TheStreet.com - 2007 In Energy - "Fundamental Supply Challenges Remain"

[hatrack]

EDIT

Although many pundits point to signs of high inventories, the global crude oil and North American natural gas markets are still near the long-term supply-demand equilibrium.

Moreover, fundamental supply challenges remain. On the oil front, the Saudis are still seeing declines in their legacy oil-production fields, and Mexico's prize Cantarell oil field has peaked and is declining quickly. While there have been some appealing deep-water discoveries, such as the one in the Gulf of Mexico made by Chevron (CVX - commentary - Cramer's Take - Rating), meaningful production is years away and will cost hundreds of millions of dollars to develop.

While natural gas remains largely a regional market, its supply fundamentals are just as challenged as crude oil. Production decline rates in existing wells average about 30%, which means drilling must be done more quickly just to remain at break-even. A growing rig count could have little impact on overall production.

In addition, geopolitical risks -- such as instability in the Middle East, violence in Nigeria and political unrest in Venezuela -- have not substantially improved in the past 12 months. The potential still exists for price spikes due to political disruption in the coming year.

EDIT

http://www.thestreet.com/_tscrss/markets/activetraderupdate/10329273.html

[EVDebs]

1. 2031, or about 25 more years left...

We've got till 2031

according to Plan B 2.0

http://www.earth-policy.org/Books/PB2/PB2ch1_ss3.htm

[4dsc]

2. That's not what I read

I believe the article claims currect expansion of the both chinese and American economies won't happen that way models are projecting. The last paragraph says it all:

The inevitable conclusion to be drawn from these projections is that there are not enough resources for China to reach U.S. consumption levels. The western economic model—the fossil-fuel-based, automobile-centered, throwaway economy—will not work for China’s 1.45 billion in 2031. If it does not work for China, it will not work for India either, which by 2031 is projected to have even more people than China. Nor will it work for the other 3 billion people in developing countries who are also dreaming the “American dream.” And in an increasingly integrated world economy, where countries everywhere are competing for the same resources—the same oil, grain, and iron ore—the existing economic model will not work for industrial countries either.

[Dogmudgeon]

3. We have NO time left

We have badly overshot our last several last chances to avoid, shall I say, "problems". I do not think that there is anything that can be done to avoid some kind of economic/social disruption, short of an energy discovery on the order of DIY super-duper cold hyper-orgone nanofusion with hot fudge, walnuts, and triple sprinkles. We may be able to avoid a population die-off, but even that will be difficult, and it's going to be absurd to persuade millions of dispossessed and angry people to save the four or five billion other people who never had much of anything to begin with.

Yes, I may crack wise, but I am not getting any pleasure out of it. I am sincerely frightened at the prospect of what will happen when the financial markets become aware of the situation. A few more oil field failures (both the Ghawar in S.A. and the Cantarell in Mexico are in collapse) and the energy market will either be thrown into a panic, or there will be a quick, if non-panicky, run-up of energy futures, and the entire economic system will change -- fast. This will not wait until 2031; it could happen as early as this coming year, though I think we do have a few more years.

The question is: "a few more years" for what?

We would need 1000 nuclear reactors, or 2,000,000 wind power plants, or 50 billion baked-bean suppers, just to buy us a little more time, a decade or so. We won't get that, either. It would take an effort on the scale of fighting WW2, and we'll only discover the will to do it in the middle of the crisis, when it's too late. We needed to make plans on this scale yesterday. And remember, the Boy King doesn't like "thinkers and planners".

We blew it. Sure, we should keep trying anyway, just in case we've overlooked some way to save our collective hide. But the future is not rosy. Deepen that rose color to the color of blood. That's more like it.

America will probably not starve. Probably. (Bush certainly won't.) But much of Europe, Japan, and developed South America will. Most of China. And all of everywhere else.

If the living come to envy the dead, the rich survivors will whine incessantly and poetically, and still steal the property the dead leave behind.

--p!