2005 June 14 Tuesday
Oil Prices Stay High As Iraqi Production Drops Saudi Production Stays Even
Iraq may export only 1.45 million barrels of oil per day in coming months.
Oil exports from Iraq have plummeted since the start of the year, despite the $2billion (£1.1billion) of reconstruction money allocated by the United States.
Last week, the Iraqi state oil marketing organisation (SOMO) cut its export contracts to just over 1.45m barrels a day for the next six months. At the end of last year, SOMO said it hoped it would ramp up exports to 1.9m barrels a day.
Some advocates of the Iraq invasion argued that once Saddam Hussein was overthrown and sanctions lifted that rapid increases in Iraqi oil production could pay for all reconstruction and so lower the world price of oil that the invasion would become a net benefit for the US economy in spite of the military costs. Well, no!
Iraq oil production has declined due to the insurgency. In March 2004 Iraq was producing 2.3 to 2.5 million barrels of oil per day and prewar production was even higher.
A month before the April 1 deadline set by Iraq and American officials for restoring the industry to prewar levels, the country is producing 2.3 million to 2.5 million barrels a day, compared with 2.8 million barrels a day before the war.
Though the CIA puts Iraq's 2002 production at only 2.03 million barrels. So who to believe? The CIA or the New York Times?
The first article also refers to the claim by Houston investment banker Matthew Simmons that Saudi Arabia does not have as much reserves as it claims. Simmons goes so far to argue that Saudi Arabian production has already peaked. (and see the bottom of this post for more on Simmons' argument). Well, this becomes more plausible as the price of oil continues to stay above $50 and Saudi Arabia continues to fail to increase output.
Leading oil producer Saudi Arabia on Tuesday highlighted OPEC's inability to cut crude prices, saying its supplies would not rise despite plans to increase official output limits.
Saudi Oil Minister Ali al-Naimi said Riyadh had informed its customers of export allocations for July that mean keeping output steady at 9.5 million barrels a day.
For a small fraction of the cost of the Iraq invasion the United States could have funded most of the academic chemists in America to investigate either photochemistry to look for better and cheaper photovoltaic materials or electrochemistry to look for lighter and cheaper battery technologies to enable cars to run on electricity. For another small fraction of the cost of the Iraq invasion we could have funded very rapid development of fourth generation nuclear power technologies such as the pebble bed modular reactor. The Iraq invasion has been a colossal waste of money.
The Saudis claim oil prices are high due to refinery capacity shortages. This is disingenuous. The only spare oil production capacity in the world happens to be for heavy oil that requires special refining capability.
OPEC is at full capacity bar some Saudi volume of heavy, high-sulphur crude that needs advanced refinery technology to meet Western environmental regulations.
But for more conventional oil the world's capacity is maxed out.
Eventually the United States will withdraw from Iraq and some faction will come out on top and ruthlessly suppress all opposition. At that point oil field investments can boost Iraqi oil production. The general director of Iraq's oil ministry, NK Al-Bayati, claims Iraq will be pumping 6 million barrels of oil by 2015. Even if they pull that off oil prices will stay high as world oil demand growth outstrips that increase. Only development of non-oil energy sources can bring about a sustained substantial decrease in oil prices.
I hope Matthew Simmons is wrong but I fear he is correct. Does anyone believe it possible that George Bush may not complete his 2nd term in office? I'm talking about some type of forced resignation.
Photovoltaics. Yawn. Since the 1970s their proponents have said, "If we can only improve efficiency another 15%, it will be competitive with oil-generated energy." Well, over 100% later, it's still not competitive. PV pimps have lost my interest.
Things were much less promising at various points in the American Revolutionary War. Good things faint-hearted supporters like you weren't around then, or there would be no U.S.
PV doesn't need much efficiency; we've got square miles of sunlit roof going begging. What it needs is watts per dollar, and that's just about here. The per-watt price of PV has been on a steady downward trend for two decades and it is already competitive with on-peak power in some locales.
If we'd started a few years ago we could be using cogeneration to offset demand for oil. Had CARB allowed the plug-in hybrid as a partial-ZEV, electricity could substitute for a large fraction of motor fuel. We could use PV when it becomes cost-effective (which is a closer prospect than you might think), or just use topping cycles on processes which require heat and skim electricity off the top. This would allow the near-complete utilization of fuel with displacement of large amounts of petroleum.
Unfortunately, CARB is one of the organizations which dropped the ball.
Bush will be like Clinton. He won't leave unless the Senate votes to remove. I don't see the vote numbers ever counting up for that.
I'm not faint-hearted in my support for PV the way you are.
As for the revolution in Iraq: I'm confident that the insurgents won't get defeated by the foreign power. Yes, there is an obvious parallel with the United States where the British eventually lost. Except the US is now more in the British position.
You seem to be missing the point that most Iraqis won't fight for democracy. Only high salaries get them to sign up for the government's military. Therefore they are more like Hessian mercenaries. The low paid volunteers are fighting against the government and against the United States. The insurgency is becoming more powerful, not less.
High salaries may be required to get Sunnis to sign up, but the Shi'a?
Wretchard at The Belmont Club seems to think that the violence is primarily Sunni. Curiously, the oil is mostly in Shi'a and Kurdish areas. If the Kurds and Shi'a decided to split from the Sunni triangle, they would sell plenty of oil while the Sunnis would have self-government and not a cent to show for it.
EP, your above post is insufficiently pessimistic. I suggest you get your mind right, my friend, and get with the program. Doom. Gloom. Darkness. Bushitler. CheneyBurtonKellogulaghell.
EP, your above post is insufficiently pessimistic
In the light of Coalition of the willing countries which are or have withdrawn troops in Iraq, With the UN and all of the aid agencies which has left due to the security problems. With reconstruction at a standstill, Inept as well as corrupt Iraq government, Increasing violence and casualties as the insurggency entering its third year in which it has become cohersive and organised. The US armed forces are failing to meet recuitment quotas. 200 Billion US taxpayer dollars have been well spent.
Its not all doom and gloom. Iraq nowdays hardly rates a mention in the news media anymore. With all the backbiting from the Bush administration the media is finally moving into line with the rest. Things are certainly looking up.