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Lower Oil Prices Strike at Heart of Canada’s Oil Sands Production

OTTAWA — For as long as 400-ton dump trucks have been rumbling around the open pit mines of Canada ’s oil sands , crews from Kal Tire have been on hand to replace and repair their $70,000, 13-foot diameter tires. But the relationship, going back over a decade, didn’t spare the company when oil prices began plummeting. Dan Allan, the senior vice president of Kal’s mining tire unit, said that customers immediately began looking for price concessions. Others asked Kal to withdraw personnel from some sites or swiftly canceled plans to add more maintenance crews. “We’re sort of caught at the sharp end of the spear,” said Mr. Allan, who is now looking to relocate some employees. “It’s really difficult.” Canada’s oil sands — and the 167 billion barrels of reserves — prompted an unprecedented expansion over the last decade. But the roughly $155 billion spending spree left the […]

Posted On : Published By : Tom Whipple
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BP to cut exploration spend, postpone upstream, cancel downstream projects

London (Platts)–3Feb2015/245 am EST/745 GMT BP is to slash its capital expenditure in 2015 by at least 17% due to the lower price of crude oil, with exploration spending to be cut, projects in the upstream postponed and certain downstream projects canceled altogether, the company said Tuesday, February 3. CEO Bob Dudley in a fourth quarter results statement said that the focus was now on "resetting" BP. "We have now entered a new and challenging phase of low oil prices through the near and medium term," Dudley said. "Our focus must now be on resetting BP: managing and rebalancing our capital program and cost base for the new reality of lower prices," he said. BP said it was now taking action to respond to the likelihood of oil prices remaining low into the medium term and rebalance its sources and use of cash accordingly. Article continues below… Oilgram News […]

Posted On : Published By : Tom Whipple
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Rosneft changes accounts policy to deal with oil and rouble blows

Rosneft , the Russian state-owned energy company, has sought to mitigate the heavy blows of falling crude oil prices and the volatile rouble by changing its accounting systems to record foreign currency fluctuations when they materialise, rather than every quarter. The company has yet to announce its fourth-quarter results but the move, which was backdated to October 1 2014, has benefited BP , which owns 19.75 per cent of the Russian company. Analysts were expecting BP to suffer losses of hundreds of millions of dollars in earnings and dividends but on Tuesday it reported a $470m fourth-quarter profit from its stake in Rosneft. Rosneft said the change was approved by the board’s audit committee “with the involvement of the independent auditor Ernst & Young”, but it is not clear if EY actually approved it. The “increased foreign exchange volatility of the Russian rouble . . . can distort the effect of the actual […]

Posted On : Published By : Tom Whipple
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Russia Details Plans to Bolster Its Economy, but Experts Scoff

MOSCOW — With oil prices down more than 50 percent in the past year, the ruble having lost more than half its value, a recession looming and the country already dipping into its rainy-day funds, the Russian economy is in a race against time. But one would be hard pressed to grasp the depth of the troubles from the Kremlin’s prescriptions. Anton Siluanov, the finance minister, laid out the government’s long-promised “anti-crisis” package in a live broadcast on state television last week, a laundry list of half-measures and a vague promise of a 10 percent budget cut that economists almost unanimously dismissed as inadequate. “That plan is nonsense,” the Russian oligarch Aleksandr Y. Lebedev said in an interview, describing it as throwing away money to rescue some of Russia ’s worst companies. “Lots of words and little specific.” President Vladimir V. Putin weighed in briefly, repeating that along with […]

Posted On : Published By : Tom Whipple
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Peak Affordable Oil

It is quite obvious that high oil prices in the last 3-4 years Fig 1: WTI spot prices to 23/1/2015 http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=rwtc&f=w have reduced demand for oil, as shown in this IEA graph for OECD countries: Fig 2: Oil demand in OECD countries Oct 2011 – Sep 2014 https://www.iea.org/oilmarketreport/omrpublic/charts/ So which oil is affordable? Let’s use a graph of the Monetary Policy Report (January 2015) of the Bank of Canada (which would be favourable to Canadian tar sands) Fig 3: Oil production by area and full-cycle costs The Bank of Canada report reads: “Based on recent estimates of production costs, roughly one-third of current production could be uneconomical if prices stay around US$60, notably high-cost production in the United States, Canada, Brazil and Mexico (Chart 4). More than two-thirds of the expected increase in the world oil supply would similarly be uneconomical. A decline in private and public investment in […]

Posted On : Published By : Tom Whipple
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Why the Crash in Oil Prices Should Bury “Peak Oil” Once and for All

The Problem Isn’t That We Have Too Little Oil. We Have Too Much and are Cooking the Planet With It. In 1977 Isaac Asimov wrote of “The Nightmare Life Without Fuel.” Writing in the wake of the first Middle East oil shock, Asimov imagined cars and air conditioning as distant memories, cities mined for valuable minerals and hardware, and the last barrels of oil hoarded for agricultural and military purposes. A future of scarcity seemed in the cards after the 1979 revolution in Iran disrupted global supplies, reviving gas lines and rationing in the United States, and sending oil prices to a stratospheric $117 a barrel in today’s dollars. The U.S. economy plunged into recession for the second time in a decade. Inflation, food prices and unemployment all shot up. Energy-importing Third World nations were devastated as expensive crude depleted their treasuries even as the U.S. Federal Reserve jacked […]

Posted On : Published By : ASPO-USA
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Forget peak oil; we’ve reached peak everything

Forget peak oil; we’ve reached peak everything thumbnail Peak oil is so last year. Now we can worry about peak everything: peak food, peak soil, peak fertilizer, even peak bees. Let’s start small. We depend on bees to pollinate plants that account for about one-third of the world’s food supply, but since 2006 bee colonies in the United States have been dying off at an unprecedented rate. More recently the same “colony collapse disorder” has appeared in China, Egypt, and Japan. Many suspect that the main cause is a widely used type of pesticides called neonicotinoids, but the evidence is not yet conclusive. The fact remains that one-third of the American bee population has disappeared in the past decade. If the losses spread and deepen, we may face serious food shortages. Then there’s peak fertilizer, or more precisely peak phosphate rock. Phosphorus is a critical ingredient of fertilizer, and […]

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World’s renewable resources reach limit

World’s renewable resources reach limit thumbnail Renewable resources representing 45 per cent of global calorie intake have reached peak production levels Peak oil has become a familiar term over the past decade, but the world will soon have to get used to peak rice, peak wheat and peak maize, according to new research from the Helmholtz Centre for Environmental Research . ‘Peak oil seemed believable because oil is a limited resource, but surprisingly our methodology in this study could not prove it,’ says Ralf Seppelt, a landscape ecologist working on the project. Money and innovation from the oil industry has seen peak oil recede as a risk, according to the research. The Helmholtz study found that while peak oil is not a cause for concern, renewable resources have reached the limit for annual growth. Among the 20 renewables studied, 18 – including meat production and the global fish catch […]

Posted On : Published By : Tom Whipple
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How Much Will Low Oil Prices Stimulate Demand?

Since weak oil demand growth is a major ingredient in the current oil price crash, higher demand stimulated by low prices could be a moderating factor. While US demand has risen since prices fell, there are several reasons why the global response may be slower to appear and less dramatic. One of the main factors that will determine the depth and duration of the current slump in oil prices is the extent and timing of a resulting rebound in demand. It is likely to occur first in countries like the US, where fuel taxes are low and consumers see the results of lower oil prices at the gas pump relatively quickly–a $1.65 per gallon drop already, since June. However, other factors besides taxes could impede faster demand growth elsewhere. From 2007 to 2009 the combination of high oil prices and a weak economy reduced US petroleum demand by almost […]

Posted On : Published By : Tom Whipple
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Oil Futures Fall In European Trade

LONDON–Oil started the week in the red as strikes at U.S. refineries and sluggish manufacturing data from China fueled fears of a demand slowdown. On the New York Mercantile Exchange, light, sweet crude futures for March delivery traded down 2.3% at $47.11 a barrel. Brent crude for March delivery fell 2.1% to $51.89 a barrel on London’s ICE Futures exchange. Workers represented by the United Steelworkers union at U.S. refineries that produce nearly 10% of the nation’s gasoline, diesel and other fuels went on strike Sunday after contract negotiations broke down over salaries and safety concerns. The union said the strike affects 3,800 workers. Oil refiners like Royal Dutch Shell PLC., Tesoro Corp. , Marathon Petroleum Corp. and LyondellBasell Industries said they would keep plants operating under contingency plans. The news fueled concerns that any reduction in refining capacity could cut consumption and allow supplies to build even more […]

Posted On : Published By : Tom Whipple