The battle against climate change must not take precedence over the need to guarantee energy security, UK Industry Minister John Hutton was quoted as saying today, remarks that signal an apparent policy change. The government has often said climate change is the biggest threat facing the world.

"Of course we've got to tackle climate change, it's a real and present danger for used (sic)," Hutton told the Daily Telegraph in an interview on the newspaper's website.

"But we've also go to be absolutely clear that our energy policy has got to be figured first and foremost with a view to supplying Britain with affordable and secure energy it needs for the future."

Read more: Upstream Online
Read the interview in full: The Telegraph

John Browne, the former chief excutive of BP said at the opening conference session of the Offshore Northern Seas show that he expected oil prices to stay above $80 to $100 a barrel.

"It is difficult to see oil prices much below $100, so $80-$100," Browne told the conference.

Browne said energy subsidies have a habit of screwing up the market. “We need to see a 10-fold increase in energy efficiency in the next 40 years. It is a very challenging task and there are critical questions about whether or not it can be achieved”

He said renewable energy presented a very mixed picture around the world “It all depends on whether or not rules are in place.” He added “It is very difficult to get out of the subsidies business once you are in it.”

“What we have to do is to improve our energy productivity three times faster than we improved our labour productivity during the industrial revolution,” he added

Read more: Upstream Online

Russian oil output growth is unlikely to exceed 2.2% next year and will slow to under 1% by 2011, the government said today, confirming earlier forecasts of a slowdown in production growth.

The Kremlin quoted the Economy Ministry's updated forecast for Russian economic development to 2011 as saying oil output could this year reach 492 million tonnes, or 9.85 million barrels per day, almost flat from 491.5 million tonnes, or 9.87 million bpd, in 2007. This year, a leap year, has one extra day.

Under the Economy Ministry's optimistic scenario, oil production is expected to rise to 503 million tonnes in 2009 but growth would then slow to just 0.8% year-on-year in 2011, reaching 518 million tonnes, a Reuters report said.

Last month, the Finance Ministry announced similar forecasts of oil production growth in the period. The Economy Ministry's scenario forecasts no production growth at all.

Read more: Upstream Online

Appearently the topic of Peak Oil is now becoming discussed more and more within the environmental movement as an alternative reason for a change to a more sustainable society. As peak oil and the limitations of available fossil energy resources will greatly affect society and its ability to affect the environment it is great to see that this also is discussed by the environmental movement

Rex Weyler, author, ecologist and long-time Greenpeace member, writes the following:
"As the era of cheap liquid fuels draws to an end, everything about modern consumer society will change. Likewise, developing societies pursuing the benefits of globalization will struggle to grow economies in an era of scarce liquid fuels. The most localized, self-reliant communities will experience the least disruption."

Read more in his blog: Deep Green

The ASPO president, Kjell Aleklett, has been interviewed by the American radiostation KCBS. The interview was about the end of oil, the potentials of offshore drilling in the US and how much of the society that is dependent on oil.

The interview can be found directly from here (as a mp3-file):
http://podcast.kcbs.com/kcbs/1270978.mp3

It can also be located from KCBS homepage at:
http://www.kcbs.com

Mexican oil production will fall to 2.7 million to 2.8 million barrels a day next year as the country's main oil field continues to decline rapidly, Carlos Morales, the head of exploration and production at Petroleos Mexicanos, said.

Mexican output has slid by 20% since peaking in 2004, and officials warn that the country will see exports completely dry up over the next decade unless Pemex accelerates oil exploration in new areas such as the deep waters of the Gulf of Mexico.

Cantarell is producing just over 1 million barrels a day, and Pemex expects it to fall to around 600,000 barrels a day by end-2012. Mexico's second-largest oil field, Ku-Maloob-Zaap, will also head into retirement in 2010 after hitting peak production of 800,000 barrels a day.

"The age of easy oil has come to an end," Morales told lawmakers at a forum. "We don't expect to find another Cantarell or Ku-Maloob-Zaap."

read more

Nigeria's government threatened to impose stiff penalties against foreign oil companies that fail to provide a certain amount of natural gas to the domestic market by the end of the year. The domestic power sector has significant problems and the lack of reliable power is thought to be one of the biggest braking factors for economic growth development in Nigeria.

"Once the emergency is declared in the power sector, there will be stiff sanctions if they fail to meet their obligations and all of this will be clearly spelled out as pre-conditions for continued operations in our country," Olusegun Adeniyi, the president's spokesman, told reporters.

Nigeria warned that it could penalise oil companies via their exports if they do not abide by their domestic requirements.

Read more: Upstream Online

The Federal Trade Commission (FTC) has proposed US government rules to fight manipulation in the oil market, where prices hit a record $147 a barrel last month. As speculation and price manipulation has been pointed out as major factors behind the steep rise in oil price new harder laws and regulations are proposed by various groups.

The commission, under pressure to investigate possible manipulation of gasoline and other fuel prices, said its rules would bar any fraud or deceit in the purchase or sale of crude, gasoline or other petroleum product.

"Fraudulent or deceptive acts, including false reporting to private reporting services or misleading announcements by refineries, pipelines or investment banks, may be covered by the proposed rule." said the commission.

Read more: Upstream Online

The conflict that has erupted in the Caucasus has set alarm bells ringing because of Georgia's pivotal role in the global energy market.

Georgia has no significant oil or gas reserves of its own but it is a key transit point for oil from the Caspian and central Asia destined for Europe and the US. Crucially, it is the only practical route from this increasingly important producer region that avoids both Russia and Iran.

The BTC pipeline, running through Georgia, is a key plank of US foreign policy because it reduces Western reliance on oil from both the Middle East and Russia. Georgia has already claimed that Russia has tried to bomb the pipeline and Azerbaijan halts their shipments of oil through Georgian ports (source: Kommersant). How large the impact on oil prices will be remains to be seen as the oil market opens tomorrow.

Read more about the BTC pipeline here: Wikipedia
Read more: Times Online

Oil consumption in the United States and OECD nations is weakening but China and India have yet to show signs of falling demand, making it unclear if the price fall below $120 is a turning point, the IEA's chief, Nobuo Tanaka, said.

He added that the current $119-$120 per barrel levels for crude oil are still very high, although prices have dropped from record highs near $150 a barrel touched on July 11.

Surging fuel consumption in China, India and the Middle East has been largely seen as responsible for fuelling oil's rally, pushing prices up more than six fold since 2002. The IEA expects oil demand to grow this year, by 890,000 barrels per day, according to its latest monthly oil report. As a result, the agency's biggest concerns remained on the supply side, rather than demand, Tanaka said.

Tanaka, who will address energy officials at the ASEAN Energy Business Forum 2008 on Wednesday, said he supported the decisions by some countries in the region to cut fuel subsidies. He said the removal of all subsidies would help promote energy efficiency, limit demand and put a lid on prices.

Read more: CNBC

China's biggest oil company, state-run CNPC, agreed a $3 billion service contract with Iraq on Wednesday.

The U.S. State Department issued a travel alert to advise U.S. citizens traveling to the Union of the Comoros of the potential for demonstrations and civil unrest due to a severe fuel shortage across the nation. The travel alert expires Oct. 12.

The Union of Comoros is continuing to experience gasoline and diesel fuel shortages following a July 2008 termination of a sole source supply contract for the country's fuel needs. Street demonstrations protesting the lack of fuel have occurred in Moroni, the Comoran capital, and on the island of Anjouan.

With Georgia still in turmoil and Russia's recognition of the independence of the breakaway Georgian regions of South Ossetia and Abkhazia, analysts said investors and creditors of the $11.8 billion project would be even more wary of putting their money into a project already running behind schedule. The pipeline is designed to skirt Russia and deliver natural gas from Azerbaijan directly to Europe, stretching over 3,000 kilometers, or about 1,800 miles, from Turkey's borders with Georgia or Iran to Austria.

After declining for 15 years, U.S. natural gas production is finally on the rise, thanks to new technological developments that make it possible to draw large amounts of gas from deposits previously thought to be unreachable. An increase in natural gas production of the magnitude many industry insiders predict could do wonders for business, the environment and even U.S. energy independence...

Dealers are seeing ``some resurgence in demand for full-size SUVs and pickups,'' Lutz told reporters today in Joliet, Illinois, for a test drive of some of the Detroit-based automaker's 2009 models. He didn't provide figures.

Should it look as if the current hurricane is going to tear up the Gulf oil fields and the coastal refineries, it might not be a bad time to go out and fill your tank for U.S. gasoline stocks are unusually low. Any supply or refining disruptions in the next week or so have a good chance of resulting in spot shortages of gasoline.

HOUGHTON, MI - A new system of measuring water melt shows that the Bering Glacier--the largest glacier in North America--is melting at double the rate that scientists thought. The glacier is releasing approximately 30 cubic kilometers of water a year, more than twice the amount of water in the entire Colorado River, said Robert Shuchman, co-director of the Michigan Tech Research Institute (MTRI).

"This could potentially change the circulation of coastal currents in the Gulf of Alaska," Shuchman said. Those currents are key factors in tempering climate, redistributing nutrients in the water and providing adequate food for the salmon and marine animals, he explained.

Terminals have run out of fuel in West Fargo and Grand Forks in North Dakota; Alexandria, Minn.; and Sioux Falls, S.D.

"This storm remains likely to explode into a major hurricane as it moves across the northwestern Caribbean and into the Gulf over the weekend," said Jim Rouiller, a senior energy meteorologist with weather forecasting firm Planalytics.

Simmons: As you know, I have been talking for some time about the natural gas cliff we are experiencing.

[...]

Well, I know you understand it, but people need to understand the concept of peaking and irreversible decline. It's a sharper issue with gas, which doesn't follow a bell curve but tends to fall off a cliff.

[...]
Someone's going to be left holding the bag big time. If natural gas consumption surges in ten days of excessive heat then it would require almost a complete shutdown of industrial consumption to compensate and protect the grid. As I have been reporting for years now, there isn't going to be enough gas to run those plants, let alone new ones.

[...]

Pray for no hurricanes and to stop the erosion of natural gas supplies. Under the best of circumstances, if all prayers are answered there will be no crisis for maybe two years. After that it's a certainty.Source

Natural gas production in the Lower 48 States has seen a large upward shift. After 9 years of no net growth through 2006, an upward trend began that generated 3% growth between first-quarter 2006 and first-quarter 2007, followed by an exceptionally large 9% increase between first-quarter 2007 and first-quarter 2008.Source

Aug. 5 (Bloomberg) -- Global energy and raw-materials stocks fell into bear markets after plunging oil, gold, copper and wheat prices spurred declines in last year's best-performing industries.
[...]
"Commodities prices have hit a choking point,'' said Nader Naeimi, a Sydney-based senior investment strategist at AMP Capital Investors, which manages about $108 billion. "With further evidence of slowing growth there'll be ongoing pressure on mining and resources stocks.''
[...]
"The perception that the global economy is slowing is damping demand for commodities,'' said Park Sehick, a fund manager at Hanwha Investment Trust Management Co. in Seoul, which holds $1 billion in equities. Commodity prices "will keep on falling from here,'' he said.Source

Deutsche Bank has called the top of the commodity cycle. The uber-bulls of the oil, food and metals boom have advised clients to take profits before the downturn engulfing most of the global economy works its inevitable effects.

Oil will slide back towards its "marginal production cost" of $60 to $80 a barrel; gold will slump to $650 an ounce as the dollar recovers against the euro; copper, lead and tin will slowly halve in price; grains will calm down as harvests in Australia and the Eurasian Steppe return to normal.

The report comes on cue. The CRB commodity index fell 10pc last month, the steepest one-month drop since the onset of the Volcker crunch in 1980. Most raw materials have been slipping for months. Crude was the last to turn after peaking at $147 early last month.

Deutsche Bank says this year's oil surge has been a quirk. Misjudging demand, Saudi Arabia cut output by 400,000 barrels a day (bpd). Several upsets hit the non-Opec bloc of Russia, Norway, the UK, and Mexico. Rebels caused mayhem in Nigeria. Global supply is now creeping back into surplus.

The Saudis are adding 500,000 bpd. Deepwater projects are coming on stream off the US, Mexico, China, and Africa. The Caspian is cranking up a gear. Non-Opec will add 2.2m bpd over this year and next, says the International Energy Agency.Source

Commodity index funds have grown significantly during the past few years, bringing significant long positions to commodity markets. In the futures markets, these funds have typically been long-only funds, buying near-term futures contracts and rolling their positions into more distant months as the delivery month approaches. Commodity index funds are often utilized by pension funds and other large institutions that seek commodity exposure to diversify existing portfolios of stocks and bonds and this exposure is provided by swap dealers. Although commodity swap dealers' gross positions have grown significantly, swap dealers' net positions decreased substantially between 2006 and June 2008. (Figure 12) This suggests that flows from commodity index funds have been offset by other swap dealer activity and thus have not necessarily contributed to the recent price increases in crude oil.

Across all maturities, the aggregate position of swap dealers in WTI crude oil futures contracts was only marginally net long as of the end of June 2008 and was net short on average during the first five months of 2008. This means that swap dealers' futures positions, on balance, were poised to benefit more from a fall in crude oil prices than from a rise in crude oil prices.
(P. 23-24)

A record 1.6 million barrels a day in American refined petroleum products were exported during the first four months of this year, up 33 per cent from 1.2 million barrels a day over the same period in 2007. Shipments this February topped 1.8 million barrels a day for the first time during any month, according to final numbers from the Energy Department.Source

If we burn less, India and China will burn it up, no problem.

The less we use the more China will use. China and the other emerging economies set the price of oil now, not the US.

BEIJING, July 22 (Reuters) - China's crude oil imports from Iran in June halved from a year ago to its lowest monthly level in 18 months, contributing to the overhang of crude stored offshore in Iran, official customs data showed on Tuesday.
Iran shipped 1.176 million tonnes, or 286,000 barrels per day (bpd), of crude to China last month, 50 percent less than in June 2007, data from the General Administration of Customs showed.
This is also well below the 400,000 bpd of term volumes officially contracted for this year, and the even higher 465,000 bpd average imports of Iranian crude for the first quarter.Source

BEIJING (Reuters) - China's worsening power woes are all but guaranteed to trigger a surge in imported oil, just as they did in 2004 during the worst crisis in decades, right?

Wrong, say experts and industry sources. While the theme is familiar, the circumstances couldn't be more different, suggesting that oil bulls looking for a reason to push crude beyond $150 a barrel will need to look elsewhere.

[...]

China appears to be well-stocked with foreign fuel after 8 months of steady inventory builds that caused diesel imports to surge 9-fold in the first five months this year.Source: Unlike 2004, China oil demand unmoved by power woes

Different species have different requirements for a given element, as Liebig knew. Consequently, when one element is limited in a community of species, population growth typically does not grind to a halt; rather, a species that is less constrained by that limiting element replaces another that is more constrained in a process called succession.(P. 242)

Charles Stucki, vice president and general manager of Cisco Telepresence Systems, said the teleconferencing technology is their fastest-growing new product in the company's history.

Of the companies that have implemented use of this new technology, Hsieh said it has likely paid for itself multiple times over just in travel cost reduction.

Cisco CEO John Chambers, said Cisco has cut its own global travel budget by $180,000,000 over the past year using the aforementioned technology.Source

Here's a suggestion: The next time a Congressional committee wants to hold a hearing on how "speculators" are driving up oil prices, each committee member should first be required to demonstrate - preferably in their opening remarks - a basic understanding of the mechanics of futures trading.

Even better, they should be required to explain in detail how it is that investors who never take delivery of a single barrel of crude - and thus never remove a drop of oil from the open market - are causing record high oil prices.Source

In the early stages of the current oil pricing system which emerged in the period 1986-88, crude oil was priced off the spot market quotations of these benchmarks (namely dated Brent, spot WTI and Dubai) as assessed by oil reporting agencies such as Platts and Petroleum Argus. In the last few years [i.e. since the early 2000s] however, there have been some serious doubts about the ability of the spot physical market to generate a price that reflects accurately the margin of the physical barrel of oil. One of the main problems is that very little actual trading occurs in these crudes which makes the process of price discovery very difficult.Source

Low volumes of crude oil available for spot trading make price discovery problematic and increase the vulnerability of markets to squeezes, distorting prices and undermining market confidence. A squeeze refers to a situation in which a trader goes long in a forward market by an amount that exceeds the actual physical cargoes that can be loaded during that month. If successful, the squeezer will claim delivery from sellers who are short and will obtain cash settlement involving a premium. It is true that all markets are prone to squeezes and in the last few years there have been occasions on which the Brent market was subject to successful squeezes. But it is also true that it is easier to squeeze thinner markets.Source

Dated Brent, which acts as a price marker for many international grades, is physical crude traded on an informal market, rather than a regulated futures exchange. This lack of regulation poses problems for oil producers and consumers seeking a fair price, said Robert Mabro, director of the Oxford Institute for Energy Studies and a leading Brent expert.

"There are regular squeezes in the Brent market," Mabro said. "In the trading community, people are fed up. This general view that you can do whatever you like in an informal market is okay, as long as you regulate the market a bit. But if it's a free-for-all, you're back to the cowboy age."

A typical Brent squeeze involves a company quietly building a strong position in short-term swaps called contracts for difference, or CFD's, for a differential not reflected in current prices. The company then buys enough cargoes in the dated Brent market to drive the physical crude price higher, which boosts the CFD differential, Mabro said.

The company may lose money on the physical side, but it's more than compensated from profits on its offsetting paper position in the short-term swaps market, Mabro said.

"The whole trick is to collect more money in CFDs than you lose on the physical squeeze," Mabro said. "People seem to do it in turn. It depends on who's smart enough to move in a way that nobody notices until it happens."Source

The declining liquidity of the physical base of the reference crude oil and the narrowness of the spot market have caused many oil-exporting and oil-consuming countries to look for an alternative market to derive the price of the reference crude. The alternative was found in the futures market. When formula pricing was first used in the mid-1980s, the WTI and Brent futures contracts were in their infancy. Since then, the futures market has grown to become not only a market that allows producers and refiners to hedge their risks and speculators to take positions, but is also at the heart of the current oil-pricing regime. Thus, instead of using dated Brent as the basis of pricing crude exports to Europe, several major oil-producing countries such as Saudi Arabia, Kuwait and Iran rely on the IPE Brent Weighted Average (BWAVE).¹¹ The shift to the futures market has been justified by a number of factors. Unlike the spot market, the futures market is highly liquid which makes it less vulnerable to distortions. Another reason is that a futures price is determined by actual transactions in the futures exchange and not on the basis of assessed prices by oil reporting agencies. Furthermore, the timely availability of futures prices, which are continuously updated and disseminated to the public, enhances price transparency.

[11] The BWAVE is the weighted average of all futures price quotations that arise for a given contract of the futures exchange (IPE) during a trading day. The weights are the shares of the relevant volume of transactions on that day. Specifically, this change places the futures market, which is a market for financial contracts, at the heart of the current pricing system.Source(pdf)