogy was very apt (i.e., one steer starts running for no apparent reason and the rest of the heard will always stampeed to follow a leader) and the trick was being one of the first few steers to bolt because they were the only ones that made real money.
If people can think that "Technical Stock Trading" has any validity, then crude-oil futures trading using "Dan Rather Science" and the National Inquirer is truly a high art.
David
RE: Oil at $66 a barrel
RE: Oil at $66 a barrel
The current increase in oil price comes from being worried about what will happen in the future http:/
corus
RE: Oil at $66 a barrel
You wonder where the comment "they make stuff up" comes from and then you post a link to
I can point to a dozen other articles where talking heads claim some pet event is driving prices.
I always love reading about an Oil-related news event in The New York Times, Wall Street Journal, the Washington Post, and the Journal of Petroleum Technology. The "facts" that each chose to display are more a function of editorial bias than the public's "right to know".
A wonderful example is the coverage of the list that developed in the BP Thunder Horse platform during a huricane last month. The technical journals covered it as a problem that the platform was designed to deal with and it was quickly dealt with. The
newsragsnewspapers were full of "multi-billion dollar platform in danger of capsising", "oil prices soar on catastrophe in Gulf", and "production will be delayed from Thunder Horse at least 3 years".Important facts get burried, skewed, or omitted to make the story bring home a particular point - I call that "making stuff up".
David Simpson, PE
MuleShoe Engineering
www.muleshoe-eng.com
Please see FAQ731-376 for tips on how to make the best use of Eng-Tips Fora.
The harder I work, the luckier I seem
RE: Oil at $66 a barrel
Given the reduction in the dependence on oil as an energy source in the more developed nations and the desire to push through Wind farms etc with big tax subsidies, one might suppose that not only are politicians and government economists more sanguine about a high $ price per barrel, they may even welcome it and not take steps they might otherwise have done.
In the UK petrol now reaches around £4 a UK gallon. This is pretty strong stuff but I recall an AA report of around twenty years ago that suggested that petrol would have toreach £5 a gallon to have an impact on car use. That's a 20 year ago £5 and what that equates to now i coulodn't say. Also the articles comments about the proportion of GDP etc suggests the value today would be significantly higher.
However, also in the UK the high price of fuel has disuaded the Chancellor from increasing fuel tax yet again as the last time he did this the truckers took to blockading terminals and crawling round the motorways at 20mph. Some sectors are affected. We should remember that what we see is not the fuel price but the tax. Tax is a huge proprtion of the actual fuel cost and it is this which magnifies the effect.
On the other hand, 98% of all goods travel by sea. Fuel is 70-80% of the operating costs even with zero taxed HFO. The high price of crude has a direct knock on effect and the first signs of the impact are the reports from a number of ferry companies introducing fuel surcharges and/ or suspending operations, especially those in direct competition with airlines who also enjoy a tax benefit for their fuel.
Sooner or later these costs will be evident in the high street but, because sea freight is so efficient, maybe not many will notice.
One concern has to be that so many different governments have milked oil for tax revenues and used taxation as a substitute for policy that the situation is very confused.
JMW
www.ViscoAnalyser.com
RE: Oil at $66 a barrel
I think you have it right. The government has the obligation (but rarely the will) to set policy (including tax policy) to further the society's long-term goals. Great Briton and most of the EU have done a pretty good job of setting taxes in place to get the price of transport high enough to be a significant factor in decision making. The result is more fuel-effecient vehicles on average, more public transport, more bicycles, etc. All good things. The U.S. on the other hand failed to implement similar actions when fuel prices were very low and now that they seem high (at least the news tells us every day that they are high), the will to impose new taxes just isn't there - the result is that public transit is mostly a joke (except in the rare town where the price of parking has become prohibitive, supply and demand again), too many people drive 3 ton SUV's with abysmal effeciency (I have three of them), and very few people can get their bicycles out of the garage.
David
RE: Oil at $66 a barrel
RE: Oil at $66 a barrel
corus
RE: Oil at $66 a barrel
RE: Oil at $66 a barrel
The point about so many taxes is that the government pretends that they are there to promote something good e.g. more use of public transport, when all they are is a money grab: the AA report gave the lie to the price of fuel, augmented by high taxes, contributing to a reduction in private car use. It hasn't andit won't. Too high a price is more likely to result in a regime change than a shift to pblic transport.
A recent news article informs that a Highways Agency study has allegedly been sat on by them for 18 months (during which they installed even more speed cameras)which has shown an "dramatic increase" in deaths where cameras are sited. To hide the report and continue investing in speed cameras on the safest roads in the safest country for driving actually is costing lives but generating millions of "free" money for the government (any government).
However, if the government were to get tough with the school mums they'd be doing something worthwhile. ALl those mums for whom road laws are suspended so they can individually take their kids to school and collect them is a nonsense that by itself must surely contribute hugely to unnecessary fuel consumption. When I was a kid there was a school bus. Everyone used it. Now?
Now an interesting point, a couple of years back the SMMT (Society of Motor Manufacturers and Traders) produced a report which showed diesel fuel prices across Europe being lower than petrol prices due to tax reasons and the sales of deisel cars increasing as a consequence. In the UK the diesel tax situation is such that diesel costs more than petrol and diesel car sales in the Uk uniquely no where near as robust as elsewhere. So as not to offend anyone I am happy to admit that all politicians are idiots, not just, in the UK, New Labour or old Tory.
Good government (and sorry, I don't know of any) ought to make rational decisions. They frequently don't. Mr Prescot dreamed up the idea of prohibiting councils from requiring new developments to provide more than one parking space for each dwelling. The idea being to encourage people to use public transport. All it does is let the developers put more houses and flats down per acre and increases the misery of street parking.
JMW
www.ViscoAnalyser.com
RE: Oil at $66 a barrel
I'd much rather that money go into the pockets of my government than into the pockets of some Saudi princes. Even if the government taxation money is "wasted" on bureaucracy, it's still circulating in my local economy!
I WANT those idiots with the SUVs to be suffering for their short-sighted, selfish choices. It can't reach $100 per barrel soon enough for me!
RE: Oil at $66 a barrel
A report by the BBC http://news.bbc.co.uk/1/hi/scotland/2513023.stm says that the introduction of speed cameras has saved lives. I'm not sure how this is costing lives. It does generate money for the government but if people wish to drive round like idiots and ignore the speed limits then let them pay, through the nose preferably. The only complaint I have is against 'sleeping policemen' and other such traffic calming methods. They might make traffic slow down but they don't calm me down one bit.
corus
RE: Oil at $66 a barrel
If nothing else had changed the government could raise fuel taxes to bring the price to £30 a gallon and be sure of:
1) they would not reduce peoples use of their cars or petrol
2) they would not imperil this as a source of revenue.
However, this neglects the fact that since that time car ownership has risen dramatically and peoples expectations have changed.
It is why I suggest that before we reach this mythical value that we might suffer a "regime change". It also discounts other mechanisms, not least the increasing disregard for law.
JMW
www.ViscoAnalyser.com
RE: Oil at $66 a barrel
Probably the major concern with the increase in fuel prices is the likely increase in the general rate of inflation, and the subsequent increase in interest rates to quell that. Fortunately, due to the import of goods from the far east, prices are being kept low. However, if that were to change then we'll be back to the '80s with 20% inflation and massive unemployment and the subsequent civil unrest and increase in lawlessness. 100$ a barrel may be a good idea for punishing the SUV drivers but not good for the economy and society in general.
corus
RE: Oil at $66 a barrel
the interest in this partuicular article which explains why so many times in the past high oil prices have triggered depressions/downturns and why this time, for the western eonomies, that is less likley now.
JMW
www.ViscoAnalyser.com
RE: Oil at $66 a barrel
RE: Oil at $66 a barrel
A very heartening news I just read on an Indian website www.ndtv.com. I have reproduced below for easier reference.
Organization of Petroleum Exporting Countries (OPEC) acting chief Adnan Shihab Eldin has said that the current high oil prices, which are hovering around $63 a barrel are very unusual.
OPEC expects crude prices to come down to about $40 a barrel by the end of next year. Eldin said one reason for the current high prices was the bottleneck in refineries.
"Fundamentally there is no reason for prices to go up. There are geopolitical concerns surrounding it," said Eldin.
"People who make money on the futures market make their own calculations and drive up the prices. I can't really comment on future prices but I know that on an average they will ease up and will go down," he added.
Maintaining that very low oil prices are not good for economy, he said that there is possibility of hiking output and maintaining spare capacity.
He also said that supply from non-OPEC countries will rise next year.
RE: Oil at $66 a barrel
The oil price is high because of unexpectedly high demand from China and India. Steel prices are rocketing too (but steel prices don't make the evening news). As it takes anything from 2 to 10 years to bring a new field from discovery to first oil, the slack in the supply side (mainly shut in OPEC production) was quickly taken up by the increased demand, so high oil prices. Add in the effects of traders and you get price spikes etc.
On the demand side, during the early noughties, there was little exploring done due to a wave of oil company mergers (exploration stops after a merger as the portfolio of the new company is assessed, and often reworked using teh dominant companie's processes), lowish oil prices (it was $9/bbl in 1999) and so on. For example, only 2 years ago, Schlumberger fired 15% of their global workforce due to lack of work....
The price will drop (possibly even crash, like it has before!) due to increased exploration: for example in the North Sea 18 months ago there were 14 drilling rigs stacked in the Cromarty Firth, now there are 5 (and we're taking one out of cold stack now)...that's 9 (almost 10) more rigs drilling in the North Sea, so over the next 12 - 36 months North Sea production will increase.
Similar things can be seen in the Gulf of Mexico, West Africa, Campos Basin etc.
RE: Oil at $66 a barrel
-The future's so bright I gotta wear shades!
RE: Oil at $66 a barrel
It really is one of the simpler things in this convoluted industry:
1. There is a refinery outage
2. The futures traders forecast a shortage of gasoline, diesel, heating fuel, etc.
3. The forecast shortages in refined products drives the price of refined products up.
4. To capture the higer prices, every facility capable of cracking a crude molecule moves closer to their physical capacity (which is higher than their rated capacity, where they are all running today) generally at the expense of facility effeciency.
5. The change in refining capacity starts a really fast bidding war for the crude on the market.
6. The price spike from the bidding is reported in all venues possible and voila you have a refinery problem causing a spike in crude prices.
It doesn't have to make sense, this is a commodity business that swings based on rumor and supposition.
David
RE: Oil at $66 a barrel
that explains it all.
With hindsight: when we reflect that just about anyone in finance has "manager" in their job description, we need never again ask how they keep messing up our lives.
JMW
www.ViscoAnalyser.com
RE: Oil at $66 a barrel
Wes C.
RE: Oil at $66 a barrel
In the North Sea, we also see several hurricane force storms (ie force 12+) regularly every winter and we just sit them out....getting bored out of our minds as operations are suspended and hoping the storm will abate before our hitch is due to finish!
RE: Oil at $66 a barrel
I used to be involved in the design of the GoM platforms. The phenomenom known as a "mud wave", where the seafloor actually heaves and subsides due to the cycles water pressure (wave height rapidly and drastically changing) is a powerful force on the platforms' foundation piles. This is especially bad near the Mississippi River delta due to the great depth of loosely sedimented soils. This was becoming known in the mid-70's, after a major platform was totally destroyed.
RE: Oil at $66 a barrel
-The future's so bright I gotta wear shades!
RE: Oil at $66 a barrel
There is a HUGE difference between winds which are equivalent to a weak hurricane and the winds in a strong hurricane.
http://www.nhc.noaa.gov/aboutsshs.shtml
Minimum hurricane strength is defined when sustained winds are 65 knots or 75 mph. Katrina at its peak had maximum sustained winds of 150 knots or 172 mph, with gusts up to 185 knots or 213 mph.
http:/
Remember that kinetic energy increases according to the square of the velocity. This means that a sustained wind of 150 knots has 5.3 times the amount of kinetic energy as a 65 knot wind.
Researchers recently estimated that Hurricane Ivan created waves 130 feet high.
htt
Ivan was a Category 4 storm. Katrina was Category 5.
RE: Oil at $66 a barrel
31 Aug 2005
We have completed a preliminary assessment of nearly all Shell-operated GoM assets and can confirm most appear to have little or no damage except for certain Central GoM assets.
Personnel have already safely returned to our assets in the Western GoM (North Padre Island, and Brazos) some Central GOM (West Cameron, Green Canyon, and Garden Banks) and hurricane recovery and production start up activities have begun. Eastern GoM assets (MP 252, Ram/Powell, Mobile Bay) do not appear to be damaged and post hurricane activities are underway there as well. Production from these assets will resume as appropriate once final inspections of the facilities are completed and pipelines and other related downstream facilities that transport our production to onshore locations have also been systematically inspected and are operational and ready to receive production.
Over-flights and site visits have identified damage to key Central GoM assets, West Delta-143, Cognac, and Mars. Equipment fabrication to repair WD-143 is underway, and assessment teams are visiting Cognac and Ursa today for initial inspection.
As reported earlier, the Mars Tension Leg Platform was significantly damaged in the storm. Attached is a photo of the Mars platform taken by Shell during one of the flights. We are making a full assessment of the damage over the next several days and will then develop a comprehensive repair and recovery plan.
Contractor personnel have boarded and secured both semi-submersible drilling rigs, the Transocean Deepwater Nautilus (DWN) and the Noble Jim Thompson (NJT), whose mooring lines broke during the hurricane. The DWN is currently under tow to a shallow water location for further assessment and repair. The NJT is planned to be secured to tugboats today.
-The future's so bright I gotta wear shades!
RE: Oil at $66 a barrel
David
RE: Oil at $66 a barrel
So it is possible to build platforms to withstand pretty srong metocean forces; withstanding a hurricane is possible, it's just a matter of doing the risk assessment to decide if the design criteria have to be raised.
And that's a question for the MMS etc!
RE: Oil at $66 a barrel
ht
It appears that the so-called "linear model" of ocean waves has officially bitten the dust.
ht
Once things start to go nonlinear, all bets are off. If individual waves become 130 feet high, then no rig is safe for human habitation.
DrillerNic, if you ever find yourself on an oil platform with a hurricane heading your way, please GET OFF.
Hurricanes can go from Cat 1 to Cat 4 overnight. Case in point: Opal in 1995.
http://www.nhc.noaa.gov/1995opal.html
RE: Oil at $66 a barrel
Very interesting.
The high price of fuel is making companies rethink offshore strategies.
Chinas rapid growth and its sudden major bid for a significant share of the fuels availability has impacted significantly on the fuel price but appears to be coming back to bite them; though what this will mean long term is something else.
JMW
www.ViscoAnalyser.com
RE: Oil at $66 a barrel
Really?
That's about 40 tons of cargo, and if we assume the ship uses the usual rubbish they burn (bunker fuel) that costs $400 per ton. ie, they seem to claim that it takes 3 tons of oil to move 40 tons of cargo.
The first figure I found on the web is 1000 ton miles of cargo hauled per gallon, ie about 1 ton of fuel for 40 tons of cargo and 6000 miles.
That is a factor of three discrepancy.
OK, JMW, I know you didn't write the article, but it is seriously wrong.
Cheers
Greg Locock
Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.
RE: Oil at $66 a barrel
http://www.esa.int/esaCP/SEMOKQL26WD_index_0.html
RE: Oil at $66 a barrel
If those #'s are right, then there would be a big market today in wind powered cargo boats. Just think of the proffits on items that are in no rush to get accross the oceans.
RE: Oil at $66 a barrel
Cheers
Greg Locock
Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.
RE: Oil at $66 a barrel
The various "off the wall" options are receiving very serious consideration these days.
I think distillate fuels topped $1000 a tone last week though mostly they are around $500-$550. It isn't just that fuel prices are high and rising, it is the rate of climb and the fact they haven't topped out that is alarming.
However, this is a good illustration of the fact that market size and cost are the fuel of inovation. We will no more have to use up all the oil than we used up coal. I hope.
JMW
www.ViscoAnalyser.com