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Follow on Google News | The truth about Peak oilSean Brodrick takes a closer look at the global demand for oil and pricing. In this issue of Money and Markets, Mr. Brodrick discusses some Peak Oil truths and lies.
The market is grateful because the Saudis are talking about boosting production by 200,000 barrels per day on top of a 300,000 barrel per day hike in May. However, OPEC production cuts, rebel attacks in Nigeria, mismanagement in Venezuela and the crashing of production in Mexico have all removed about a million barrels a day from the global market. The Saudi hike barely makes up for half that. While the Saudis say they are raising production, the truth is OPEC exports will probably fall in July. According to Britain based tanker tracker Oil Movements, OPEC crude oil shipments are projected to fall by 230,000 barrels a day to a total 24.59 million barrels a day in the four week period to July 5. The biggest drop is in the Middle East. Shipments from key Middle Eastern OPEC producers are projected to decrease by 350,000 barrels a day to 17.63 million barrels a day. America isn’t in control when it comes to global oil prices. Global energy consumption increased by 2.4% in 2007 on top of a 2.7% increase in 2006. U.S. energy consumption was flat, while Chinese consumption rose by 7.7%. In 2008, emerging markets combined will pass the U.S. in oil use. Going forward, global oil consumption is expected to keep climbing even as U.S. consumption eases. There aren’t enough drilling rigs or ships to exploit the deep water fields in the Gulf of Mexico. The world’s existing drill ships are booked solid for the next five years. And that shortage should continue. Transocean, the world’s largest drilling company, is building nine new deepwater rigs, and eight of them are already under contracts that run from four to seven years. Those drill ships are designed to plumb the depths of deepwater oil fields, those below more than 1,000 feet of water that represent one of the final frontiers of oil prospecting. In fact, some of the best prospects are in ultra deepwater fields beyond 5,000-foot depths. Drilling costs for some of the newest deepwater rigs in the Gulf of Mexico have hit $600,000 a day, compared with $150,000 a day in 2002. So while more oil might be found, it won’t be cheap. The talking point in some parts of Washington is that if only the U.S. would open up the Alaska National Wildlife Reserve (ANWR) and restricted parts of the Gulf of Mexico to drilling, gasoline prices would fall pretty quickly. However, this is not the case. Even if the U.S. opened up the ANWR right now, it wouldn’t affect prices at the pump for years to come. A 2004 study by the government's Energy Information Administration (EIA) found that drilling in ANWR would trim the price of gas by 3.5 cents a gallon by 2027. If oil prices continue to soar, the savings would be more, but not much. Opening up areas off the Florida Coast may also cut gasoline by a few pennies a gallon when that oil eventually comes to market. While offshore territories and public lands like ANWR may contain up to 75 billion barrels of oil it won’t make a significant difference in a world that uses about 86 million barrels of oil a day and will use even more by the time those fields start pumping. “I already told you about the Democrats being on the wrong side of offshore drilling. And just recently, GOP members of the Senate declined on a bill that would have extended tax credits for wind power, solar, and renewable energy sources like biomass, geothermal, landfill gas and trash combustion. There is no good excuse for the GOP action, except that it makes their contributors at the oil companies happy. And leadership from the White House on this issue has been laughable,” Brodrick states. To read this issue online, please visit: http://www.moneyandmarkets.com/ # # # Money and Markets (www.moneyandmarkets.com) End
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