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Posted at 10:14pm
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Peak oil causes problems within OPEC; Canadian “oil sands” demonstrate desperate measures

This Marketplace report on the OPEC summit highlights what we’ve seen revealed in the Wikileaks memo. Don’t think that just because oil prices dropped for a bit that everything’s better now. These fluctuations will continue and the overall trend will be a continued rise.

By Stephen Beard for Marketplace -  APM

The price of crude jumped by more than $2 a barrel today. A key meeting of the Oil Producers’ Cartel — OPEC — failed to find agreement on an increase in production. The meeting in Vienna was a contentious one — and that’s putting it mildly. Now, just weeks after a consumer pullback that prompted gas prices to drop, there are fears of another sharp rise in the price of oil. Which would not bode well for any kind of global economic recovery.

But there’s an even more fundamental divide in the cartel. Between those countries like Saudi Arabia with big reserves that want a stable price for their oil, and those like Iran, Libya and Venezuela who have little spare capacity. Samuel Ciszuk is an oil analyst with IHS Global Insight.

Samuel Ciszuk: Those who are starting to see the end of their reserves are obviously interested in maximizing the amount of money they will get out of it.

That group of countries today refused to back Saudi Arabia’s call to pump more oil and restrain prices, hence the jump in the price of crude. But the Saudis hinted that they may step up production anyway. Chris Skrebowski of Peak Oil Consulting says this could herald the end of OPEC.

Chris Skrebowski: I think it’s probably a 60 or 70 percent chance that this will fundamentally change the cartel. That in practical terms, it will split.

With Saudi Arabia pumping more oil and with OPEC in disarray, that would seem to be good news for beleaguered oil consumers. But as Professor Kent Moors of Duquesne University told the Marketplace Morning Report, don’t bet on it.

Kent Moors: Well, gas prices probably have gone down as much as they’re going down nationally. We’re not going back anywhere close to $3.30 or thereabouts.

Such is the rapid growth in demand for oil — in China, India and elsewhere — the price seems headed inexorably higher.

Meanwhile, the oil sands in Canada which are touted as an alternate solution further reveal how problematic peak oil is becoming as we get closer to spending a barrel of oil to extract one:

By Scott Tong for Marketplace - APM

This pipeline fight is over the most expensive oil in the world. Oil companies drilling in the Canadian oil sands typically spend $60 or more to produce one barrel of crude. It’s what’s called tough oil — it takes a lot of energy, geology, and fancy acronyms.

Drew Zieglgansberger: Probably the most advanced technology right now is called SAGD, or it stands for Steam-Assisted Gravity Drainage.

Drew Zieglgansberger is vice president at the Canadian oil firm Cenovus. We’re on a bus, touring their operations in middle-of-nowhere, Alberta. He says the world’s easy oil is gone.

Zieglgansberger: The oil now that people are looking for are not the nice light oil sitting in pools that you drill into it and it just flows by itself.

What’s left is in remote places, often way underground. As for the oil sands, they’re not even a liquid.

Zieglgansberger: It’s basically a solid matter. It’s very much like a shoe polish. It’s hard and it’s… if you put it in a cup it would be there forever. If you dump it out, it’d be like dumping some wet sand in your sandbox.

Still, processing the oil sands is worth it, ‘cause American import one hundred barrels of crude, every second. That comes out to 24,000 barrels by the time this story is over. Or one million gallons. The key ingredient to oil sands is heat: you send steam down a well, turn the sand into liquid, and pump it.

Zieglgansberger: This is basically a big, big boiler.

The steam source runs almost 3000 degrees Fahrenheit. Great big fire.

Zieglgansberger: This is where we’re burning natural gas. If you look at a normal barbecue, your barbecue is probably about 30,000 or 40,000 BTU of heat, maybe. This one generator is 250 million. It’s a massive amount of energy.

There’s the rub. In some cases, the energy put in equals what you get out.

Not worth it, says Calgary author Andrew Nikiforuk. His book is called Tar Sands.

Andrew Nikiforuk: The returns are absolutely minimal. It takes one barrel of oil or oil equivalent to get one-and-one-half barrels. Some steam plants are getting even negative returns.

Energy use makes the oil sands process emit 17 percent more greenhouse gases than normal oil — according to a U.S. government study. Critics say that makes for one of the dirtiest crudes in the world, not to mention the chemical wastewater, and clearing of forests for mining.

Canadian activist Danielle Droitsch is with the Pembina Institute.

Danielle Droitsch: It’s similar to Venezuela. It is similar to Nigerian oil. So it’s sort of the worst of the worst.

Droitsch moved to D.C. last year, in her view to keep the oil sands industry honest. She’s fighting the expansion of a pipeline carrying Canadian oil sands crude to the United States. And for now it is stalled. The application’s been at the State Department for 33 months. Opponents like Droitsch think choking off supply will help choke off oil addiction quickly. But the reality of driving suggests, maybe not.

Analyst Jim Burkhard at IHS Cambridge Energy says most of us own our cars for a decade or more. So it’ll take a long time to retire a whole generation of oil guzzlers.

Jim Burkhard: So even if we have stunning success in electric vehicles, it will take decades before we see that reduce overall global oil demand.

Read the rest of the article to find out more about the pipeline.  Peak oil isn’t fake science. It’s real. Oil companies have been talking about it for a decade, but try to play it down. We have some time left, but we’re on the down-hill slope at this point.


Soaring food prices to dent Asia’s growth

Soaring food and fuel prices are threatening to derail growth in Asian economies, according to a report by the Asian Development Bank (ADB).

The bank has warned that if food and fuel prices continue to surge, economic growth in the region could be reduced by up to 1.5% this year.

According to the bank, domestic food prices have risen at an average of 10% in many Asian economies this year.

Oil prices have also surged because of the crisis in the Middle East.

The bank said that a combination of these two factors has been a major setback for growth in Asian economies.   Source


Price increases of up to 7% on commodities such as toilet paper, diapers, baby wipes, garbage bags

Get used to it. This is just the beginning. If you remember, the same thing happened back in 2008 when P&G raised prices by up to 16%.  

Procter & Gamble Co. last week notified U.S. retailers that it was raising wholesale prices on Pampers diapers and baby wipes, Charmin toilet tissue and Bounty paper towels, a company spokesman said Monday.

The wholesale price increases amount to 7% for Pampers diapers, 3% for Pampers baby wipes and an average increase of 5% for Bounty and Charmin products.

The price increases come in the wake of rival Kimberly-Clark Corp. on Monday saying it was raising prices on most of the products it sells in North America as it faces higher costs for key materials like wood pulp and fuel. Last month, Kimberly-Clark announced price increases on items like Huggies diapers and Cottenelle bathroom tissue.  Source

Kimberly-Clark reported Monday that a bigger-than-expected rise in the cost of raw materials took a toll on first-quarter profit, which fell 9% to $350 million, or 86 cents a share, from $384 million, or 92 cents a share, a year earlier, even as net sales increased 4% to $5 billion.

The Dallas-based company, which also makes Kleenex tissues, said cost increases for raw materials like wood pulp, resins and fuel are likely to run twice as high this year as previously projected. It said it needs to raise prices in response.

Clorox Co., which reports next week, says it is raising the price of Glad trash bags by 9.5% beginning in May. The cost of some of its salad products, like Hidden Valley ranch dressing mix, will also rise.

Shoppers and investors will be watching for similar moves from Colgate-Palmolive Co.,Unilever PLC and Energizer Holdings Inc., which report results this week.

Consumers already are absorbing higher costs for food and gasoline. And price tags are also forecast to begin rising for apparel, reflecting rocketing cotton costs. U.S. consumer prices rose 2.7% in March from a year earlier, the largest increase since December 2009.

"When you look across almost every category out there you are seeing the impact of higher commodity costs show up and higher selling prices for everything," Kimberly-Clark CEO Thomas Falk said on a conference call to discuss quarterly results Monday.


CHICAGO, March 18 2011 (Reuters) - Procter & Gamble Co will raise U.S. detergent prices by 4.5 percent in June as the world’s largest household products maker starts to respond to rising costs for materials, packaging and transportation.

 The maker of Tide, Gain and Era laundry detergents said the increase would go into effect on June 6.  Source

What you see here is the manufacturers raising prices on things they know people have to have and are less likely to buy generic.  This is just the beginning of commodities price increases. Stock up while you can or BUY GENERIC.

Shoppers are less likely to switch to a cheaper brand on a baby product than many other items on the shopping list, according to a recent survey by Sanford Bernstein analyst Ali Dibadj. Just 10% of consumers said they switched to a cheaper diaper brand because “it’s not worth paying more in this category,” and no consumers reported switching baby food. By comparison, nearly a third of consumers said they switched brands of bleach, bottled water and liquid soap.

Jacking up prices carries marketing risks, even for diapers. Premium brands face intense competition from less-expensive options, especially private-label brands, which gained market share during the recession. Nevertheless, many parents, especially new ones, are willing to splurge on babies even when cutting back elsewhere, believing pricier products are better for comfort or development.



Analysts predict price of gas will continue to rise; possibly up to $6

Tom Petrie, Bank of America Merrill Lynch vice chairman, says oil prices per barrel will increase another 5-10 dollars at least.  He says by 2015 Iraqi oil output will be a critical factor in supply-demand balance.  Does everyone remember why we REALLY went into Iraq?

CNBC points out that the prices could go a LOT higher:

A dollar plumbing three-year lows is hitting Americans squarely in the gas tank, and one economist thinks it could drive prices as high as $6 a gallon or more by summertime under the right conditions.

One result has been a surge higher in gasoline prices to nearly $4 a gallon before the summer driving season even starts, a trend that economists say will be aggravated as demand increases and the summer storm season threatens to disrupt oil supplies.

"All we have to have is a couple badly placed hurricanes which could constrain some of the refinery output capacity in some key locations," says Richard Hastings, strategist at Global Hunter Securities in Charlotte, N.C. "If you get weakness in the dollar concurrent with the strong driving season concurrent with the impact of one or two hurricanes in the wrong place, prices could go up in a quasi-exponential manner."


Oil prices likely to keep rising until June

Consumers leery of oil prices topping $111 a barrel may want to brace for more sticker shock in the coming months. With a 4% gain so far this month, following March’s 10% rise, benchmark oil futures are keeping up with a long-running trend — advancing in March, April and May before taking a breather in June.



Rising Fuel costs feed economic crash cycle - Can we break our dependency on oil before it’s too late?

Excerpts from an op-ed piece in the Washington Times, titled "Rising Oil Prices Threaten Economic Crash" by Robert Zubrin, detail the economic jeopardy we are placed in as fuel prices rise. The author relates that more US drilling and other carbon-based fuels are a possible answer.

In recent days, oil prices have climbed above $100 per barrel. As chaos spreads through the Arab world, we could soon see much worse.

The distress to American workers caused by such events is manifest, but the economic damage goes far beyond the impact on the unemployed. A sustained oil price of $100 per barrel will add $520 billion to the U.S. balance-of-trade deficit. Furthermore, there is a direct and well-established relationship between unemployment rates and the rates of mortgage defaults.

Thus, the $130-per-barrel oil shock of 2008 didn’t just throw 5 million Americans out of work, it made many of them default on their home payments and thus destroyed the value of the mortgage-backed securities held by America’s banks. This, in turn, threatened a general collapse of the financial system, with a bailout bill for $800 billion sent to the taxpayers as a result. But that is not all. The destruction of spending power of the unemployed and the draining of funds from everyone else to meet the direct and indirect costs of high oil prices reduce consumer demand for products of every type, thereby wrecking retail sales and the industries that depend upon them.

Indeed, the world today is already in deep recession. Yet as a result of the systematic constriction of oil production by the Organization of Petroleum Exporting Countries (OPEC), which is limiting its production rate to 1973 levels of 30 million barrels per day, petroleum prices stand at more than four times what they were in 2003. This has imposed a tax increase on our economy of $500 billion per year, equal in economic burden to a 20 percent increase in income taxes, except that instead of the cash going to Uncle Sam, it will go to Uncle Saud and his lesser brethren.

The only way out of this mess is forcefully to expand production of liquid fuels from sources outside OPEC control, particularly our own. That means unleashing our own domestic oil supplies through expanded drilling and also opening our vehicle-fuel market in a serious way to alternative fuels, such as methanol, which can be made cheaply from coal, natural gas or biomass and used in flex-fuel cars.

It may be too late already to stop the crash that will follow the current oil price run-up, but we still have to get started without further delay. Otherwise, while the crash itself will bring down world fuel demand and thus oil prices for a while, they will just rise once more when the economy begins to recover and slam us right back down again. And again. And again.

I hate to be pessimistic, but all that does is buy us some more time, and despite the push to alternative energy, I think we’re fighting a losing battle.  The current energy needs of the US, and the rest of the world, will continue to out-pace the availability of viable fuel sources.  

In spite of the recent push to ethanol, which has contributed to the rising cost of corn and foods made from it, the focus on solar, wind, and nuclear energy, and the various other alternatives, I believe the demand will continue to grow while war, natural disasters, and general political bickering with put the US further in the hole. 

The summary of a very well written, excerpted chapter from The Post Carbon Reader: Managing the 21st Century’s Sustainability Crises, Richard Heinberg and Daniel Lerch, eds. (Healdsburg, CA: Watershed Media, 2010) as posted by, backs up my perception that nothing short of a comprehensive approach, founded on decreasing energy consumption in general, will help solve this problem. I recommend reading the whole report for a list of advantages and obstacles faced when considering alternative energy.

How Will Society Evolve in a Post-Carbon World?

Alternative energy forms are crucial for a global transition away from fossil fuels, despite the myriad challenges of their development, scaling, and integration. In face of the peaking of global oil production—to be followed by peaks in natural gas and coal extraction—and of the need to reverse trajectory in carbon emissions, alternative energy sources will need to form the backbone of a future energy system.

That system, however, will not be a facsimile of the system we have today based on continuous uninterrupted supply growing to meet whatever demand is placed on it. As we move away from the energy bounty provided by fossil fuels, we will become increasingly reliant on tapping the current flow of energy from the sun (wind, solar) and on new energy manufacturing processes that will require ever larger consumption of resources (biofuels, other manufactured liquids, batteries). What kind of society we can build on this foundation is unclear, but it will most likely require us to pay more attention to controls on energy demand to accommodate the limitations of our future energy supply. Moreover, the modern focus on centralized production and distribution may be hard to maintain, since local conditions will become increasingly important in determining the feasibility of alternative energy production.

While it is great to hold out hope, how many Americans that you know will part easily with the freedom of movement and luxury of unlimited energy expenditure that we currently enjoy?  Perhaps it will happen. Perhaps we can change, but I wonder if we can do it in time or if it is already too late.  It’s going to take some significant changes in methods and perspective. Personally I think we’ll keep on trying to control oil resources, while trying desperately to play catch-up.

Oh geez, I’m doing it, I sound like the Doomers. :)