I'm Spooked

Had a half-dozen eggs in the basket before lunch!

Lots going on with the day job. Lots going on with the kids.

Here's the spooky news du jour. This is from the Association for the Study of Peak Oil and Gas, or ASPO. Here's a quote from T. Boone Pickens:

``As this unfolds, you're going to have to find alternatives that are going to do the job that oil is doing,'' Pickens said. ``Everyone is going to have to come to grips with this in the next two or three years. People are going to have to figure it out.''

Well, we hope to find alternatives to oil.

Here's an excerpt from the weekly ASPO report, available from the above link:


1. New record prices.

The week started with predictions that oil prices would soon fall as US oil inventories were
forecast to start building again. Many analysts believed a slowing US economy and relatively
low gasoline prices do not support oil above $80. Oil has fallen in the fourth quarter during 13 of the past 20 years after peak summer demand was over.

On Tuesday, however, prices started to rise on concerns that there will be a big shortfall during the Northern Hemisphere heating season this winter. For the next four days, oil continued to rise until it hit an all-time peak of $84.05 on Friday and closed at a record $83.69.

Two reports issued on Thursday were the key reasons behind the price increases. In its monthly Oil Market Report, the IEA in Paris stated that crude oil stocks in the OECD countries around the world continued to fall in September at a time when they typically increase in preparation for the winter heating season. This report was followed a few hours later by the weekly US stockpiles report which showed US commercial crude oil stockpiles dropping by 1.7 million barrels as compared to analysts’ predictions that there would be a 1 million barrel increase.

While US stockpiles are still above average for this time of year, they have dropped by 10
percent since June.

Last week also saw renewed threats by Turkey to launch military operations against Kurdish
insurgents in Iraq. Most analysts believe that the state of OECD inventories, which have now
fallen below five year averages, is more important than geopolitical factors in the recent price
increases.

On Friday, Energy Secretary Bodman told reporters that high prices are being driven by
fundamental supply and demand imbalances and not speculative investing. The head of the
EIA, Guy Caruso, told a conference last week that he foresees that gasoline prices will continue to climb in 2008.

2. The International Energy Agency’s monthly report

As the world approaches peak oil production, the IEA’s Oil Market Report that is released
around the middle of each month is becoming a key document in understanding the
supply/demand situation. In this month’s report, the Agency still sees “falling US, European and Japanese crude and product stocks, and expectations are that tighter conditions will be seen in the fourth quarter.” OECD stockpiles are estimated to have dropped by 21 million barrels in August and another 27.4 million in September which implies a counter-seasonal 360,000 b/d drawdown during the 3rd quarter.

Peak Oil Review

Although world demand for oil is seen as slowing a bit due to high prices, the financial crisis,
and slowing economic growth, the Agency still believes that world demand for oil in the 4th
quarter will increase by 2 million b/d over last year and will increase to 88 million b/d next year.

The IEA calculates that world oil production increased by 415,000 b/d in September to 85.1
million b/d. Although OPEC is still on record as planning to increase production by 500,000 b/d on 1 November, many remain skeptical that world production will increase as rapidly as required to meet demand. The price increases of this past week may be a reflection of this imbalance.

To summarize: When there's more demand than supply, we're in a world of hurt.