[R-G] OPEC and US Fuel Figures at Odds + OPEC Sees Future Fall in Demand for Its Oil

Yoshie Furuhashi critical.montages at gmail.com
Sun Jul 13 09:50:27 MDT 2008


The history of great oil price volatility helps create self-fulfilling
expectations of long-term price volatility, which in turn worsens
short-term price volatility today, leading to far higher prices than
actual demand and supply today justify (supply still outpacing demand
even in the context of relatively low spare production capacity -- see
the charts on the right at <http://omrpublic.iea.org/> and listen to
Adhip Chaudhuri at
<http://english.aljazeera.net/business/2008/07/200879184520258575.html>).
 That, in addition to direct impacts of conversion to biofuels,
indirectly helps escalate food prices, triggering social unrests in
many nations -- including oil producers -- and diminishing political
stability, which in turn feeds back into self-fulfilling expectations
of price volatility.  (Imperialists are in part motivated by all this
and foolishly take actions that make it all worse, since they are,
contrary to their self-image, destabilizers rather than stabilizers.)
Oil illustrates the problem of market anarchy -- lack of planned
coordination between producers and consumers -- like nothing else.
But instead of analyzing this problem, a number of otherwise
outstanding leftists turn to "peak oil" theory, which, like hedgers
and speculators, adds to self-fulfilling expectations of price
volatility.  What is ironic is that "peak oil" theorists on the Left,
many of whom are Marxists or Keynesians or Marxian-Keynesians and
friends of planning and counter-cyclical policy-making, are in essence
spreading an unfounded idea that intensifies market anarchy and
miseries it causes. -- Yoshie

<http://www.ft.com/cms/s/0/d7f74fd6-42de-11dd-81d0-0000779fd2ac,dwp_uuid=f2b40164-cfea-11dc-9309-0000779fd2ac.html>
Opec and US fuel figures at odds

By Carola Hoyos in London

Published: June 26 2008 02:47 | Last updated: June 26 2008 02:47

Opec believes it will need to produce far less oil over the next 12
years than does the US, creating uncertainty over whether the oil
cartel's members will invest enough to boost production capacity to
stop oil prices rising.

The US Energy Information Agency on Wednesday predicted the world
would need more than 37m barrels of oil a day from Opec by 2010 and
44.4m b/d in 2020.

But in a concurrent report, Opec said new supply from other regions
and biofuels would reduce the need for its oil from 32m b/d today, to
31m b/d in 2012 before it rose again, but only to 35.5m b/d in 2020 –
more than 9m b/d less than the EIA expects.

The differing views matter because the long-term forecasts will be one
of the main determinants of how much resource-holders invest in future
production capacity.

"The oil industry faces great uncertainties over how much to invest,"
Opec said in a background paper.

The oil cartel has long argued that consuming countries' policies to
boost car efficiencies and support alternative fuels make it difficult
to know how much oil it will have to produce to meet global demand in
the longer term.

This thinking is already having an impact. Saudi Arabia, the world's
biggest oil exporter, recently postponed plans to expand its
production capacity past the 12.5m b/d it is expected to reach next
year, arguing the demand it anticipated did not warrant the
investment.

Other Opec countries – most notably Qatar in terms of natural gas –
have also put expansion plans on hold as record oil prices have
dampened the urgency to boost production.

But these countries are also worried that biofuels will make their oil
redundant – in what could be a misplaced fear, as a barrel of ethanol
is still far more expensive to produce than a barrel of Middle Eastern
oil.

The EIA sees the use of biofuels doubling from 2010 to 2030, to reach
2.7m b/d, rather than the group's previous estimate of 1.7m b/d. US
ethanol production will account for more than half of that increase,
the EIA said on Wednesday. Renewable fuels are expected to make up
about 8.5 per cent of global energy use by 2030, up from about 7.7 per
cent in 2005, the EIA said.

Because of its higher price forecast, the EIA, cut its oil demand
figures, with needs reaching 89.2m b/d by 2010, rather than the
previous estimated 90.7m. Most of that cut came from outside Opec.
Non-Opec oil production estimates in 2010 were reduced to 51.8m b/d,
down 1.1m b/d, while Opec's estimated supply dropped only 400,000 b/d.
to 37.4m b/d.

"We do think that over the next five to 10 years the high [oil] prices
will bring on new supplies that will put downward pressure on price.
But we're not going back to the historic prices we saw in the 1980s
and 1990s," said Guy Caruso, head of the EIA.

<http://www.ft.com/cms/s/0/b0ca55de-4ed2-11dd-ba7c-000077b07658,dwp_uuid=f2b40164-cfea-11dc-9309-0000779fd2ac.html>
Opec sees future fall in demand for its oil

By Carola Hoyos in London

Published: July 11 2008 03:15 | Last updated: July 11 2008 03:15

The Opec oil cartel on Thursday warned it might need to slow
investment in its oilfields as consuming countries reduce their oil
demand through conservation and by increasingly turning to
alternatives, such as biofuels.

Abdalla Salem El-Badri, the group's secretary-general, said: "Why
should we invest in spare capacity that will not be used? We see
plenty of spare capacity until 2020."

Opec said new projects from outside the group could reduce the need
for the ­cartel's oil to 31m b/d by 2012.

In its most recent annual report, the group also cut its demand
forecasts for 2030, estimating that the world would need 113m b/d, 4m
fewer barrels than it had previously predicted.

The report cites the efficiency gains and demand erosion that come
with high prices as their reason.

Opec doubled its price assumption to $70-$90 a barrel in its latest report.

Some of the biggest recent changes in demand have come in the US where
petrol has remained at more than $4 a gallon for a month, according to
a survey by the American Automobile Association.

In July, petrol use in the US fell to its lowest level since 2003,
dropping 3.3 per cent from levels at the same time last year, the
Energy Information Administration, the statistical arm of the US
department of energy, said this week.

But in other parts of the world, particularly Asia and the Middle
East, analysts still expect rapid growth. Many say Opec is being too
optimistic about the ability of countries outside its club to add new
barrels.

Some, such as Matthew Simmons, a Texas-based energy investment banker,
have even speculated that Opec, and particularly Saudi Arabia, its
biggest member, are hiding behind lower demand forecasts to obscure
the fact that they will be unable to squeeze as much oil out of their
ageing fields as they have claimed.




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