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West Races to Defuse Ukraine Crisis

Ukrainian military vehicles drive toward the flashpoint city of Debaltseve in eastern Ukraine on Sunday. ENLARGE Photo: Associated Press MUNICH—The U.S. and Germany are struggling to maintain a united front against an unflinching Russia ahead of a crucial week of high-stakes, top-level diplomacy on the Ukraine crisis. Chancellor Angela Merkel has given Russian President Vladimir Putin until Wednesday to agree to a road map to end the fighting in eastern Ukraine, according to Western officials. If in her assessment Russian intransigence has blocked a deal, they said, Germany will likely move to step up European sanctions against Russian companies, possibly including broader asset freezes. Separately, the U.S. is considering supplying Ukraine with lethal aid. President Barack Obama has held off on a decision until he sees Ms. Merkel—who has publicly opposed weapons deliveries—on Monday morning. The confluence of events—which follows a recent surge of deadly fighting between Ukrainian forces […]

Posted On : Published By : Tom Whipple
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Merkel to meet Obama over Ukraine

Angela Merkel speaking at the Munich conference Angela Merkel is to meet President Barack Obama in Washington on Monday in a bid to secure a diplomatic solution to the escalating Ukraine crisis amid calls for the US administration to arm Kiev. The German chancellor’s visit comes after the latest round of talks between France, Germany, Ukraine and Russia failed to result in a peace accord at the weekend. Adamantly opposed to arming Ukraine, Ms Merkel is putting huge efforts into bringing Russian President Vladimir Putin to the negotiating table. In a four-way phone call on Sunday, Mr Putin and Ms Merkel, together with French President François Hollande and Ukrainian President Petro Poroshenko, agreed to meet on Wednesday in the Belarusian capital of Minsk. Talks have taken on new urgency following the collapse of September’s ceasefire agreement as Russian-backed rebels seize government-controlled areas in eastern Ukraine. The Washington meeting comes […]

Posted On : Published By : Tom Whipple
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Crisis in Ukraine Underscores Opposing Lessons of Cold War

MUNICH — The Cold War is history, but its spirit this weekend stalked the security conference held here each winter for the past 51 years. Chancellor Angela Merkel of Germany and Senator John McCain drew very different lessons from the West’s 20th-century showdown with the Soviet Union, as they clashed over whether to arm Kiev’s troops in response to Russian aggression in eastern Ukraine . That disagreement represents one of the sharpest rifts yet over how the allies should respond to the current challenge from Moscow. Europe is very different from the days when the militaries of NATO and the Soviet bloc stared each other down. But the crisis in Ukraine has reopened familiar differences as to whether the threat of force — in this case, Washington’s readiness to bolster Ukraine’s military against pro-Russian rebels backed by the Kremlin — is more effective than months of so-far failed negotiations. […]

Posted On : Published By : Tom Whipple
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There Is No Peak Oil–But We Are Approaching Peak Low-Cost Oil

The collapse in oil prices over the last seven months looks to destabilize the world stage by redirecting over $1.8 trillion in spending if current prices hold. While worldwide demand exceeds 92 million barrels per day , the drop in price from over $105 this past summer to under $50 translates into sizable savings for the average American. Who Gains vs. Who Loses Spread out across all industries, U.S. consumers could be looking at an extra $300 billion in savings this year, since oil touches just about every aspect of daily life in one form or another. The working poor, in particular, will be the largest beneficiaries , since energy expenses constitute a greater percentage of household income for them than for any other group. They will likely feel as though they are getting ahead, for a change, rather than continuing to slip further into the abyss . The impact of “less pain at the pump” […]

Posted On : Published By : ASPO-USA
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Alternate opinions: The world’s energy information duopoly comes to an end

Woodcut showing a soothsayer in front of a king. We can see some of the signs in the nature the soothsayer uses: stars, fishes and sounds from the mountains. Creator: Olaus Magnus 1555. Source: "Historia de gentibus septentrionalibus", book 3 via Wikimedia Commons. Recent developments are beginning to undermine the supremacy of the world’s long-running energy information duopoly and its perennially optimistic narrative. Policymakers, investors and the public should take heed. Until now most energy price and supply forecasts and analyses were based predominately on information from the globe’s two leading energy information agencies: the  U.S. Energy Information Administration (EIA) , the statistical arm of the U.S. Department of Energy, and the  International Energy Agency (IEA) , a consortium of 29 countries originally formed in response to the 1973-74 Arab oil embargo to provide better information on world energy supplies to its members. Both agencies provide forecasts that are […]

Posted On : Published By : Tom Whipple
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Charts showing the long-term GDP-energy tie

In Part 1 of this series , I talked about why cheap fuels act to create economic growth. In this post, we will look at some supporting data showing how this connection works. The data is over a very long time period–some of it going back to the Year 1 C. E. We know that there is a close connection between energy use (and in fact oil use) and economic growth in recent years. Figure 1. Comparison of three-year average growth in world real GDP (based on USDA values in 2005$), oil supply and energy supply. Oil and energy supply are from BP Statistical Review of World Energy, 2014. In this post, we will see how close the connection has been, going back to the Year 1 CE. We will also see that economies that can leverage their human energy with inexpensive supplemental energy gain an advantage over other […]

Posted On : Published By : Tom Whipple
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Here’s Why Big Oil Companies Are Unable To Increase Reserves To Counter Declining Production

Here’s Why Big Oil Companies Are Unable To Increase Reserves To Counter Declining Production thumbnail According to the quarterly results announced during the past few weeks, major oil companies have reported a mediocre performance for last year, as far as exploration and production of crude oil and natural gas reserves is concerned. At the same time, companies have also reduced their capital spending budgets for this year, which might exacerbate their lower production problem. Over the last decade, some of the biggest oil companies have seen their production drop and their growth of reserves stutter, even though oil price was going up for the most part. Royal Dutch Shell plc (ADR) ( NYSE:RDS.A ), BP plc (ADR) ( NYSE:BP ), ConocoPhillips ( NYSE:COP ), Exxon Mobil Corporation ( NYSE:XOM ), and Chevron Corporation ( NYSE:CVX ) are five of the biggest global oil and gas companies, which saw their production drop 3.25% year-over-year (YoY) on […]

Posted On : Published By : Tom Whipple
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Jeremy Grantham Divines Oil Industry’s Future

The simplest argument for the oil price decline is for once correct. A wave of new U.S. fracking oil could be seen to be overtaking the modestly growing global oil demand. It became clear that OPEC, mainly Saudi Arabia, must cut back production if the price were to stay around $100 a barrel, which many, including me, believe is necessary to justify continued heavy spending to find traditional oil. The Saudis declined to pull back their production and the oil market entered into glut mode, in which storage is full and production continues above demand. Under glut conditions, oil (and natural gas) is uniquely sensitive to declines toward marginal cost (ignoring sunk costs), which can approach a few dollars a barrel — the cost of just pumping the oil. Oil demand is notoriously insensitive to price in the short term but cumulatively and substantially sensitive as a few years […]

Posted On : Published By : Tom Whipple
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After Saudi Arabia Crushes The US Shale Industry, This Is Who It Will Go After Next

Whether it is to cripple the will of Putin and end his support of the Syria regime (thus handing the much desired gas-pipeline traversing territory over to Qatari and/or Saudi interests), a hypothesis first presented here in September and subsequently validated by the NYT , or much more simply, just to destroy any and all marginal producers so that Saudi Arabia is once again the world’s most important and price-setting producer and exporter of oil, one thing is clear: the Saudis will not relent from pumping more oil into the market than there is (declining) demand for, until its biggest threat and competitor – the US shale patch – which recently had become the marginal oil producer, as well as its investors – mostly junk bond holders gambling with other people’s money – are crushed, driven before the Saudi royal family, and the lamentation of their women is heard […]

Posted On : Published By : Tom Whipple
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Oil majors fail to find reserves to counter falling output

* Oil groups produced much more than they found last year * Oil and gas output fell in 2014, echoes trend over past decade * Graphic on oil majors’ output: link.reuters.com/huh93w * Companies now making investment cuts to counter low oil prices Big oil companies had a poor record of finding and producing oil and gas last year, according to figures out in the past week – and big cuts in spending in response to falling crude prices could undermine their plans to turn that around. Four of the world’s six biggest oil firms by market value – Royal Dutch Shell, Chevron, BP and ConocoPhillips – released provisional figures showing together they replaced only two-thirds of the hydrocarbons they extracted in 2014 with new reserves. Combined, those four and industry leader Exxon Mobil posted an average drop in oil and gas production of 3.25 percent last year. All predict […]

Posted On : Published By : Tom Whipple