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Guest Post: Rumors Of OPEC's Demise Exaggerated

Tyler Durden's picture




 

Submitted by Daniel J. Graeber of OilPrice.com,

A mixed picture is starting to emerge from the Middle East in terms of oil production. Several members of the 12-member OPEC oil cartel are embroiled in turmoil or struggling to ensure post-war political gains. Oil production from the Middle East declined by 1.5 million barrels per day in 2009. Production from most Middle East countries has slowed down or leveled off, though gains from Iraq have offset some of those declines. With economic recovery seemingly on the horizon, a new OPEC may be developing from the ashes of the recession.

An assessment from the Energy Information Administration, the statistical arm of the U.S. Energy Department, says oil production from the Middle East grew by 900,000 bpd in 2010 and another 1.3 million bpd in 2011 as major economies started to emerge from the global economic meltdown brought on by a housing crisis in the United States.

Real estate markets in the United States peaked in 2006 and then collapsed, leading to the onset of one of the worst financial crises since the Great Depression of the 1930s. The National Association of Home Builders said this week builder sentiment rose 8 points for its biggest monthly increase since September 2002, however. A glimmer of hope even emerged for the eurozone Monday when Germany reported that its wages grew at their fastest rate in more than four years.  There may be further signs of optimism ahead on word the U.S. and European Union are negotiating a trade deal, the biggest such bilateral initiative ever.

OPEC said in its market report for June the global economy is expected to grow 3.2 percent for the year. The cartel said recovery in the U.S. housing sector should stimulate the economy and, while the "challenges continue" for the eurozone, a recovery is expected there for later in the year. In terms of demand, OPEC said oil demand from cartel members was forecast at 29.8 million bpd, around 400,000 bpd less than last year. Some of that demand contraction, however, may be from 40-year lows for foreign oil imports from the United States, which is starting to use much of its own oil.

Iran is the worst hit among OPEC members. The EIA assessment said Iranian oil production declined by 17 percent compared to 2012 totals because of Western economic pressure. Iranian President-elect Hassan Rouhani said he was a moderate leader open to transparency, though it's unlikely the regime would undergo a radical sea change with the new president. This week, New Delhi said it was sending a high-ranking official to look for an alternative to Iranian oil in Iraq. The EIA said that, despite the conflict, Iraqi oil production increased 14 percent in 2012 year-on-year. Even Libya has posted a comeback streak in terms of oil production, according to OPEC sources.

OEPC said world oil demand should increase by 800,000 bpd in 2013 and is expected to reach more than 107 million bpd by 2035. In the interim, much of that demand growth will have to be met from countries other than the United States, which as of now is restricted in terms of crude oil exports. Reading between the lines of what OPEC expects to see in terms of demand for its crude suggests it's feeling the pinch from North American oil production. Despite regional conflict, the EIA's assessment suggests OPEC's durability is about the global economy as much as it is about war. The cartel may be down, but it's certainly not out.

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Tue, 06/18/2013 - 10:42 | 3667985 prains
prains's picture

Peak Middle East, Glithchez!!

 

express elevator to helllllllllllllllllllllll.......or the dark ages, you pick

Tue, 06/18/2013 - 11:37 | 3668260 caconhma
caconhma's picture

Two points:

1. " With economic recovery seemingly on the horizon..." What is he talking about?

2. With Iran, Iraq, Syria, and Hezbollah gaining an upper hand in the Middle East equation, the US control of this region oil supply is very much in equation. This will greatly undermine the US petrodollar  status.

 

Tue, 06/18/2013 - 12:00 | 3668340 LawsofPhysics
LawsofPhysics's picture

Indeed, one final point, oil remains the most fungible and dense form of energy and commodity chemicals.  You need both in order to actually do anything in the real economy.  In this way, oil is a reserve currency of sorts.

Tue, 06/18/2013 - 10:47 | 3668006 Dr. Engali
Dr. Engali's picture

I can't take seriously any article presented by an author who believes that we aren't still in a freaking world wide depression.

Tue, 06/18/2013 - 10:56 | 3668074 SpiceMustFlow
SpiceMustFlow's picture

agreed, luckily "recovery is on the horizon" so don't worry

Tue, 06/18/2013 - 11:24 | 3668207 NotApplicable
NotApplicable's picture

Anybody who thinks that even more malinvestment in the housing industry can sustainably "stimulate an economy" needs to be seriously beaten about the head.

I'll just point out that electo-shock therapy is stimulative as well.

And that cancer is growth.

Tue, 06/18/2013 - 10:46 | 3668008 Flakmeister
Flakmeister's picture

107 million bbls in 2035?? Pray tell, could we have a breakdown of who is supposed to produce what?

Now that is some funny shit...

Tue, 06/18/2013 - 10:50 | 3668032 Herd Redirectio...
Herd Redirection Committee's picture

Yes, apparently there is currently no waste, nor will substitutes be be used in place of crude oil FOR ANYTHING.  end sarcasm

Tue, 06/18/2013 - 11:10 | 3668145 Spastica Rex
Spastica Rex's picture

I converted my Dodge Ram HD to electric power. Also the 4 quads I tow behind it. And my ski boat.

Suck it, peak oil!

Tue, 06/18/2013 - 11:28 | 3668224 CrashisOptimistic
CrashisOptimistic's picture

How far do you tow things per charge?  10 feet?

Tue, 06/18/2013 - 11:39 | 3668268 Spastica Rex
Spastica Rex's picture

I'm also pretty certain that the jet my family and I took to Hawaii this last winter was electric. Oh - and I heard Tesla is going to field a NASCAR entry next year.

edit: I forgot to mention: my 40ft triple slideout coach is now all eletcric - nearly silent on the freeway.

Tue, 06/18/2013 - 12:02 | 3668355 CrashisOptimistic
CrashisOptimistic's picture

Numbers.

745 watts per horsepower.  A 100 horsepower Camry therefore requires 74,500 watts.

That 100 horsepower Camry also has a range on a tank of gasoline of 450ish miles in 8 hours (56 miles per hour speed) and when you need to refill that tank it takes about 3 minutes.

Your 74500 watt vehicle trying to go 8 hours requires 74500 X 8 = 596,000 watt hours.  596 Kilowatt hours. 

The Tesla's largest battery is 85 KW-Hrs. 

Refilling its tank, so to speak, takes 3 hours.  You'll have to do that every 1.1 hours of 56 mile per hour driving.  No, don't whine about "it works fine for a short commute".  If it's that short, take a bus.

These numbers are for a 100 horsepower Camry.  The numbers for the trucks that bring food from Iowa to your grocery store are far worse.  They are not electric.  They are not natural gas.  They are oil.  And so they will remain.

 

Tue, 06/18/2013 - 12:07 | 3668383 Spastica Rex
Spastica Rex's picture

Are all the good manly American things oil powered? That would suck. :(

Tue, 06/18/2013 - 12:26 | 3668513 I_Rowboat
I_Rowboat's picture

Hell no!  I made lump charcoal this weekend with nothing more than a coupla' steel drums and some maple firewood I had lying around.  The things you do with charcoal are pretty manly -- namely barbecue and metal forging.  You could make black powder with it, but that's just silly.

Tue, 06/18/2013 - 13:11 | 3668703 CrashisOptimistic
CrashisOptimistic's picture

Except those steel drums you used were transported to you with oil.

Tue, 06/18/2013 - 13:28 | 3668756 I_Rowboat
I_Rowboat's picture

Nope.  Those were hand-crafted from steel I smelted from a taconite ore deposit in my backyard using charcoal baked in a clay retort I built from a clay deposit in my neighbor's yard.  Though I did use a store-bought rubber wheel on my wheelbarrow, so I'm guilty as charged.  You got me.

Tue, 06/18/2013 - 14:23 | 3668978 Herd Redirectio...
Herd Redirection Committee's picture

What I am getting at is, oil used for almost everything except food production, and commodity extraction, can likely be viewed as 'waste'.  Yes, literally wasted oil. 

Now, if that means people have to walk everywhere or ride a bike, or sail, or rollerblade so be it.  Life would go on.  Maybe not smoothly.  Going to work and the grocery store would become a tremendous pain in the ass, but society would ADJUST eventually (likely the population would adjust as well).  Think a farmer taking a trip down your road with a horse buggy.

Tue, 06/18/2013 - 14:43 | 3669044 Citxmech
Citxmech's picture

The rub (and it's a big one) is that our new 1860's level economy wouldn't have most of the jobs we now enjoy.  Add to that food transportation issues - and you can quickly see that any transition to a low-energy future is going to suck-ass.  It's not like city folks can just go buy a horse and park it in their carport and continue life as usual.

Remember that our debt-based monetary system requires growth to keep us out of a deflationary death spiral.  Printing simulates that missing growth (for a while).  Once the real engine of industry (oil) becomes less available than before - the system begins to fall apart.

Plan accordingly.

Tue, 06/18/2013 - 22:23 | 3670222 StychoKiller
StychoKiller's picture

I made my own hand-cranked coffee grinder...

Tue, 06/18/2013 - 17:42 | 3669474 Staplegun
Staplegun's picture

That camry uses all 100HP to maintain 55mph for 8 hours? Toyota must be slipping...

 

I'm hoping that you are assuming that the fictional Camry runs 100HP at 1500(ish) RPM to operate at 55 in 5th gear and not just using 100HP stat as the max HP output of the engine at 6500rpm. But I don't think that is accurate for Camry specs. Adjusting for the horsepower to torque ratio of the car and the car's specific torque needs to maintain 55mph etc etc etc. is going to change your watt requirements. 

Regardless, I accept your premise. Until they can make a battery powerful enough to sustain 8 hours of driving and have it still fit in a car AND not cost $40K...I'm sticking with my 13 year old Jeep. 

 

 

Tue, 06/18/2013 - 22:25 | 3670227 StychoKiller
StychoKiller's picture

Curious that no one makes electric pickup trucks...

Tue, 06/18/2013 - 11:53 | 3668317 Taint Boil
Taint Boil's picture

 

 

I did the same thing more or less but I went one step further … I actually pull a wheel driven generator from behind to charge up the batteries and once you get going... you don’t even need the stinking batteries ….  Sweeeeeeeeeet set-up. 

Tue, 06/18/2013 - 11:54 | 3668322 Flakmeister
Flakmeister's picture

Yep, that's what we need! Good ol' American know how and ingenuity...

Tue, 06/18/2013 - 14:41 | 3669039 thisandthat
thisandthat's picture

Ha! And you think that's something? I just sit quietly, while I let the Earth rotate beneath my feet!

Tue, 06/18/2013 - 10:50 | 3668039 Poor Grogman
Poor Grogman's picture

Seems the same people that do the FED models do this work as well.

None of what they do is supposed to make sense.

100% perception management...

Tue, 06/18/2013 - 11:01 | 3668098 Beam Me Up Scotty
Beam Me Up Scotty's picture

"100% perception management..."

What if its all bullshit?  I mean, it seems everything is bullshit now adays.  What if there were 1000 years of oil left, but they were telling us it was going to run out soon instead?  Nice way to keep crude over $20 a barrel---on a story.

Or maybe peak oil is real.  I don't know.  But I wouldn't put anything past TPTB anymore.

Tue, 06/18/2013 - 11:11 | 3668147 Herd Redirectio...
Herd Redirection Committee's picture

This is why abiogenic oil theory is intriguiging, it basically stipulates (if its true) that you would want to control all the oil wells that have decent flow (because, if true or partially true, finding new reservoirs would pale in comparison to holding on to the likes of Ghawar). 

Personally, I am leaning towards 'plateau oil', no production increase, and slow decrease from here.

Tue, 06/18/2013 - 11:13 | 3668151 Poor Grogman
Poor Grogman's picture

If oil is finite, production will peak.

That much Is a mathematical certainty.

If OPEC were more transparent with their reserve calcs then we could probably be reasonably certain of the peak year?

Things always change or are about to change, or have just changed. Just the same way as people adapt to those changes.

It would certainly silence all the fretting about obesity anyhow...

Tue, 06/18/2013 - 11:22 | 3668197 Beam Me Up Scotty
Beam Me Up Scotty's picture

Finite oil is a fact, there is no doubt.  But what if there was really 1000 years of oil left, or 10,000 years of it.  Telling the sheep we are mere years away from running out would be a real nice cover story to jack the price way up.  Not arguing that there is abiotic oil, or that there is 1000 years of supply left.  Im simply saying that in a world of bullshit, it would fit right in.

Tue, 06/18/2013 - 11:27 | 3668219 CrashisOptimistic
CrashisOptimistic's picture

You have to be careful of your phrasing.

There are millions of years of oil left -- if you burn 1 teaspoon per year.

This is a favorite PR phrasing from oil hypers -- "The Bakken will still be producing oil in 80 years."  Sure it will.  At 1 barrel/day.  As long as you don't put a rate requirement out there, you could say 800 years.

Stripper wells in Texas that produced 5000 barrels/day on day one lasted 50 years, still in production, at 5 barrels/day.

Tue, 06/18/2013 - 12:54 | 3668623 Beam Me Up Scotty
Beam Me Up Scotty's picture

Or, there could be a 1000 years of oil left at current consumption rates.  We have to take someone's word for it, that there isn't.  Not arguing with your point at all CIO, just pointing out that for some reason, in this day and age, I find myself trusting very little of what someone else tells me, especially if they work for .gov.  I didn't down arrow either btw.

Tue, 06/18/2013 - 13:18 | 3668731 CrashisOptimistic
CrashisOptimistic's picture

There is an enormous amount of lying going on. 

Barrels of oil in Exxon and Chevron reports of annual production have become "barrels of oil equivalent".  Oil from shale is being called oil and it's mostly condensate.  It's light and sweet, and that used to be a favorable thing, but if you're too light, you don't have 5.6 million BTUs in it like proper Brent quality crude.

Then there is "all liquids", put into sentences and paragraphs about "oil", when what is flowing is propane, and butane, and ethane, none of which have 5.6 million BTUs per barrel.

Bottom line, if the liquid you send to the refinery doesn't have 5.6 million BTUs per barrel in it, then it won't create the same number of gallons of gasoline as would a barrel of proper crude.  You can bullshit volume, but you can't bullshit BTUs.

Tue, 06/18/2013 - 14:19 | 3668963 Citxmech
Citxmech's picture

Read Simmons' "Twilght in the Desert."  Yes, there is perception management going on - but there are "tells" that cannot be hidden (deep water wells is one of them).

Tue, 06/18/2013 - 14:38 | 3669016 I_Rowboat
I_Rowboat's picture

Yes, precisely.  Why are we drilling in 6000ft of water?  Why are we exploring further into the hostile Arctic wastes?  Why are we deploying every technological trick into every existing well to goose its production ever so slightly?  It hasn't always been this way.  It used to be you could poke a soda straw into the back 40 in west Texas or Pennsylvania or Persia and become a rich man overnight.  Why are we now doing things the hard way?  Because the earlier, easier way no longer exists.  Also, why hasn't the U.S. petro industry added to the refining capacity in any substantial way since the 70's.  It ain't on account of enviro regulations -- the industry has legions of attorneys to negotiate that gauntlet and they don't give a shit about what you think about them; you're a captive consumer. Refining capacity hasn't been added because it won't be needed.  They know this.  They're shrewd and they're savvy and they know that it's not worth sinking costs into a facility to refine oil that either doesn't exist or does exist but isn't worth getting out of the ground.

There's the peak oil meta-message for you.

Tue, 06/18/2013 - 11:33 | 3668249 NotApplicable
NotApplicable's picture

Easily extractable oil may be finite, and abiotic oil could even appear to be if we consume it faster than it regenerates, but neither of these are proof of what is finite, and what is infinite over time.

To state that oil is finite is to imply a creation event of biblical proportions involving dinosaurs (irony, anyone?) that is not repeatable. Ala, the "end of history."

So, in truth, it really isn't a fact, but a belief.

Tue, 06/18/2013 - 17:02 | 3669391 I_Rowboat
I_Rowboat's picture

Are you implying that, by contrast, "infinite oil" is not a faith claim?  It sounds pretty faith-based to me.  And while I do not work as a petroleum geologist, I am a practicing consulting geologist and so do have some aquaintance with the Earth Sciences.  As for abiotic oil genesis, let me simply state that it is not a widely subscribed theory and is not supported by much evidence.  But supposing that it were true, are you representing that re-genesis is a process that could occur at a rate even remotely approaching useful?  That is, if we're simply talking about emptying the tank at 10 gallons an hour but it's being refilled at 0.0001 gal/hr, then what is there really to discuss?  Why not just comment on how nicely the deck-chairs have been re-arranged?

Tue, 06/18/2013 - 20:30 | 3669856 Flakmeister
Flakmeister's picture

You are being far too diplomatic about abiotic oil. The only evidence that abiotic oil could exist is that oil does indeed exist...

Tue, 06/18/2013 - 11:24 | 3668203 CrashisOptimistic
CrashisOptimistic's picture

People will adapt.  They will take on a configuration of no heartbeats.

That will silence . . . a lot of things.

Tue, 06/18/2013 - 11:29 | 3668230 Beam Me Up Scotty
Beam Me Up Scotty's picture

Oh for sure, CIO.  Oil would last more than twice as long if the population was halved.  Wipe a bunch of people off the planet and the remaining oil would last a whole lot longer.  One way to move peak oil out into the future, kill some people.

Tue, 06/18/2013 - 11:15 | 3668160 yrbmegr
yrbmegr's picture

It's a simple extrapolation.  What's so hard to understand?

Tue, 06/18/2013 - 11:54 | 3668320 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

It's a simple extrapolation.  What's so hard to understand?

Its connection to reality.

Tue, 06/18/2013 - 10:50 | 3668034 Skin666
Skin666's picture

"With economic recovery seemingly on the horizon, a new OPEC may be developing from the ashes of the recession."

Looks like Dan Graeber has been reading too much Bloomturd/CNBC bollox...

Tue, 06/18/2013 - 10:52 | 3668046 pocomotion
pocomotion's picture

The world economy will recover with a vengeance.  Within 1 month the western world will be down to 4% unemployment with Detroit leading the recovery.  It's now a sellers market in real estate.

Where, oh man, did I bury my gold and silver?  I am sooo tired of eating spam from a rectangle can.

Tue, 06/18/2013 - 10:54 | 3668059 Rusty Shorts
Rusty Shorts's picture

I think this is the great example of why so many pin their hopes on the "as-yet-unknown-future-technology-fix". We just pop together the as-yet-unknown free energy device into the as-yet-unknown spaceship and fly to the as-yet-unknown destination and *wham!* populate the galaxy.

Tue, 06/18/2013 - 11:13 | 3668152 Herd Redirectio...
Herd Redirection Committee's picture

We also don't know if there is some 'as-yet-unknown-past-technology-fix', i.e. processes for using oil substitutes, or using oil more efficiently.  Because sure as hell those technologies would have been ruthlessly suppressed.  Of course there is a chance no such technologies exist or have been suppressed.

Tue, 06/18/2013 - 13:14 | 3668716 Flakmeister
Flakmeister's picture

My money is on the latter...

Tue, 06/18/2013 - 13:50 | 3668848 Citxmech
Citxmech's picture

These cornucopian techno-fantasy energy sources would have to be almost instantly implementable with little to no infra-structure needs for us to not be in a world of shit - even if they did exist right now.

We'd have a fantastically hard time converting current diesel trucking infrastructure to rail at this point  - and that would be about the simplest realignment out there.

Tue, 06/18/2013 - 14:12 | 3668938 Totentänzerlied
Totentänzerlied's picture

Precisely. The process of a new infrastructure buildout would itself involve enormous crude oil (derivates) consumption. And every day it doesn't happen, the cost gets a bit higher, the near-term economic incentives decreases a bit more, the probability of it ever happening drops a bit lower.

 

Tue, 06/18/2013 - 10:55 | 3668061 toms
toms's picture

What a complete pile of SHIT!!!!

Tue, 06/18/2013 - 10:55 | 3668062 disabledvet
disabledvet's picture

Iran is a natural gas powerhouse so they don't any oil to "survive." (hence "here come the Revolutionary Guards into Syria.") Neither does the USA nor Europe. I think OPEC has been a thing of the past for well over a decade now and I can very much see oil heading down to 5 bucks a barrel from here. The collapse of the carbon credit market is your tell. Coal mines are being shuttered...oil will still be needed...just not on the scale it used to be. If Venezuela hyperinflates "look out."

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