[Ok-sus] Oil posting record prices and they're saying its abundant?

Robert Waldrop bwaldrop1952 at att.net
Tue Mar 12 03:52:25 UTC 2013


Excellent blog article noting the dependence on magical thinking and future 
promise in the pro-abundant-oil arguments.

http://resourceinsights.blogspot.com/2013/03/oil-is-at-100-and-theyre-telling-us-its.html

 Bob Waldrop, Oklahoma City
http://www.ipermie.net -- How to permaculture your urban lifestyle

SUNDAY, MARCH 10, 2013
Oil's average price posts new records and they’re telling us it’s abundant!

It is a slick piece of public relations to convince people to disregard what is 
right in front of them and believe the opposite. And yet, that is what the oil 
industry has achieved with an oh-so obviously coordinated campaign to tell the 
public and policymakers that there is no need to be concerned about future oil 
supplies.

Many people remember the price spike of 2008 which shot prices to an all-time 
high of $147 a barrel. Oil subsequently crashed all the way down to about $35 at 
the end of that year as a brutal contraction gripped the global economy. But, 
oil has subsequently been making new all-time highs when you consider the yearly 
averages.

U.S. drivers should not be that surprised by this for they paid average daily 
gasoline prices that were higher in 2011 and 2012—$3.53 and $3.64 per gallon 
respectively—than they did in the previous record year of 2008 when they paid an 
average of $3.26, according to the U.S. Energy Information Administration (EIA).

Brent Crude, which has become the de facto world benchmark price for crude oil, 
has also just posted back-to-back years of record prices, higher than even the 
average daily price in the fateful year of 2008. In that year Brent achieved an 
average daily price of only $96.94 according to the EIA. But, in 2011 the 
average daily price was a record $111.26—which was followed by another record in 
2012 of $111.63. The price in 2013 has so far averaged about $114.

It is true that the American benchmark crude—Cushing, Oklahoma West Texas 
Intermediate—has been trading at a discount to Brent Crude. This is because 
Cushing, one of the country’s largest oil depots, is being flooded with supplies 
from North Dakota and the Canadian tar sands, supplies currently unable to find 
their way to a seaport that would connect them with world markets and thus world 
prices. An operator I know in Houston said that rather than send his production 
to Cushing where the discount is between $20 and $25, he is happy to put his oil 
on a barge and send it to Louisiana where he has consistently been getting 
prices over $100.

As it turns out, most inhabitants of the globe pay prices reflective of the 
Brent Crude price, and that’s why it is frequently quoted as the world price.

So, how is that the public and many policymakers have swallowed the abundance 
argument even though the evidence of prices suggests the opposite? The industry 
has made its case by saying that newly accessible tight oil deposits in North 
Dakota and elsewhere are going to vastly expand oil production. It has coaxed 
Wall Street firms with whom the industry does business to put out rosy 
forecasts; it has made an army of paid think-tank propagandists available to the 
media; it has convinced government agencies that the future is bright; and, in 
one case, it sent one of its own to Harvard to write an industry-funded report 
that says everything will be fine—in the future!

You will notice one theme here. The industry’s case for abundance rests not on a 
current glut or a downward sloping oil price chart, but rather on the promise of 
abundance at some indeterminate time in the future, that is to say, on magical 
forecasts. But colorful charts and cheery prognostications are not facts. And, 
as always, it is important to consider the source.

Keep in mind that what a good magician does is not really magic. Rather, a good 
magic show is based primarily on misdirection. Get the audience to look in the 
wrong place while you do your handiwork unobserved.

And, so it is with the oil industry. It has been able to get the public and 
policymakers to focus on marginal gains in U.S. oil production while ignoring 
declines in the rest of the world. Mathematically speaking, that is how it must 
be since the rate of worldwide oil production has been essentially on a bumpy 
plateau since 2005. As U.S. production has grown, production in the rest of the 
world as a whole has declined by about the same amount.

Now, that wouldn’t matter quite so much if oil were not traded in a world market 
dominated by large countries that are still huge importers of crude oil. But, 
the other fact that the industry PR magicians don’t want you to focus on is that 
global net exports of oil—that is, the oil available on the world market to 
importers such as the United States, China, Japan, India and much of Europe—has 
been shrinking since 2006. The global competition among importers for those 
shrinking exports has been a major factor in sustaining record prices for the 
past two years.

It is worth keeping in mind that all of this is happening as the so-called 
fracking “revolution” is proceeding, as record investment in oil exploration and 
development continues, and as consistently high prices drive the necessary 
profits for all this effort. And yet, the impact on supplies worldwide has been 
almost imperceptible.

More at the link above.
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