Peak Oil and the Fading of the Oil Economy
High Petrol and Gas Prices - unfolding
Period: In the year 2007

History of the rise of the cheap oil and gas economy - commentary and speculation on its fading
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summary   details of fading hydrocarbons   price spikes  translate crude price rises to gas pump price rises
the immediate future
  recession in the USA
    recession overview  
immediate response to recession  medium term response to recession 
recession to depression
Sites of note
oil fields

Oil and gas reserves developed from 140 million years ago. Global depletion of these reserves by humans between1859 until 2005 has now reached the halfway point. The shape of the 'top of the curve' depends on the rate of oil and gas use, which in turn depends on employment and confidence.
Recession can flatten the top of the curve.
Wars in the 'high volume' suppliers of the Middle East or Russia could also flatten the top of the curve.
Unexpected events such as collapse of mega-oil and gas fields can steepen the shape of the downslope.
The story from 140 million years ago until the global peak of oil production in 2005 is available here.

With the exception of regions of Africa, tropical Asia and Southeast Asia and tropical South America, all economies are effectively oil-based economies. Oil products provide the majority of the motive power for goods. Many economies also rely heavily on natural gas to generate electricity. Coal will be increasingly used for power generation, especially in East Eurasia and North America.

Global production is running at full steam and consumption almost matches it, meaning the greatest influences - political events and weather events - are 'wildcards' and very difficult to predict when or even if they will appear. 'Chance' events will have a major effect, but cannot be easily predicted.

In general, the large increase in carbon dioxide emmissions from coal, in particular, is likely to add even more influence toward trapping additional heat in the global climatic system. It is possible regional oceanic warming effects - whether from natural climatic variablity or from as-yet unregistered forcing of climate to a new dynamic -  might add to destructive force of hurricanes. This might effect deepwater oil production. Increased calving of icebergs might affect northern latitude deepwater production. Permafrost melt might result in pipeline slump and fractures. Markedly warm summers may prevent nuclear power plants from accessing suffiicent water volumes for cooling purposes, requiring a switch to coal or gas. Heatwaves might cause surges in power demand for airconditioning, destabilising and 'crashing' poorly maintained and regulated electricity grids. Severe snow storms in eastern USA or Europe might cause a temporary large spike in crude prices as demand for fuel oil surges.

Or none of these climatic events or effects may occur.

In summary, it is 'business as usual' this year, with adequate oil and gas supplies, with one huge caveat - margins of production over demand are so thin that -
1. large weather events in the 'wrong' place,
2. precipitous decline in North Ghawar or Canterell megafield production,
3. or pipeline or port disruptions in the Middle East
could cause supply shortfalls and price spikes. The size of the spike will depend on the volumes lost, how long they are lost for, and whether preventing or mitigating further loss in that locale or facility is within reasonable human control in future.

Outlook for 2007

Oil and gas demand appears was increasing slightly (around 1-2% globally) but may now be unevenly 'plateauing' as the margin between gas and oil supply and demand thins and increased energy prices feed into the structure of the global economy.

Global car numbers climb, but there is an increasing trend to smaller cars, and CNG powered cars. Biggest effects on transport fuel use will come from the biggest users, and this is USA. The slight trend to smaller vehicles and more fuel efficient diesel vehicles is unlikely to increase - unless gasoline becomes expensive for 3 quarters or longer. European transport fuel use is already heavily price-limited, resulting in small and effcicient cars and excellent public transport. Relatively little fuel is used for personal transport in China and Japan.

Natural Gas
Dependance on gas for electricity supply at peak times is becoming critical for more and more countries of the world. Tight natural gas supply  in Russia this winter might see cuts to domestic supply in order to keep European customers supplied.  Some countries, such as India, Iran, and Iraq, also rely very heavily on bottled natural gas to be able to cook their grain and bean-based foods. Demand for natural gas continues to surging. The UK and USA in particular, are facing shortfall in domestic supply and an interim period of  2007 when domestic importation infrastructure (pipelines and terminals) will likely be insufficient to meet peaks of demand.

All around the world, countries are investing and providing for terminals for increased importation of natural gas for electricity generation. These costly investments demand matching long-term gas contracts and secure and stable bilateral deals between gas producing countries and gas consuming countries. Bilateral arrangements have long been shown to stabilise prices over the medium run.

Natural gas prices are likely to remain firm, but with spikes in improvident (lacking long term plan-and-build for significant bilateral supply and facilities agreements) countries such as UK and USA as competition for natural gas on the 'spot' market hots up in winter. Russian gas is already slated to increase by 14% this year as supplies tighten, and because new gas supply areas are in very expensive to produce arctic areas. This year will continue the move to entrench diversity of gas supply sources within and to Eurasia (including coal gasification), continued increase of strategic gas storage facilities, all at the same time as there is increased use of gas globally. Bilateral long-term supply arrangements are likely to increase, as producers are as economically dependant on the gas revenue as are the industrial consumers. Stability of supply and good relationships between suppliers and consuming countries will continue to increase in importance.

Natural gas supplies in North America will continue to tighten. Supply in Asia will improve as new South East Asian fields come on stream, Kazakhstan supplies increasing volumes of gas, Irans vast Pars field starts supplying China, and as increasing number of new LNG terminals in China are built.

New nuclear power plants are a long way off, cost of uranium 'yellowcake' for processing into fuel is likely to rise, and coal, especially 'clean burning' coal is becoming shorter in supply and thus more expensive.

Crude oil supply and demand
Crude oil supply and demand will likely continue to be very closely matched. World oil reserve depletion rates are considered to average around 3% a year. The largest, most important fields, fields have higher depletion rates - around 6%. Growth in demand for oil is expected to be at least 3%, barring recession. The year is beginning with ample fuel oil in store in USA as the winter is mild. OPEC plans to reduce supply to hold up prices, starting early in the year.

By mid year, Mexico's Canterell oil field, a major supplier to USA will likely be showing increased fadeoff in production, perhaps down 5% or more on last year. Saudi Arabia is the one country that might replace the shortfall from Mexico. Two new high volume refineries to handle heavy crude are expected to come into operation this year. If Saudi Arabia can't take up the slack, some shortfall in supply of cheap crudes, and thus higher prices, seem likely in the USA 'driving season' later in the year.

Overall, it is likely that more expensive crudes will meet any shortfall in supply of cheaper and light crudes. Refineries are largely now modified to handle the more expensive-to-process heavy and 'sour' crudes. As long as heavy crudes are significantly cheaper than light crudes, refineries that can handle them will earn a bigger profit from this grade than from light.

As always, reduction in demand due to recession in USA (primarily) is the key to moderate or lower oil prices. Whether a collapse in the USA house bubble happens this year is unknown. If it does, oil consumption will drop, and as the USA dollar continues to weaken even further, the price of gasoline in USA will rise. Increased gasoline prices due to an unfavorable exchange rate may further ratchet any USA recession.

Oil prices are likely to move in periodic bands, with occasional geopolitical-event or weather-related 'spikes'.

Crude will likely increase to a higher band (say US$70-$US78) at times of 'bad news' in the Middle East or Nigeria (and maybe Venuezula and Mexico) and if hurricanes threaten Mexican or USA rigs in the Gulf of Mexico.

Crude will perhaps hover between US$65 - US$75, a little higher than last year; the change primarily reflecting a weaker USA dollar.

Crude may fall to a lower band (US$50 - US$60) if the vast USA borrowing boom slows down and recession-induced unemployment in USA and China goes up.

Increasing use of bilateral supply and purchase agreements (rather than via speculators on the international oil bourses) is likely to dampen event-driven price spikes somewhat. Country-to-country agreements for supply are likely to be the 'name of the game' as time goes by. Some will be relatively simple and direct, for example between Iran and China. Others will be complex and continue to evolve and consolidate this year. The best example (although not yet obvious to the main stream media as yet) is between 'Iraq' and USA, where long-term guarantee of Iraqi oil supply to USA is slowly being built via complex arrangements with middle-men, factional agents, third-party out sourcing, oil-swapping, and a USA military guarentee (and control) of export pipelines and ports.

As always, Russia and Saudi Arabia are the two countries crucial to high volume oil and gas supply (and to a lesser extent Norway is also a significant volume producer). Both produce roughly 9 million barrels a day of (mostly) crude oil each, with a total of nearly 16 million barrels a day being exported. The three countries together are responsible for half the oil exported by the worlds ten highest-volume oil exporting countries.

Russias daily production increases have been dramatic over the recent past years. Russia may have already produced more than 80% of its reserves, as far as can be told, but it is new investment in technology and new management that is holding volumes - for the moment. Even so, its massive old fields are in decline. When Russia commences production decline is uncertain.  The commencement is possible this year (or may have begun is reduced end of year exports are significant), but more importantly, it is likely to consume uncreasing amounts domestically, reducing the amount available for export.

Iraqi production will doubtless hold; but development will not be possible until the country has completed the process of splitting into the three stable local war-lord controlled fiefdoms, with USA controlling export ports and pipelines. In the end, the fighting parties cannot reap the enrichment of oil concessions until the regions are secure and stable enough to attract USA and European oil companies.

Saudi Arabia once more claims it will be able to reduce oil supply  in 2007 in order to underpin prices. It is possible that Saudi production may also have peaked. It is uncertain whether OPEC cuts are masking an inherent reduction from the super giant Ghawar field. If not, then so long as pressurisation of their massive fields holds, Saudis are likely to at least maintain volume this year.

Aside from 'wild cards' of a sneak Chinese neutron bomb or biological warfare attack on USA, global bird influenza pandemic, a sudden and irrational collapse of the USA dollar, steep collapse of the Saudi Gharwar oil field, war in the Straits of Hormuz,  insufficient snowfall in the mountains of Eurasia and North America followed by prolonged drought, or other possible but improbable event, economic conditions are possibly likely to be similar to of 2006 unless recession in USA sets in.

Once again, it is a very safe prediction that no government will publicly, actively, positively, and effectively start to plan and provide for the fading of the oil economy and the rise of the solar economy during the course of 2006.

January - oil prices  - global production rate of crude oil plus condensate is roughly 325 million barrels less than that produced mid-year 2005. The amount of oil traded on the spot market is also less, but the spot market drives short term volatility, as it is driven by 'desperate traders' betting on margins. The spot price for Brent crude averaged over this period to date is about 60% higher than for the average spot price in the same period prior to mid 2005. The average life of a NYMEX spot contract is now only 1 day before it is re-traded. Last year it was about 2 days. Spot price crude will remain volatile, but the broad trend for all oil contracts has been a rise to a new undulating plateau whose base appears to be $US50 (increasing in tandem with any declining worth of the USA dollar over this year).

January - Costs of major oil and gas production projects are now 53% higher than in the last two years, according to Cambridge Energy Associates. These huge capital costs make investment in politically unstable areas very risky, adding a new dimension to the problem of oil reserve depeletion.

January - Mexico - Canterell - Permex's "official" production estimate for Cantarell this year is "an average" of 1.526 million barrels per day - 15% less than the 2006 full year average of 1.788 million barrels per day, as distinct from end 2006 production.

January - Mexico - State oil company Permex says the company needs a budget of at least $US15 billion a year for exploration and production if it is to have any chance of keeping Mexican total crude oil production steady between 3.0 million and 3.1 million bpd .

January 1 - Angola - Angola joins OPEC as its 12th member. Angola  is widely expected to get a quota as soon as it reaches production of 2 million barrels of crude a day, probably about 2008.

January 1 - USA - gasoline demand remains steady. Regular is about $US2.33 a gallon.

January 4 - USA -  the “Coal-To-Liquid Fuel Promotion Act of 2007” is introduced to congress. It aims to heavily tax-payer subsidise the large-scale industrial production of liquid transport fuels derived from US coal fields ('coal-to-liquids') for USA industry and the USA military.

January 5  - oil price - crude oil drops to $US55 a barrel due to a very mild winter in USA dropping demand for fuel oil, resulting in ample stocks left on hand in eastern USA. Demand for natural gas is also lower than normal, and prices slip accordingly.

"Jan. 9, 2007 — The 2006 average annual temperature for the contiguous U.S. was the warmest on record and nearly identical to the record set in 1998, according to scientists at the NOAA National Climatic Data Center in Asheville, N.C.....After a cold start to December, the persistence of spring-like temperatures in the eastern two-thirds of the country during the final two to three weeks of 2006 made this the fourth warmest December on record in the U.S., and helped bring the annual average to record high levels...It is unclear how much of the recent anomalous warmth was due to greenhouse-gas-induced warming and how much was due to the El Niño-related circulation pattern. "

In 1977, also a El Niño year, a mild beginning to winter ended in severe cold.

January 8 - USA - China - US marine industry reports hazard sensors on LNG tankers are being triggered, not by natural gas leaks from their cargo, but by venting of methane on continental slopes, particularly the Hudson submarine canyon. Methane in the deep ocean is held by the high pressure and cold temperatures prevalent at those depths. Methane - natural gas - is a potent 'global warming' gas, with responsible for a higher climate 'forcing' effect than carbon dioxide.

China is to spend $US100 million to see if the huge frozen methane concentration in the northern slopes of the South China Sea are able to be 'mined'. This 430 square kilometre area has the largest frozen methane concentration in the world. While 1 cubic meter of frozen methane gas-hydrates ( methane clathrate ) expands to nearly 180 cubic metres of natural gas when thawed, exploitation is not yet commercially viable. Extraction costs about $US1 per cubic meter of gas ($US200 per cubic meter of methane-ice), whereas China's current cost for conventional natural gas production is about 12 cents US per cubic meter.

January 9 - Russia - Europe - Belarus - Russia, having stopped selling gas at prices far below world market prices to Belarus and having imposed an export tax on its exports of oil to Belarus, finds Belarus retaliates by imposing a 'transit duty' of $US45 a tonne on Russian oil transitting Belarus via the 4,000 kilometre long high-volume Druzhba ('friendship') pipeline from Russia to Europe. Russia refuses to pay the tax, Belorus supposedly 'steals' 79,000 tonnes of oil for Europe from the Druzhba, and so Russia cuts off the export oil flow in the pipeline. Belarus, until recently a strong Russian ally, has enjoyed heavily subsidised gas and oil for its support of Russia, however Belarus support has been erratic recently under the hand of the authoritarian dictator.

January 9  - Russia - Europe - Belarus - With the Druzhba pipeline closed, substantial amounts of oil for Europe are shut out. As the pipeline supplies Poland with 70% of its 18 million barrel a year oil needs, Poland is left only with whatever is in its storage tanks. Luckily, following last winters supply disruption, that amounts to around 80 days of supply. Germany also has its Russian supply cut, but it, too has large amounts of oil in storage. Hungary obtains nearly 90% of its oil from the Druzhba. Overall, about 20% of Russia's oil exports go through this particular pipeline.

January - Russia - Azerbaijan - Russia's Gazprom offers a gas supply contract for 2007 of  $US235 per thousand cubic meters - up from the subsidised price of $US110 tcm last year. Unsuprisingly, Azerbaijan refuses the offer, as some gas is available from other fields.

January - China - natural gas continues to be sold within China at artificially low (state subsidised) prices. The government is slowly moving to price natural gas at its real-world cost. Chinese households will have an increase of  about 8%, to US26 cents per cubic meter. Natural gas in Canada costs in the region of  US34 cents per cubic meter. Canada has plentiful natural gas reserves and a relatively high price to the consumer. China has relatively scarce reserves and a relatively low price to the consumer.

January - China - Australia - China's very first LNG project, completed last year, now receives cheap gas - significantly below market prices - from Australia's Northwest shelf project. Under the bilateral contract, China will receive 3.7 million tonnes a year at a fixed low price for the next 25 years.

January 9 - Azerbaijan - Georgia -  Turkey - natural gas supply to Georgia from Azerbaijan via the Gadzhigabul-Gazakh pipeline commences. The price is a very favorable $US120 per 1,000 cubic metres (tcm), but is only for 90 days, until the Shah Deniz gas field comes more fully on stream. Then Georgia will buy 250 million cubic meters of Azari gas per year at $US64 per 1,000 cubic meters. Turkey, which has a 3 billion annual quota for the Shah Deniz gas, has signed an agreement  to on-sell 800 million cubic meters of its allotment to Georgia

January 11 - Russia - Europe - Russia resumes pumping oil to Europe via Belarus. Belarus is compensating Russia for the crude oil it has illegally siphoned off.

January 11 - EU - Germany - Russia - German foreign minister suggests the EU "opens a dialogue" with Russia to establish a long-term, reliable oil and gas supply. Most of Europe (except UK) has long had a long-term and stable relationship with Russia for stable and long-term gas supply, at least. The move by Belarus to exploit the export pipeline crossing its territory will almost certainly result in deals to create more secure supply routes.

January 10 - EU - Russia - Ukraine - Ukraine offers to replace Belarus as a host nation for oil and gas transitting from Russia to Europe. Ukraine transit pipelines take both oil and gas to Europe from Russia. Last year the natural gas pipeline moved 136 billion cubic meters to Europe, and still has about 30% spare capacity. There are 19 major oil pipelines taking Russian oil through Ukraine, but only the contentious Druzhba pipeline exits to Europe. Extensions, up-grading and re-routing of Ukrainian pipelines could allow significant amounts of Russian oil to by-pass Belarus. This would require considerable capital.

January 11 - EU - An EU 'white paper' is released proposing that the 27 EU member nations should have to meet a series of binding energy targets by 2020. Among them are that 10% of vehicles to be powered by bio-fuel; 20% of all energy  for all purposes (personal transport, public transport, home and office heating, lighting etc) be from 'carbon-neutral' sources (solar, wind, and nuclear energy); and reducing carbon dioxide emissions from fossil-fuel burning power stations by sequestering it by some means (such as re-injection underground into emptied gas fields). About 30% of EU energy comes from nuclear power. This would have to be increased substantially to meet the very modest 20%-from-carbon-neutral target.

January - EU  - France generates about 80% of its electricty needs from nuclear power, Belgium and Sweden roughly 50%.

January - India  - shortages of coal mean that Indian power stattions are running at only half their capacity. About 70% of India's electricity is generated in coal-fueled power stations. India is the world's third largest coal producer, after USA and China. Indian coal production fell in 2006, while demand increased. The Indian government plan further deregulation of the industry in the hope that the depletion of the resource can be accelerated.

January 10 - USA - Speaking before a senate committee on global oil supplies, the vice chairman of Goldman Sachs says that Bushes idea energy independence "offers a false promise to the American people", and said the USA congress should legislate to make USA automobiles more fuel-efficient.

January  - oil prices  - as large refineries invest in facilities to handle heavy and sour crude, many also install 'coking' equipment to further refine the relatively high volumes of heavy oil, tars and asphalt into oil products such as diesel and gasoline. Daily production of refinery residual oil has dropped by about 40% relative to a year ago.

As a result, less asphalt is available on the market, driving the price higher. Road building and maintenance costs increase as a result.

A side effect may be that diesel is used for fuel for ships and large stationary engines for peak-load power generation, instead of heavy oil (bunker oil, aka residual oil). This may increase diesel prices in USA, where most refineries are configured to produce gasoline for the large gasoline car fleet, and where winter heating oil for home central heating also competes with diesel.

January 15 - Iraq - Russia - USA - In an unexpected twist, the draft hydrocarbon law imposed by the USA via the IMF (in order to give control of Iraqi oil fields to USA and European private oil companies) contains a clause validating "any contract made under existing law concerning exploration and production of petroleum in the territory of Iraq". Russia's Lukoil immediately resurrects the US$4 billion project signed under the regime of Hussein to develop the west Qurna-2 oil field. This field supposedly holds reserves of up to 16 billion barrels of oil. The US firm Conoco-Phillips is also apparently a partner in the shelved joint venture. If the Iraqi oil ministry (controlled by USA) agrees, exploration could commence within 3 months, if the area is 'secure' enough.

January - Iran - domestic petroleum use rises at 6%, the highest rate in the world. Petroleum prices are subsidised so that Iranians can buy petrol at 'giveaway' prices - 9 US cents a litre. Iran continues to import petroleum. Its refining capacity is only 1.6 million barrels a day.

January - Iran -  Exportable oil production, which provides almost all of Iran's government revenue, continues to decline. A John Hopkins University analysis sees "...exports declining to zero by 2014–2015. Energy subsidies, hostility to foreign investment, and inefficiencies of its state-planned economy underlie Iran’s problem...." The decline in oil produced due to lack of investment in fields (8%) plus increasing domestic (2%) use is about 10% a year. Iran's giant fields (which produce well over half Irans oil) are over half a century old, and are declining at about 8% a year onshore, and about 13% a year in the offshore fields, dropping off around require 350 thousand barrels of oil a day. Estimates by oil industry experts suggest Iran may lose 500,000 barrels of daily production by 2010. These declining fields urgently need enhanced oil recovery techniques employed, such as gas or water injection to rebuild pressure. Iran's Energy Committee says 30 fields need gas re-injection to halt declining production. These fields would need 12-14 billion cubic feet of gas a day to be injected. Currently 3 billion feet of gas a day is re-injected into Iranian fields.

January - Iran - The debate on Iran's gas exports continues. The Energy Committee of the Majlis (parliament) re-affirms 20 billion cubic feet of gas a day will be needed by 2010 for pressurising oil fields if a massive decline in production is to be averted. This amount exceeds the amount that is estimated will be required by 2010 to meet domestic demand alone. Critics say the giant South Pars field could supply the needed gas. But the rate of production of South Pars gas is likely to simply match increasing domestic demand.

January - Iran - USA - While Iran continues to focus on developing bilateral deals on its vast natural gas supplies, USA actively forces International banks with US links ( a very large number) to refuse to participate in the financing of the highly capital intensive gas and oil development in Iran where foreign firms wish to invest in joint ventures. This will inevitably push Iran further in the direction of partnering with Asia and West Eurasia, particularly cash-rich China, as well as perhaps Russia and India.

January - Iran - USA - Bush's state department officials warns European oil and gas company executives not to invest in Iran. One executive reports the officials said 'the situation' in Iran was "hot and is going to get hotter". America has recently been 'upping' its anti-Iranian propoganda, for what reason is uncertain, as yet.

Iran - Russia - Iran continues to try to move its domestic power supply away from its huge dependency on natural gas and oil. About 75% of Iran's electricity generation capacity come from natural gas fired generators. Another 18% is from very expensive oil-fired generators. Hydroelectric pwer provides only 7% of Iranian needs. Iran is planning to develop nuclear, coal, thermal, solar, and increased hydro power for a future of less hydro-carbon dependance.

January - USA - Natural gas reserve capacity is estimated at 3.6 trillion cubic feet. Most of the 394 reserves around the country utilise depleted underground natural gas formations.

January - USA - Around 62 million US homes use natural gas for heating. Natural gas inventories have recently been at historic highs.

January 17 - USA - A storm in the midwest moves up into the northeast, increasing demand for power. Missouri is hardest hit, with some counties declared federal disaster areas due to power outages. Arctic air expected to move over the Great Lakes  over the next week may bring heavy snow dumps in the northeast. Demand for natural gas for electricity generation in the Northeast has been increasing over the last few years. Existing pipelines can no longer meet peak demand in the northest, due to newly built extra generation capacity demand, but no new investment in pipelines. While there is currently a natural gas surplus due to the mild start to winter, gas reserves can be quickly depleted if severe weather sets in. Lack of pipeline capacity may mean gas prices will increase, due to inability to physically move all requested supply, even although stored stocks are large.

January 17 - USA - Congressman Roscoe Bartlett continues his exemplary effort to inform the ill-informed congress of the reality of fading oil economy and the options to act ( Congressional Record House of Representatives, January 17, 2007:  The problems with fosssil fuels: peak oil production and global warming. He spoke (pdf) to a largely empty house. Required reading for all American citizens.

January - fuel efficient cars - VW will stop producing 1.6 litre naturally aspirated petrol engines for its Golf hatchbacks by mid year. It will replace them with its new 1.4 litre 'twin' turbo-charged engine, which has better fuel efficiency - although inferior to VW's world-beating deisel engine efficiency.

January - taxing inefficient vehicles - a local authority in London institutes a greatly increased parking tax for large, fuel inefficient vehicles. Vehicles parked on the kerb outside their owners home will pay no tax if they are electric cars, and up to about $US625 a year if they are one of the biggest sports utilities, such as BMW X5, or Mercedes-Benz M-class. Cars with large engines, such as X-type jaguars, will also pay the highest tax.

January 18 - oil price - crude briefly falls below $US50 a barrel.

January - Pakistan - Although Pakistan has previously been self-sufficient in gas, increased demand from industrialisation, population growth, and a move to natural-gas powered cars has aligned with declining gas supplies and insufficient pipeline capacities to create absolute shortages. Demand for natural gas is growing at about 12% a year - which is a requirement for an additional about 200 million cubic feet of gas per day.

Winter has caused a sharp rise in demand for power, causing peak demand from gas-fired power generation, and peak demand for bottled natural gas for heating. Hydro lakes are usually at their low point in winter, and cannot help meet peak demand. Pakistan's Sui Northern Gas Pipeline Limited (SNGPL) cannot supply an estimated 700 million cubic feet of gas demand per day. It cuts gas to industry units in Punjab and NWFP in order to supply domestic households. Gas is cut to fertiliser manufacturing plants, which predict a 'massive' shortage just as demand for the coming 'spring' planting peaks.

Pakistan - four natural gas powered electricity generators - Safire, Saif, Orient and Savari - are in construction. When complete in 2008, they will need 220 mmcfd gas. Pakistan hopes to buy gas from Iran when the 2,600-kilometer Iran-Pakistan-India gas pipeline project is set up, but there has been no action as yet. It is unlikely the new plants will be able to operate in winter, and in summer may not be able to operate at full capacity.
January - USA - Ethanol - Huge taxpayer corporate welfare checks to pay for ethanol planting and processing leads to a boom in plans for new ethanol plants. Subsidised money for building ethanol production was $US278 million in 2004, but sky-rocketed to $US2 billion in 2006.

But only 1% of gas stations in USA carry E85, the 85% gasoline 15% ethanol blend used by 'flexi cars'. There are currently 6 million 'flexi cars' in USA  It is uncertain how many of the over 16 million new cars expected to be sold in USA this year will be able to use E85. Most existing vehicles can use a gasoline blended with up to 10% ethanol without any technical problems. As ethanol yeilds less energy than gasoline, the blend, while slightly cheaper, is actually more expensive when calculated on a cents per mile travelled basis.

5.4 billion gallons of ethanol was blended into gasoline in 2006.

Blending of gasoline with up to 10% ethanol will have to become compulsory if the large supply of subsidised ethanol is to be used up.

January - USA - Bush makes a 'state of the nation address' espousing a 'goal' of  producing an additional 35 billion gallons of 'alternative' fuels - mainly 'corn politics' ethanol and synthetic fuels cooked out of fossil coal - by 2016. As the USA 2005 total corn harvest was roughly 12 billion bushels, which can be converted very roughly into only 28 billion gallons of ethanol, then at least 7 billion gallons of  'alternative fuel' will have to come from commercial scale plants converting coal to synthetic fuel. This don't exist in USA as yet. Hydrogen is a joke, cellulosic ethanol production consumes as much fuel as it creates, and canola oil as diesel needs a great deal of land and a domestic fleet of primarly deisel engines.

"Tonight, I ask Congress to join me in pursuing a great goal. Let us build on the work we have done and reduce gasoline usage in the United States by 20 percent in the next ten years - thereby cutting our total imports by the equivalent of three-quarters of all the oil we now import from the Middle East." - USA's President Bush

Bush clearly tries to gull listeners with sly juxstapositions into 'hearing' that three-quarters of all the oil the USA imports now comes from the Middle East. Of course, it doesn't.

Most USA oil comes from a combination of domestic reserves, Canadian, Mexican, and Venezuelan reserves. Using this phrasing, he is hoping to leave the impression that 'the noble' goal of reducing the profligate use of crude oil by US citizens will 'strike a blow' against a (false) dependency on the Middle East.

January - USA - Bush makes a 'state of the nation address' espousing a 'goal' of a 20% reduction in gasoline use in USA by 2016! Even if this was achieved in 10 years time, at that point, in a decade from now, with a 20% 'saving' achieved, the average person in USA would still use more gasoline than a European person does TODAY...

Worse, the "20% reduction" is not 20% less than TODAYS gasoline use - the detail in the report shows that Bush means a 20% reduction in a projected increased gasoline usage by 2017! USA gasoline consumption by decade has shown consistant increases by anything from 14% to 25% - even in the oil shock decades...Is this a smokescreen?
Bush also espouses a 'goal' of  improving 'fuel efficiency' of USA cars to save 8.5 billion gallons - by 2016.

No mention is made of the only immediate and easily implemented tool to pressure consumers into reducing gasoline use  - a tax on fuel - with the tax then returned to as a subsidy to those of modest means buying small cars and diesel cars.

The conclusion is that Bush is demonstrably not serious about reducing Americas unsustainable gasoline consumption.

January 23 - USA - The Energy Secretary announces the US will buy 100,000 barrels per day of crude oil, starting about march, to add another 11 million barrels to the US Strategic Petroleum Reserve. The president wants to double the capacity of the reserve. There is not enough global production capacity to meet this goal without outbidding other buyers and driving up the price of oil. As oil prices jumped immediately on this news, this may be 'cheap talk' to drive crude prices up slightly, perhaps on behalf of USA's oil ally, the house of Saud.

January - USA - Power generated from the wind increased by 27% in 2006 (2,454 megawatts of new generating capacity), according to the American Wind Energy Association, and is expected to increase by a further 27% this year.

January - USA - Plans for an LNG terminal at Long Beach California are finally abandoned in the face of safety concerns.

January - USA - Mexico - as Cantarell mega oil field continues its slow-motion topple, A contract is let to Halliburton to establish "...temporary detention and processing capabilities to augment existing I.C.E. 'Detention and Removal Operations' (DRO) program facilities, in the event of an emergency influx of immigrants into the U.S.; or to support the rapid development of new programs...the contract may also provide migrant detention support to other U.S. Government organizations in the event of an immigration emergency".
The concentration camps in the south, especially Texas, (and beefed up USA national guard contingents already earmarked for the border) are clearly being prepared in the expectation of a mass migration into USA as people flee from projected social breakdown and starvation in Mexico within the next 5 years.
Mexico is dependant on USA for its gasoline supply. USA is dependant on Mexico for roughly 20% of its imported crude oil supply (USA's indigenous oil production is roughly 40% of its total needs). Subsidised corn production in USA is driving up the cost corn in Mexico (the price of Mexican corn is indexed to the  international price, which has now hit the highest prices in ten years), the staple food of the huge number of impoverished Mexicans. The new prices mean that Mexican poor earning around $US4.60 will have to spend $1.50 of that daily income just to buy corn tortillas.
Mexico's economy is hugely dependant on oil. The fuse on the social timebomb is shortening.

January -  USA - there are now 110 ethanol plants in the United States and an additional 63 refineries due to be brought into action over the next 18 months. If oil prices rise, ethanol demand will strengthen and more corn for ethanol planted. If oil prices fall, the economics of ethanol substitution are not as good, and less corn for ethanol is likely to be planted. Oil prices typically swing up and down two or three times in a year. But the decision to plant more corn or less corn is made only once in a year. The USA is likely to mandate a 'price guarantee' scheme for farmers to ensure ethanol plants are fully utilised, no matter if oil is in a relatively low price band.

January - USA - World - Urea - Urea (a nitrogen fertiliser) is now US$275 a tonne - a record high. This price is only indicative - South American fertiliser companies are scrambling for additional supply, bidding some spot market contracts to US$310 a tonne. Suppliers most distant from the market have the lowest price (Russia, at US$275 a tonne), while more centrally placed manufacturers command a premium (Middle East at $US300 a tonne). Production problems in several countries has made the problem worse, with 'tight' natural gas supply forcing some reduction in manufacture.

Demand is said to be driven partly by USA domestic politics, and partly by increased demand in China and India.

Analysts claim that the USA will plant an additional 9.5 million hectares of corn this year, mostly to cash in on the government-created 'subsidised ethanol production market'.

Demand in India and China is up, also partly to supply additional grain crops as industrial feedstocks.

Increasing demand for additional production for ethanol has seen demand for potash increase by 25% over the last three years, with accompanying year on year price rises. The USA is now actively competing with China and South America for additional supply. Increased volume demand has also led to a shortage of bulk frieghter capacity. In some cases, the 'spot prices' to charter a bulk carrier to a more distant port has doubled over the last year (a bulk carrier out of southeast Asia has gone from US$30,000 a day a year ago to $US74,000 a day).

January - China - Urea - China heavily subsidises the cost of indigenously produced urea. It imposes a heavy export tax on any nitrogenous fertiliser sent out of the country, forcing manufacturers to sell in the domestic market. If the tax were removed, the extra Chinese supply would drive down world prices.

January - China - World - Urea - China now produces (and uses domestically) 50 million tonnes of urea  a year - about 37% of world production.

January - New Zealand - fertiliser costs now make up 20% of farm expenditure for dairy production (the cost of diesel fuel is another significant cost). The New Zealand dairy farming system is the most efficient converter of solar energy captured by grass into solid form (milk fat, i.e. butter and cheese) in the world. Its industry is totally unsubsidised, and the animals are normally totally grass-fed. Clover (legumes) plants capture nitrogen naturally (from nitrgen in the air) and are integrated into the pasture of high-performing grasses. This reduces the amount of artificial nitrogen fertiliser that has to be bought. Production is kept at a high plateau by applying additional artificial nitrogen, much of which is made from natural gas from the indigenous Kapuni gas field, discovered 30 years ago. The balance of the urea used in the dairy industry is imported. As natural gas producion declines, it is likely that a greater proportion of urea will have to be imported over the coming years. As international urea prices increase, New Zealand farmers are likely to reduce the amount of urea they use, and rely even more heavily on the 'free' nitrogen fixed by clover in the pasture. In turn, lower grass growth provides less 'metabolisable energy' available in a given area of pasture, and so fewer cows can be fed. In the long run, production per unit area is likely to be reduced.

January - Norway - Production for the month has been about 2.42 million barrels a day, down about  1.2% on last month.

January - Iraq - production for the month has been down by 400,000 barrels per day, mainly due to the ongoing conflict.

January - OECD - according to IEA figures, record crude inventories built over (Northern Hemisphere) late-summer autumn for winter emergencies initially met less than anticipated demand, but december demand was ultimately high, drawing down stored crude very heavily by end of december 2006. January orders for replenishment are consequently high, firming oil price.

February - Saudi Arabia - The Saudis report they are now producing 8.5 million barrels a day (crude plus condensate). This is slightly lower than last december, and is closer to their prefered safe production levels, and more likely to conserve reserves while retaining some spare capacity. There is some suggestion that the 'cuts' reflect the mid and south Ghawar megafield reaching accelerated production decline due to depletion, and north Ghawar production rate slowing for engineering regions.

February - Brazil - new deepwater floating production storage and off-loading facility ships deployed in Brazils larger fields now enable Brazil to increase production by about 141,000 barrels a day. These deepwater wells are too far from land to allow well production to be be transported by undersea pipelines. These 'FPSO' ships are used instead. They remain permanantly stationed over the wells, acting as floating bulk oil storage tanks. Oil tankers visit them regularly to empty them.

February - Brazil - the state owned petroleum company, Petrobas, estimates it will produce an average of 1.919 million barrels of oil a day in 2007. Most is from deepwater wells.

February - Angola - Although an OPEC member, and supposedly making cuts in production, in fact Angola pumped a record amount of crude - 1.8 million barrels a day.

February - demand over the last month appears particularly high, with one commentator estimating demand at over 86 million barrels a day.

February - OPEC - in spite of Saudi 'cuts', OPEC has probably produced around 2 million barrels per day more exported crude. This may be non-Saudi members cheating on their quota, or it may be reduction of domestic fuel oil use in the unexpectedly mild winter allowing more for export, or it may be increased bilateral oil imports for strategic reserves at a time of relatively low oil prices. Or it may be a combination of all these factors.

February - Norway -  oil production is now 2.45 million barrels per day.

February - world - OPEC - The IEA warns that although demand for oil imports in the 30 largest OECD countries has been relatively muted over Northern Hemisphere winter, the february OPEC production cut (really the Saudi Arabian production cut) will theoretically reduce OPEC's production to 25.8 million barrels a day from this month. This reduced rate of supply would see OPEC crude production not meeting demand by sometime in the second quarter of this year. On the other hand, other OPEC members may cheat on their quota.

February - world - OPEC -  The IEA now predicts demand for OPEC oil in 2007 will be 30.6 million barrels a day.

February - world -  IEA now predict that increases in non-OPEC oil production will be around 50% less than its prediction for 2007 - made only last july. It is now currently predicting an increase of 1.1 million barrels a day for non-OPEC regions.

February - The EIA warns that OECD oil stocks will have an increased demand draw on an additional 1 million barrels a day over this quarter, tripling the five-year average decline rate. The first quarter of the year usually sees a rebuild in OECD stocks of more than 800,000 barrels a day, rather than a nett draw down. Stock levels on hand by the end of the first quarter are predicted by the  EIA to be around 2.58 billion barrels, enough for about 51 days of demand cover.

February - the latest estimate by ASPO is published, suggesting, as far as can be told, peak of production of regular (cheap) oil was 2005. They estimate peak of all oil (including tarsand, shale, polar, deepwater, natural gas liquids, conventional crude, condensates - but excluding synthetic crude made from coal and biofuel, and excluding refinery processing gains) might be 2010.

February - crude oil  rises to $60

February - Qatar - ExxonMobil cancels its $US 7 billion gas-to-liquids project supposedly because of costs. The project was based on the vast 'North field' gas resource, but the area has been more closely examined and the field found to be complex and non-homogenous. Far more wells would be required than first thought, and each sub-reservoir is likely to have a relatively short life.

February - USA - Canada - a fire at Imperial Oil's 118,000 barrel-a-day Nanticoke refinery in Southern Ontario - one of Canada's biggest  - causes gasoline shortages at many Ontario gas stations. Imperial oil is owned by USA's ExxonMobil. Cold weather has slowed tanker deliveries on the Great Lakes, and other refineries are running almost at full capacity. The resulting tight supplies drive up local gasoline prices.

February - Turkey - A conference on Turkey's energy future concludes an energy shortage is looming. If the economy keeps growing at the present six percent, Turkey’s electricity demand will reach 300 billion kilowatthours by 2015. Demand will exceed present plant capacity by 2009, and electricity shortages will be inevitable. By 2012, at present growth rates (which are unlikely to be sustained) Turkey will need an additional 40 billion kilowatthours of electricity above present maximum capacity. Turkey relies heavily on natural gas for generation, mostly from Russia (via the Blue Stream pipeline) and, increasingly, Azerbaijan (via the South Caucasas Pipeline).

March - Venezuela - Venezuela will pay a non-cash equivalent of  $US250 million to BP and Total for last years nationalisation of the 30,000 barrel a day Jusepin oil field.

In march 2006, Total had refused to alter their contract from majority holder to a joint venture, with Venezuela holding a majority share - resulting in seizure of the field. Now that settlement has been reached, Total says it will now "work toward the future...undoubtedly, for Total and the rest of the partners, the Orinoco represents a high priority".
BP, formerly a minority partner with Total, will now enter a partnership with Petróleos de Venezuela.

March - Venezuela - Exxon Mobil agrees to cede the Cerro Negro heavy oil project to majority Venezuelan governmental partnership by May 1. The oil Minister says the oil majors with projects in the Orinoco reserve will be compensated with crude oil, rather than cash.

All oil companies involved in projects in the Orinoco - Total, BP, Chevron, ConocoPhillips, and Statoil - have until May 1 to renegotiate contracts to allow the Venezuelan government majority control of their resource. If terms can't be agreed within 4 months, the projects would be nationalised.

March - Brent crude is $US60.80

March - Iran - World - Iran moves to accept only non-dollar payments for its oil (primarily euros). Japan waits until it is 'officially' asked by Iran to pay in other currencies. Japan buys about 550,000 barrels of oil a day from Iran. Less than half Iran's income is now paid in USA dollars. USA itself does not buy any oil from Iran.

April - Saudi Arabia - the Saudi total oil reserve resource is interpreted to have been about 175 Gigabarrels. Of this total, about 110 Gigabarrels have been used. About 65 Gigabarrels remain. If production rates that minimise damage to the fields are used, Saudi production is in future likely to be not more than 8 million barrels a day by next year. Projecting total Saudi decline rates of under 5.5% a year forward in time shows production falling to about 4.5 million barrels a day by the end of 2020.

April - Japan - Iraq - Japan loans Iraq $US850 million for 40 years. The loan is part of a $US6 billion loan 'package' to build refineries, pipelines, and 'assit' with repairing the USA damaged electricty facilities. Reading between the lines, it seems likely this is a de facto long term contract for 'payment-in-kind' of Iraqi oil (or indirect 'swap oil' from another country).

April - Pakistan - Supply of electricity no longer meets demand. Demand is 16,000 MW, and supply is 1,000 MW less than demand. The government decrees that for the next 4 months commercial firms will not be allowed to operate after sunset, and will have to have staggered weekends from friday through sundays when they must not operate. Street lighting will be cut by 50%, which is estimated to save 25MW.
The power shortfall is expected to worsen, peaking at an unmet demand of 2,500MW in the june-july period.

April - Serbia - Bulgaria - In line with the G7 decision of 1992, Bulgaria closes two units at its Kozloduy nuclear power plant, reducing the power available to export to Serbia. Serbia has benefitted by very cheap electricity from 'load shedding' by the Bulgarian power plant. Serbia's own power infrastructure has been neglected as a result.

April - Albania - Montenegro- Bosnia - Herzegovina - Croatia - Serbia - Hydro storage in southeast europe is low due to reduced flow in the Danube, Morava and Drina rivers, and the price of electricity to Balkan states is likely to increase. With a hotter than normal summer predicted, Balkan states are unlikley to be able to meet peak summer demand (mainly due to power used for air-conditioning).

April - Australia - the severe drought in southern Australia has meant that the 16 water reservoirs for the Snowy River Hydro complex's 7 power stations are much lower than usual. If heavy rain does not fall between may and july, hydro power to major Australian cities will have to be cut. It is hoped additional coal powered generation may be able to take up the potential shortfall. The Snowy River complex provides around 3.5% of Australia's power, and nearly three-quarters of Australia very minimal renewable energy sources.

April 23 - Crude oil prices - Brent crude hits $US68 as the Nigerian presidential results are disputed due to widespread fraud.

April 25 - USA - As part of Bush's $US405-million "Global Nuclear Energy Partnership" to build new nuclear plants in the coming decades, a 'joint nuclear action plan' is announced between USA and Japan. Critics argue the GNEP plan to dispose of  large amounts of highly radioactive cesium 135 in a single "near surface" site means there will be the potential for soil, water, or dust-borne wind contamination for many thousands of years. Cesium 135 has a half life of 2.3 million years. The other major concern is that 95% of the weight of spent nuclear fuels is made up of uranium, and while uranium can be re-used, it is very expensive to re-process it into fuel rods, so only a small part of the waste is likely to be recycled. The US Department of Energy plans to dispose of "tens of thousands of tons" of waste uranium in so-called 'spent' fuel rods in the landfill.

April - uranium - "yellowcake" spot prices now hits $US120 a pound. Inflation adjusted, this is close to the all-time record high price.

April 30 - Crude oil prices - Brent crude falls back to $US67.30

April - USA - gasoline inventories fall to below the average at a time of year when US refineries are usually building supply ahead of the USA 'driving season'. Markedly strong demand and a series of outages at USA refineries in the first part of the year are the primary cause. USA crude oil stocks are high, in part due to the refinery bottleneck.

May - UK - Britain faces a lack of gas storage facilities due to North Sea gas no longer being as readily 'on tap' . Industry warns government that its inaction may lead to gas shortages this (UK) winter.

May - Norway - crude oil production is now about 2.2 million barrels a day.

May - China - A large new oil and gas field is discovered in Bohai Bay, off China's coast. The Nanpu block of the Jindong oil field has estimated reserves of crude and natural gas 'equivalent to' 7.5 billion barrels of crude, increasing China's remaining reserves by 20% (so long as Nanpu's gas is counted as 'oil equivalent'). Production will start late 2008 or 2009. It is expected the oil will be produced at about 180,000 - 200,000 barrels of crude a day. China's very large oil fields have almost certainly begun their decline, so this find will help make up for slowly dwindling supply. One commentator notes that the estimated daily production rate is slightly less than last years increase in foreign oil imports into China.

May 2 - USA - once again, refinery bottlenecks cause a shortage of gasoline, resulting in record high pump prices. Recent accidents and malfunctions at various US refineries mean they are operating at only 88.3% of capacity - close to the 20-year low experienced last month. As a result, USA gasoline inventories drop for the 12th week in a row, if the face of ample crude ready for refining. Current gasoline refining capacity is 17 million barrels a day. Demand, coming into the driving season, is 22 million barrels a day.

May - Japan - Indonesia - as supply contracts come up for renewal, Japan manouevours to sign a bilateral contract with Indonesia to lock in supplies of Indonesian LNG to Japan. Japan, desperate for Indonesian gas, offers a bilateral free trade agreement between Japan and Indonesia which would eliminate import taxes on trade between the two. Nippon Oil Exploration owns extensive gas field rights throughout South East Asia, Australia, and Mexico.

May - China - Iran - A deal for China to invest in the construction of up to 10 dams and associated hydro power stations is signed with Iran. The deal is worth about $US10 billion dollars. Iran's oil and gas reserves supply 98% of its primary industrial and domestic energy consumption. Natural gas supplies 60% of domestic energy consumption.

May  - China - Iran - The Chibese state-owned Zhuhai Zhenrong Trading Company confirms it will now pay for its 240,000 barrels of oil per day crude oil imports from Iran with euros. rather than the US dollar. Iran is likely to be a major oil supplier to China in future decades, due in part to the joint Iranian-Chinese Yadvaran oilfield venture 

May - Iran - bourse - Around 60% of Iran’s oil income is now in non-dollar denominated currencies. The idea of an Iranian regional oil bourse to compete with the New York and London oil bourses seems to have been shelved in favour in direct bilateral selling in nominated non-US currencies.

May - Middle East - Asia - Middle East oil ministers from Iran, Kuwait, United Arab Emirates, Qatar, Oman, Iraq and Bahrain are hosted by Saudi Arabia at a conference to discuss oil and gas markets, energy security, and security of supply to their major makets in adjacent Southeast and East Asia. These markets take 66% of Middle East oil and gas, but the suppliers are increasingly concerned about the regions ability to maintain a stable demand. Energy officials of their East Asian customers  - Japan, China, Korea, India, Indonesia, Pakistan, Thailand, Philippines, Brunei - were concerned about security of supply given the USA threats against Iran and its poor control of Iraqi oil development, and, unsuprisingly, price.

May 1 - Saudi Arabia - Philipines - the Saudi oil minister promises the Philipine government it will "make up the shortfall" if the Phillipines cannot import enough oil from "other sources" to meet its needs. The Philipines import 56% of their oil from Saudi Arabia, and 39% from other countries in the Middle East.

May 1  - China - Saudi Arabia - a further bilateral contract for oil supply between Saudi and Arabia and a Chinese customer is signed at the Asian Ministerial Energy Round Table Conference. The contract is for supply of 1 million barrels of oil a day "for the next few years".

May - China - China completes filling its first strategic oil reserve, with a capacity of 33 million barrels. In spite of relatively high prices, it takes delivery of 2 million barrels of 'Middle Eastern' crude for its next part of the reserve, the Aoshan oil storage facility. China aims to have a strategic oil reserve of 100 million barrels by the end of 2008.

May - fuel efficiency - Korean car maker Hyundi continues its record of fuel efficient cars based on diesel as well as hybrid technologies. An Australian owner of a Hyundai Santa Fe SUV, powered by a turbo-diesel engine, found he could get over 50 mpg on the open road by reducing his speed to 55 mph. Hyundai are increasingly moving to the efficient modern turbo-diesel engines as they are less expensive than hybrid drive trains, much less complex, and give similar fuel efficiencies.

May - USA - The Toyota Prius now ranks sixth best selling passenger car in the USA. Toyota has now sold one million hybrid cars globally since their introduction.

May - India - India now imports about 11% more crude oil than it did a year ago. Due to the increase in the price of crude, it now pays 24% more for the crude than a year ago.

May - India - India now imports nearly 111 million tonnes of crude a year, and exports almost 33 million tonnes of oil products from its domestic fields (mainly diesel and naptha, and smaller amounts of petroleum and avaition fuel).

May - India - India now imports almost 2 million tonnes a year of LPG, mainly for its domestic market.

May - India - The government has prevented oil companies from raising diesel, petroleum, LPG and kerosene prices for the past year. Kerosene sells at 22 US cents a litre. Oil companies continue to make losses. Both LPG and kerosene are regarded as the "poor man's fuel" and the government knows the vast numbers of poor people have no ability to pay the real cost of fuel.

May - India - Reliance Industries negotiates long term contracts to sell its natural gas to nitrogen fertiliser manufacturing companies for $4.50 per million British thermal unit (mBtu). The gas, from the Krishna-Godavari Basin, would be the benchmark price for India's domestically produced natural gas.

May - India - State owned NTPC Ltd, India’s largest power generation company, refuses to pay $4.50 per mBtu for gas for electricity generation, even although, at this price, gas is a cheaper fuel for power generation than naptha, an oil-based liquid fuel.

NTPC has a current generation capacity of 27,404MW (all sources), and aims to expand its generation capacity to 50,000MW by 2012. Over 15,000 MW of new generation will come from burning coal. India is the world's third largest coal burner, after USA and China.

About 4,500MW of new generation was intended to come from natural gas. The company says it will put its expansion plans at gas-based power stations at Kayamkulam, Anta, Auraiya and Faridabad on hold. In the meantime, NTPC is exploring offshore blocks to meet its own natural gas needs.

May - India - power is currently sold at just over 4 cents (US) a unit. One estimate is that India will need $120-$150 billion over the next five years to pay for the its increasing coal, oil, gas and nuclear power needs.

May - Nepal - The Nepalese government continues to sell gasoline and LPG to its poverty-stricken people at prices below cost. The government controlled oil import and distribution company takes a loss of  $3.70 for each cylinder of LPG it fills, loss of 7.5 cents for every litre of petrol it sells, and a loss of 6 cents for each litre of diesel it sells. The company is bleeding money at the rate of $US6 million dollars a month $4.8 million of which goes on liquid fuels. It can only continue to operate by taking on massive debt. The Nepal Oil Corporation has to pay nearly $US4 million a month to settle outstanding past debts owed to Indian oil refineries.

May - Iran - Iran announces plans to introduce petrol rationing in two weeks. A 'smart card' for each vehicle is supposed be introduced on may 21 to limit purchases, but may have to be delayed until later in the year. So far, 2,300 petrol stations have the technology installed, but the software for re-charging the cards has yet to be rolled out. Private motorists will be allowed no more than three litres a day of the state subsidised petrol. The price of petrol will be increased to 38 US cents a gallon. The cost of the state subsidies is estimated to be billions of dollars per year. Motorists currently pays only about 25% of the true cost price of the petrol.

May - Brazil - continuing growth increases the demand for electricity. Brazil's current generation capacity of over 98 terrawatts is not not enough to meet demand growth of about 3 megawatts a year. Most of Brazils electricity comes from hydro dams,  but if enough cannot be built, Brazils 2 nuclear power plants (Angara 1 and 2) will be joined by a third (currently on 'hold' due to lack of funds). The first two power plants have had a poor safety record, and have been hugely expensive to build. There is widespread opposition to completing the third unit.

May - Russia - now the worlds largest oil producer, at 9.79 million barrels a day, Russias domestic demand is increasing at the same time as the giant west Siberian oil fields are slowly fading. On the back of record profits, Russias oil companies look to the very difficult terrain of frozen East Siberia to find new supplies. It won't be cheap.

May  - Russia - Khazakstan - Kazakhi and Russian oil exports thru the CPC pipeline are down by about 9% since the all time peak of over 800,000 barrels a day in february.

May 17 - USA - In an unfortunate coincidence, Valero's Houston refinery closes for a week due to problems with part of the plant. Around 64,000 barrels a day of gasoline is shut out. ConocoPhillips Sweeny refinery also shuts down temporarily due to plant problems. 

May 17 - USA - Petroleum prices reach record levels (but still low by European standards) of around $US3.10 per gallon. Midwest areas, far from refineries, reached prices as high as $US3.85, prompting 'internal exports' from Texas to cash in on the high prices - causing temporary petroleum shortages in some parts of Texas. Driver behaviour is not much affected, with surveys indicating more Americans will travel over the Memorial Day holiday than usual, albeit the planned trip distances are lower than usual.

May - gasoline prices - USA, with substantial oil reserves remaining, is both a producer and importer of crude oil. While it is true that in the USA gasoline ('petrol') has a low level of hidden subsidy to the domestic producer oil companies, it is sold free of federal taxes. As a result, the USA pump price is something of a benchmark for the 'true' cost of gasoline. According to USA's AA Motoring Trust, the price of a US 'short' gallon of gasoline around the world is as follows:

USA                 gasoline is $US 3.10/gallon.

In one major oil producing country, gasoline is not subsidised at all, and has such a large additional government tax on the pump price that it is the most expensive gasoline in the developed world:
Norway              gasoline is $US 7.76/gallon.

In one oil producing country where oil production is in steep decline, gasoline is not subsidised at all, and has such a large additional government tax on the pump price that it is one of the most expensive gasoline in the developed world:
U K                 gasoline is $US 7.15/gallon.

In some major oil producing countries, gasoline is extremely heavily subsidised:
Venuezuela         gasoline is 19 US cents/gallon.
Iran                    gasoline is 33 US cents/gallon.
Saudi Arabia      gasoline is 19 US cents/gallon.
Kuwait               gasoline is 78 US cents/gallon.

In some major oil producing countries with more mixed internal and external economies, gasoline has a small subsidy:
Russia                gasoline is $US 2.69/gallon.
China                 gasoline is $US 2.44/gallon.
Mexico              gasoline is $US 2.38/gallon.

In some countries with useful domestic oil resources, gasoline is unsubsidised, and in addition has a government tax put on top of the pump price:
Australia              gasoline is $US 4.05/gallon.
Canada                gasoline is $US 4.10/gallon.

In most developed mixed economies with little or no oil resources, gasoline is unsubsidised and carries an additional government tax at the pump, encouraging motorists to chose small cars and diesel powered cars:
Germany             gasoline is $US 6.98/gallon.
Denmark             gasoline is $US 6.95/gallon.
France                 gasoline is $US 6.50/gallon.
Sweden               gasoline is $US 6.50/gallon.

Other developed mixed economies with little or no oil resources elect to have a lower government tax at the pump:
Japan                   gasoline is $US 4.16/gallon.
Italy                     gasoline is $US 4.80/gallon.
New Zealand       gasoline is $US 4.17/gallon.
Switzerland          gasoline is $US 5.17/gallon.
Greece                 gasoline is $US 4.91/gallon.
Austria                 gasoline is $US 5.40/gallon.
Israel                   gasoline is $US 5.52/gallon.

A countries currency exchange rate for the US dollar can have a huge effect on the pump price. As oil is traded in US dollars, when a countries currency weakens against the US dollar, the price at the pump must go up, even when the oil price on international markets remains unchanged.

May - UK - The UK government admits it will not reach its target of 20% renewable power by 2020. In addition, all but one of the UK's nuclear power plants will have reached the end of their operational life soon after this date - as will some fossil fuel powered plants - creating an estimated power shortfall of about 30 gigawatts.

May - USA - ethanol - a study by Iowa State University finds USA retail food prices could increase if crude oil prices reach $65 to $70 per barrel and USA corn prices reach $4.42 per bushel. Corn (maize) was $2 per bushel in August 2006. Both oil prices and corn prices are now within the range discussed by the study. These prices, in theory, underpin an expansion of USA ethanol production to the point where crops might provide 30 billion gallons by 2012. This would use half the crop of corn, wheat and other grains currently grown for cattle, pig and poultry feed and for export. The result would be an increase in US dodmestic food prices of about $US20 billion a year. For this reason , subsidised ethanol production in the USA is almost certain to be limited by legislation.

May - USA - BP plans to totally rebuild its damaged Thunder Horse sub-sea oil pipe distibution network in the Gulf of Mexico. The estimated cost of repairs is $US250 million - which is more than the original cost of construction. BP's oil concesssion in Prudhoe Bay is in decline, and the Thunder Horse platform is what may be one of the largest oil fields in the American sector of the Gulf of Mexico, with potential to produce around 250,000 gallons of crude a day.

Like all private oil companies, BP is now facing declining major reserves, fewer opportunities as governments nationalise their strategic oil and gas, and rexamining opportunities predominantly in hurricane ridden or severely cold environments where operating costs and risks are very high.

May - Mexico - At 3,110,000 barrels a day, crude oil production is now about 70,000 barrels a day less than in april.

May - Kuwait - swamped in devaluing USA dollars, Kuwait finds it has imported the USA's inflation along with its inflated currency. For the first time, Kuwait stops pegging its currency to the USA dollar.

June 2 - Brent crude is now over $US68 a barrel.

June - weather - Oman - Iran - Cyclone Gonu coming off the Arabian Sea brings flooding to some southern Middle East Gulf countries. Damage is limited, but is enough to temporarily spike Brent crude oil prices to over $US71.

June 10 - Iran - USA - Qatar - Bahrain - Gulf oil states -Iran warns USA it would retaliate with a massive ballistic missile attack against multiple targets within an hour of USA bombing Irans nuclear energy research facilities. Admiral Ali Shamkhani, a senior defence adviser, said to the USA journal 'Defense News' that Gulf states that aid and co-operate with the US would be key targets. In a direct copy of the USA strategy in attacking Iraq, Iran said it would target strategic' infrastructure facilities such as electric power plants, oil facilities, and presumably (if it follows the US example) other civilian domestic infrastructure, such as government offices. US bases in Gulf countries would also be targetted. The USA has huge bases in Iraq and Qatar, and smaller bases in Bahrain and Oman. Iran says it would also simultaneously launch 'airstrikes' against Israel.

An un-named Iranian foreign ministry official has reportedly said: “The objective would be to overwhelm US missile defence systems with dozens and maybe hundreds of missiles fired simultaneously at specific targets.”

June - Saudi Arabia - Japan - South Korea - Saudi Arabia tells Japan and South Korea it will continue to supply around 9.5% - 10% less crude oil than it is contractually obliged to, into July, at least.

June 11 - Venezuela - China - A new joint venture oil exploration and development company is set up by the Venezuelan government owned PDVSA oil company, and the Chinese government controlled CNPC oil company. The new company, Petrozumano, has a licence to explore and develop oil and gas in Anzoategui state. The company is majority owned by Venezuela.  China currently imports 300,000 barrels of crude oil a day from Venezuela. China hopes to be able to source 1 million barrels a day of Venezuelan oil by  2012.

June - Venezuela - USA - ConocoPhillips and Exxon Mobil abandon their Orinoco oil projects as they do not want to agree to Venezuelan governmental terms for re-nationalisation. The two USA companies plan to sue the Venezuelan government.

June 11 - Quote of the month -

"For US crude oil imports to stay flat, our consumption has to fall at the same volumetric rate that our domestic production declines.
For a post-peak exporting country's crude oil exports to stay flat, their consumption has to fall at the same volumetric rate that their domestic production declines.
Worldwide, in my opinion, we are facing an epic collision between the expectation of an exponential increase in exported crude oil and petroleum products versus the quickly developing reality of an exponential decline in exported crude oil and petroleum products."
- Jeffrey Brown, petroleum geologist and oil production commentator, writing in the 'Oil Drum' Blog. Emphases added.

According to Rembrandt Koppelaar, Oilwatch Monthly June 2007, while worldwide 'all liquids' production (all fuel liquids, that is, conventional plus unconventional crude oil, natural gas liquids, lease condensates, gas-to-liquids, coal-to-liquids and biofuels) was 85 million barrels a day in 2006, worldwide oil exports (conventional and unconventional), at 47 million barrels, were down slightly over the previous year.
Russia, (sharing the title of the worlds highest oil producer with Saudi Arabia) exports about 6.6 million barrels of oil a day. Russia has remained on this plateau for several years. As Russias internal consumption increases and its production remains static and begins to decline, there will be less available for export.
The same is true for Saudi Arabia and Mexico, the other high volume oil producers.
Norway, an important exporter, is also beginning a production decline, but internal demand is relatively static and unlike these other countries, the population is relatively small. In addition, production declines in Iran, Venezuela, and Iraq have contributed to an overall stasis in the availability of oil for export.
OPEC countries as a whole have had declining export production since mid 2006.

The previous year-on-year growth in demand appears to be shifting away from exports of crude to meeting internal demand in oil producing countries as their populations and economies grow; internal demand in OPEC countries is, for the moment, showing year-on-year growth. Jeffrey Brown estimates the top ten net oil exporters had an aggregate increase in internal oil consumption of 3.3% from 2000 to 2006. He notes that this increased internal consumption for that period equates to about the whole of Nigeria's annual oil production for 2006.

June - Saudi Arabia - a combination of higher oil receipts, trade liberalisation and massive petro-chemical 'megaprojects' accelerates the growth of the Saudi economy by almost 8% p.a. The fastest growing sectors in the Saudi 'economic boom' are manufacturing, finance, communication, and construction. The riyal is pegged to the US dollar, and, according to one bank's estimate, every 10% drop in the value of the US dollar leads to an erosion of the purchasing power in Saudi hands of 5%. On the plus side, Saudi interest rates also follow the US artificially low interest rates, providing abundant cheap capital; but this is in a country that, like China, also huge dollar reserves. Saudi therefore has a vested interest in slowing the downward drift of the US dollar, least its currency reserves becomes less and less valuable over time.

June - Saudi Arabia - Like other Gulf oil states, Saudi Arabia is quietly converting as much of its dollar reserves into productive assets in other countries as is safe to do without spooking the currency markets. 'Officially recorded' foreign assets were $US73 billion in 2002. They increased to $US273 billion in 2006.

June - Saudi Arabia - Bahrain - Qatar - Kuwait - Abu Dhabi - UAE - expanding populations and consumer demand for air conditioning see the possibilities of power shortages in Gulf states.
Kuwait has already said there will be power cuts this summer. It is considering building a LNG import terminal to import natural gas.
Abu Dhabi will divert natural gas used to pressurise oilfields to run its power stations and desalination plants.
The UAE largest gas-fired power station has insufficient natural gas to meet this summers demand and will run part of the plant on gasoil, to the tune of 50 tanker trucks a day.
In Qatar, shortages of gasoil for power plants see trucks queuing for hours to take on a load. Qatar, with massive gas reserves, is building huge gas export facilities, but cannot divert enough gas for its power plants, and is reportedly considering building coal-fired plants.
Bahrain has approached Saudi Arabia to buy electricity.
The Gulf states have some of the highest sunshine hours in the world.

June - BP statistical review of world energy - The 2007 version of this now prestigous report is published. As usual, the Middle East countries report no decline in their oil reserves. Saudi Arabia, the world's largest oil exporter, revised their oil reserves upward by a massive 53% in the period 1987 to 1989. There were no massive new discoveries made that could justify this increase, and while new technologies being deployed at that time would justify some increase, but not of that size. Prices at that time certainly could not justify 'uneconomic' reservoirs in difficult rock strata becoming viable to produce. Current oil prices might now make some difficult-to-produce oil fields economically viable; but again, not to the level the inflated reserve figures suggest.

In addition since the late eighties, Saudi Arabia has not subtracted the oil it has produced and sold from its remaining reserve figures. In effect, the Saudis - and other Middle East producers - are stating the newly revised estimate of the amount of economically recoverable oil  that was in a reserve when it was first discovered, taking no account of the amount already pumped out and sold.

So the BP analysts must take the Saudi reports at their face value, as Saudi Arabia regards scientific data on the true state of its oil reserves as a state secret.

The situation is very similar for the Middle East Gulf state producers Iran, Iraq, Kuwait, UAE, Qatar, and Syria. Their stated reserves are also likely to be false.

Peter Davies, Chief Economist with BP reportedly said that BP doesn't believe there is "an absolute resource constraint", and that when peak oil comes, it is as likely to be from "consumption peak" as from production peaking. He is technically correct. For practical purposes, the world will always produce 'some' oil. "Consumption Peaking" is code for worldwide depressionary conditions: that is, high unemployment equals an inability to buy gasoline which means consumption falls and falls. The reason he tentatively gives for the sudden unaffordability of petroleum is "climate change policies". This is code for a carbon tax added to the price of gasoline and diesel. He is unlikely to be correct that politicians will be able to impose further taxes on petroleum products. He is likely to be wrong when he suggests consumption will decline before declining global export-available crude oil forces a crunch. 

June - Saudi Arabia - Saudi Aramco releases its report “Facts and Figures 2006” updating their oil expansion projects. Two major expansion projects (an additional 500 thousand barrels a day (kbd) from Khursaniyah, and 250 kbd from Shaybah) are delayed by about 6 months, and one, an additional 100 kbd from Nuayyim is on target. The additional 200 kbd expansion at Shaybah is no longer mentioned, and neither is an expansion of 300 kbd in the Neutral Zone. As Saudi production plateaus, these expansions will do nothing but hold present levels. A greater part of Saudi production is likely to be consumed within Saudi Arabia in future.

June - OPEC - The increase in internal consumption by OPEC member countries is estimated to be 5% a year.

June 27  - Iran  - gasoline rationing commences. Introduced without warning at 2 hours before a midnight implementation so as to prevent hoarding, motorists are limited to 100 litres/26 US gallons a month, and taxis to 211 gallons a month. People queue outside gas stations for hours when they hear the announcement.. Some gas stations close the pumps at midnight to re-calibrate the pumps, sparking rioting by motorists. Around 17 gasoline stations are damaged.

June 27 - Iraq - The Iraqi oil minister says contracts signed with the previous government (since deposed by USA) to develop oil fields in Iraq will be honoured, but will be amended under the new laws due in two months. China, the Vietnam and Indonesia have contracts for oil field devleopment in Iraq. Russia's OAO Lukoil Holdings contract has been cancelled.

June - Iraq - Iraq's oil mininster admits the civil war in Iraq could double or even treble the cost of expanding Iraqi oil production. Iraq hopes to 'eventually' reach 6 million barrels of oil a day. The cost of reaching this target had previously been estimated at about $US25 billion. The continuing cost of the USA invasion force is estimated at about $US130 billion a year.

Iraq currently produces about 2 nillion barrels of oil a day. Prior to the US invasion it produced about 2.2 million barrels a day. The chances of Iraq significantly increasing its oil production within the next five or so years are very low.

June  - Iraq  - the export of oil through the southern port of Basra can now only continue so long as 'taxes' are paid to various local 'insurgent groups'. The new power brokers no longer try to control the streets - just the oil security. The British forces are mired on the streets and can do nothing to stop the 'protection' racketeering behind the scenes.

June - Thailand - China  - Thailand signs an "initial" agreement with China to buy 3,000 Megawatts of electricity from hydro stations in southern China by 2017. Thailand claims it needs an additional 30,000 MW of capacity  by 2021. Currently Thailand uses 26,000 MW. About 70% of Thailands electricity is generated in natural gas powered stations.

June 28 - International Energy Agency - the chief economist of the International Energy Agency, Fatih Birol, says in an interview in Le Monde, that "If Iraqi production does not rise exponentially by 2015, we have a very big problem, even if Saudi Arabia fulfills all its promises. The numbers are very simple, there's no need to be an expert...Within 5 to 10 years, non-OPEP production will reach a peak and begin to decline, as reserves run out. There are new proofs of that fact every day. At the same we'll see the peak of China's economic growth. The two events will coincide: the explosion of Chinese growth, and the fall in non-OPEP oil production. Will the oil world be able to manage this shortfall, that is the question...I understand the Saudi government claims 230 billion barrels of reserves, and I have no official reason not to believe these numbers. Nevertheless, Saudi Arabia - as well as other producing countries and oil companies - should be more transparent in their numbers. Oil is a crucial good for all of us and we have the right to know how much oil, as per international standards, is left.."
(emphases added).

July - International Energy Agency - the July 2007 'Medium-Term Oil Market Report' states that OPEC will have only "minimal" spare capacity by 2012. If the current global average GDP growth of 4.5% continues, the report says, "uncomfortably low" capacity will commence 2009. In addition, much fuel oil has been replaced with natural gas. By 2012, natural gas supplies will also be "tight", meaning that there may have to be a return to fuel oil for essential power generation, no matter the cost. The cost for fuel oil in this scenario will be very high.

The IEA sees OPEC as a whole having 2.5 million barrels a day spare capacity. As non-OPEC producers no longer have sufficient spare capacity to meet buyers expanded needs, OPEC is now the 'swing producer'. OPEC now has the luxury of not producing more (at current prices), even when there is an unmet need for more. In this way it both keeps a floor under high prices, and acts as a monopoly price-setter. The high prices retain the income stream to OPEC (and non-OPEC) while conserving the remaining OPEC resource and playing it out in the most long-term efficient manner. The high price can no longer be driven down by non-OPEC producers increasing their production.

Expect traders to take positions around this projection, and for prices to remain volatile on the high side from now on.

Up until now, only poorer, 'less developed countries' have been price-forced to drop the amount of crude products they buy. In these countries, the number of poor people is huge, relative to the number of well-off who can afford oil products at 'any' price. While the poor in these countries use relatively small amounts of oil products, much is for cooking and heat, and thus essential. Government must pick up the price difference.

Consumers across all 'developed countries' (with more disposable cash and better credit rating) will be bidding against each other for supply. The relatively large number of middle class oil-product consuming people across all developed countries will absorb the price increase. Lower incomes across all developed countries will be price-forced to drop the amount of crude product they buy. As the consequence of unaffordibility of oil is not usually life-or-death, government in these countries will not pick up the price difference.

The IEA report notes that if there is a drop in forecast global GDP growth of just over 1% (i.e. a recession), then, by 2012,
2 million barrels a day of OPEC oil will no longer be required. Oil will be cheaper, debt will be higher, jobs will be fewer. Not much of a 'cure'.

July - Yemen - Yemeni Marib light crude oil sells for $US79.24, an all-time high. The price increase is attributed to reduction in Nigerian output due to the on-going discord (Shell oil currently has shut-in production of about 465,000 barrels a day), lower than expected OPEC production, and warnings that there may be shortages in supply.

July - Canada - China - The plan for a joint Canadian-Chinese pipeline to take crude oil from Canada's oil sands to a Pacific port for export is cancelled by PetroChina. The 'Gateway' project pipeline was to have taken 400,000 barrels a day of crude, with 200,000 barrels a day of that being bought by PetroChina. Delays due to lack of support from Canadian firms, Native land title claims, lack of committment of supply to China, and unwillingness to assist PetroChina to access Canadian domestic markets were the main factors on the decision.

July - Argentina - Argentina has had almost the lowest electricity prices in the world for the past four or so years, and an 8% annual growth rate - but no new energy infrastructure to meet burgeoning demand.

July 13  - Argentina - Shortfalls in natural gas supply causes the government to ban the sale of compressed natural gas for motorists. The natural gas crisis was precipitated by dramatically colder temperatures causing a sudden surge in demand for natural gas for home heating, coupled with lack of investment in new power generation capacity. Sale of natural gas to Chile has also been cut, and Argentina has asked Brazil to share some natural gas it imports from Bolivia. Argentina asks Brazil to sell it additional electricity, as Argentine hydrodams have insufficient capacity to meet the additional electricity need.

The government subsidises gasoline to bring it down to the same price as the cheap (but unavailable) natural gas widely used for commercial vehicles. Gasoline in Argentina is about seven times more expensive than natural gas. The government extends the same subsidy to fuel oil to make private power generation at factories affordable. The consequent 400 Megawatt drop in demand for electricity allows natural gas to be made available for fertiliser production and for combined-cycle power plants currently running on the less efficient fuel oil...

July - Argentina - The budgetted government subsidy for the year of ARS500 million for subsidising the price of fuel oil for combined-cycle generators is now spent. In light of the natural gas shortage and consequent increase in fuel oil consumption, the cost of the subsidy is expected treble to ARS2 billion by the end of the year.

July - Russia - France - France's Total Oil company provisionally signs a $US15 billion deal with Russia's Gazprom gas company to take up a quarter share in the giant Shtokman field in the Barent Sea in the Arctic circle. The agreement sees both companies designing, building and operating the new field, due to come on line in 2013. However, Total has been given no specific allocation of reserves, which are owned by a 100% owned Russian company. Under the deal, Total will relinquish its 25% stake when phase 1 of the 4 phase project is complete.

July - Iran - USA - Japan - USA continues to apply sanctions against banks that do business with Iran. As a result Iran finds it increasingly difficult to process dollar payments for its oil. Iran now formally asks Japan to pay for all its oil in yen, not dollars - thereby strengthening the yen and weakening the dollar. Japan is Iran's biggest customer for oil. Japan has essentially no oil reserves.

July - Japan - crude oil imports are now about 4.32 million barrels a day. This is an increase of 3% over last year. Oil imports have increase month-on-month for the last three months. Japan imports nearly 88% of its oil from the Middle East. Saudi Arabia is still Japan's biggest supplier, at over 1 million barrels a day, but Japan now imports 18% less Saudi crude than last year. The difference has been made up by Iran, now supplying about 546,300 barrels a day, 33% more crude than previously.

Japan - around 80% of Japan's oil supply is now bought in direct bilateral supply agreements with the producers. The price is based on the spot price for Dubai crude, the benchmark for the Asian region.

July - OPEC - USA - The US dollar weakens to an all-time low against the Euro. Major banks sell more than 18 tonnes of gold to try to drive down the price of gold and bolster confidence in the dollar as a currency of international settlement (and said by the World Gold Council to be poised to sell the same tonnage every week for the next few months). OPEC, in the meantime, says the weakening dollar means the returns for its oil - sold in US dollars - have been eroded. An article in the Financial Times notes  “The adjusted ‘OPEC basket price’ averaged only $43.60 a barrel in June compared with $44.30 a barrel in the same month last year, according to the organisation’s latest monthly report...”. While OPECs import trade with Europe is in Euro's and pounds, a very large part of the oil export trade is in the US dollar. The lower purchasing power of the dollar is now affecting the amount of profit available to spend within OPEC countries. Conditions are nearly ripe for Saudi Arabia to also abandon pricing oil solely in the US dollar.

July 25 - Iraq - USA - Iraq passes a law allowing foreigners to build and run refineries in Iraq. All refineries are presently government owned. The private refineries will be offered Iraqi crude at a discount of 1% over what it sells for on the open market. They will be sold land at heavily discounted prices. They will receive government subsidised electricity. The refiners will be allowed to sell the refined product overseas, or locally, at their discretion. When foreign companies have built sufficient refineries, the government will then begin selling all the government owned refineries to foreign companies, or foreign controlled companies.

July - Iraq - Government subsidised fuel prices are increased. Unemployment remains at 60%-70%. Fuel supplies, from petrol to cooking kerosene, remain short. The supply is only at 50% of the governments target. Theft and sabotage of fuel are costing around $US700 million a month.

July - Albania - Drought in the Balkans has resulted in lower than normal hydro dam reservoir levels, and reduced power generation. Albania's burgeoning demand for electricity, made worse by the heatwave, cannot be met. It's electricity grid needs major work. Power cuts in some areas last 16 hours a day. To save power, beginning July 30, the Albanian Government will cut working hours of government employees to 5 hours a day.

July 26 - Russia - oil production from the Russian privately owned joint venture company Slavneft is down by about 11% for the half year, compared to the same period in 2006. This reduction is about10.5 million tonnes, a drop of roughly 47,000 barrels a day. This in spite of a total of 99 new wells put in place since the beginning of the year.

July - Norway - crude production now averages 22.277 million barrels a day.

July 27 - oil price - Light, sweet crude for September delivery is $77.02 a barrel on the NYMEX (New York Mercantile Exchange). This is almost equal to the previous all time high.

July - Mexico - PERMEX, the Mexican state owned oil company, informs stock markets that its reserves of "economically exploitable" oil may run out within seven years.

July - Saudi Arabia  - Saudi Arabia opens bids for companies to contract for work assisting in the development of Manifa offshore field, which Saudis hope to have in production by about 2011. The contracts are for costs of about $US3 billion.

July - electric cars - Toyota announces it will introduce a cheaper 'plain' version of its hybrid Prius in 2008. The base price will be $US20,950, plus shipping. This version will be 5.5%  ($US1,225) cheaper than the current lowest cost version.

July - China - faced with diminishing production and continued high costs of extensive new drilling, China two major oil firms apply for permission to increase their prices for gasoline and diesel.

August - USA - a fire at Chevron Corp's 330,000 barrel per day refinery in Pascagoula, Missouri reduces production. Full production capacity is not expected to be back until early 2008.

August 1 - oil price - crude reaches it a new all-time high of US$78.21.

August - Norway - crude production averages 2.111 million barrels a day, down 7.3% from last month.

August - Canada - oil companies finally agree to the lease conditions for the Hebron Ben Nevis offshore heavy oil field set out by the Newfoundland and Labrador state government. The major 'International' oil companies now have fewer and fewer oil plays that are not controlled by the countries under which the oil is found. Their company reseves are depleting, and they are now desperate to 'play ball'.

August - China - Petrol supply is short in more than 40 Chinese cities, particularly on the East coast. Very tight supply, diminishing production from the mature and fading oil fields such as Daqing and refinery outages mean that production cannot meet demand. The situation is made worse by reports that the two Chinese oil producers, PetroChina and China Petroleum & Chemical Corp (Sinopec), have cut supplies to private distributors. While conceding it is reasonable, the Government has refused their request to raise oil gasoline and diesel prices because it will affect "economic stability". The firms can best maintain their profit margin by supplying their own outlets. The Government calls on them to "work hard to boost their oil-refining output."

August - China - Gasoline retails at about US 59 cents per liter.

August - China -  China has a tiger by the tail. A large part of its economic boom comes from selling to USA, resulting in a large dollar holding. The USA dollar is sliding in value. It would be prudent to offload dollars. Offloading dollars makes Chinese exports to USA more expensive, and helps devalue the USA dollar, making Chinese exports more expensive, and so on. The wisest thing for the Chinese to to would be to buy oil now, at any price, on the open market for their strategic reserves, while the dollar is still relatively high. In turn, exchanging USA dollars for oil helps 'back' the dollar with black gold..

"China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced the their dollar holdings. China is unlikely to follow suit as long as the yuan's exchange rate is stable against the dollar. The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar" - He Fan, a Chinese Communist Party official at the Chinese Academy of Social Sciences, reported in the China Daily.

August 21 - Mexico - Hurricane Dean, a category 5 hurricane initially (the third-most intense Atlantic hurricane to reach land on record), hits the Gulf of Mexico, causing the precautionary evacuation of 14,000 workers from Mexico's 140 offshore oil rigs, including the Cantarell oil field. After crossing the Yucatan Peninsular, the hurricane loses impetus, and decays to a category 1 tropical storm by the time it hits the oil fields in the southern Bay of Campeche. Pemex, the Mexican state oil company, produces about 66% of its oil from this region.

August 21 - Mexico - About 2.6  million barrels a day of oil from all the Mexican offshore fields may be 'shut in' for up to a week or so until platforms are re-staffed. About 2.6 billion cubic feet a day of natural gas is also shut in.

August, late - Mexico - offshore fields are back in operation, a total of about 10 million barrels a day of oil production was lost  due to the shut in.

September 10 - Mexico - political extremists set off 6 explosive charges on gas and oil pipelines in the state of Veracruz Mexico, affecting the supply of gas to10 states. Thousands of factories have to close. Mexico produces 6 billion cubic feet of gas a day. Mexico also imports gas from USA. Crude oil exports are not affected.

September 11 - Venezuela - The Venezuelan oil minister announces China and Venezuela will undertake a $US10 billion joint venture to build six refineries and a shipping company to supply increased amounts of oil and oil products to China.

September 11 - OPEC - OPEC agrees to increase production by 522,000 barrels a day, supposedly starting november 1. Saudi Arabia will supply 53% of this "extra production". This works out to the Saudis increasing their production by 327,000 barrels a day.  This volume is close to the expected exportable production from the re-worked oil and gas fields at Abu Hadriya, Fadhili and the oil fields at Khursaniyah. Expanded supplies of natural gas liquids from the Hawiyah plant are also expected before november.

September - USA - The power supply to the 325,000 barrel a day Valero Energy Corp refinery at Port Arthur, Texas is damaged by hurricane Humberto and briefly shuts down. Total SA, which produces 180,000 barrels a day and Motiva Enterprises 285,000 barrels of oil a day LLC's refinery are also affected by the power outage and shut down briefly.

September 13 - Oil prices - Oil briefly hits a new record high of $US80.36 cents a barrel on the NYMEX.

The increase follows news of the Texan refinery outages and tight inventory and crude supplies in USA. There is some suggestion that investment funds are buying oil futures in the expectation of further price increase. For the first time, longer term forward contracts for oil supply are on an upward trend.

September 14 - USA - Iran - In contravention to all (elaborate and 'fail-safed') military procedures, a USA B-52 bomber carrying multiple small-yield nuclear warheads goes from North Dakota to the 'Middle East staging post' at Barkdales, Louisiana, USA. They were supposed to be transported on special 'high safety' aircraft and taken to Kirtland for decommissioning. USA military personnel 'spring' the news of this astonishing apparent 'failure' in security. Knowledgeable commentators observe it could only have happened if vice President Cheny had taken direct charge and overridden military command. Cheney has delegated Presidential powers to take charge of federal programs dealing with weapons of mass destruction within the Departments of Defense and 'other' federal agencies. Speculation is that the nuclear weapon was to be used on the Iranian uranium-enrichment plant at Natanz, while conventional armaments were to be used in a pre-emptive strike to destroy Iran's capacity to close the Gulf of Hormuz. Rather, USA may, in line with the true meaning of the USA's 'Carter doctrine', be bent on preventing Iran from controlling Iraq, a fellow Sunni muslim country. Or it may be an elaborate and risky USA Presidential/military propoganda ploy aimed at strongarming Iran.

September 16 - Iraq - USA - Alan Greenspan, 81 year old retired senior cog in the USA financial/banking system admits the truth in his memoir -

"I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil..."

September - Iraq - Iraq continues to burn the equivalent of 100,000 barrels of crude oil per day to generate electricity. At the same time, it 'burns off' natural gas from its oil wells. Natural gas could be used for power generation, but the concurrent warlord power struggles and the resistance to US occupation prevents the construction of pipelines.

September - Iraq - the oil pipeline shifting around 250,000 barrels of oil a day from the southern oilfields north through Syria to the Mediterranean prior to the USA invasion  remains out of action.

September 17 - Venezuela - USA - Petroleos de Venezuela SA, the Venezuelan state oil company, converts its oil-income investment accounts from US dollars to euros.

September - Around 70% of the oil traded in the world is traded in US dollars. The USA dollar remains, for the moment, backed by gold - 'black gold'. As Chris Cook, former director of the International Petroleum Exchange, observes, in reality, oil is not priced in dollars, dollars are priced in oil.

September 17 - Iran - USA - The Iranian Oil Bourse, brainchild of Chris Cook and the Wimpole Consortium, has made little progress. The object of the bourse was to cut out middlemen and speculators and dampen price volatility. Today, Cook admits that Iranian oil officials have been blocking the government sanctioned project. Cooks protests to the Iranian President are believed to have been partly responsible for the sacking of the oil minister, and removal of some of the so-called Iranian 'oil mafia'. The Iranian Oil Bourse, when it eventuates, will trade initially in bitumen - according to Cook "You can’t run before you can walk, and there is huge resistance in Iran to transparency in the existing market in crude oil. That’s why [ ..] we got nowhere with crude oil". The internet-based bourse would not trade in US dollars.

September 20 - USA - Saudi Arabia - Inflation in Saudi Arabia has risen to 4%. Saudi Arabia refuses to cut its interest rates when the USA does, suggesting it is moving to also de-couple the US dollar from its own currency, the Riyal. As the USA dollar continues to weaken, tying a currency to the dollar effectively 'imports' the USA's inflation. (USA hides its true inflation rate by not taking energy and food inflation into account in the 'official' statistic.).

The euro and many other currencies remain strong, meaning that oil priced in USA dollars does not increase much in local currency terms when oil prices rise (the dollar is now at an historic low against the euro). A component of oil price 'rises' is actually the USA dollar becoming worth less, requiring more dollars to reflect the steady-state value of a barrel of oil.

In addition, overseas investors have now largely switched from buying long term USA treasury bonds to buying only short term bonds. This change suggests financial markets expect the dollar will decline in value rapidly (foreigners hold over $US2 trillion in US denominated debt, a debt whose real value is now eroding with the weakening dollar).

Worse, global central banks, whose reserves have been increasingly 'top heavy' with dollars (now around 68% in US dollars versus about 25% in euros), find themselves having to 're-weight' to other currencies, such as the euro, the yen, the rupee and ruble. These foreign exchange transactions will ultimately return many billions of dollars to the USA. This will inflate the huge USA internal money supply even further (the USA prints its own money at will, via 'bond' sales). This is likely to make USA inflation even worse, and make USA debt notes even less attractive - unless the USA Fed puts up interest rates. The US needs $US70 billion a month of foreign capital to cover its current account deficit, so bonds must have an attractive interest rate. But raising domestic interest rates is politically almost impossible in the heavily debt burdened USA domestic economy.  The USA will therefore end up living with an ever-increasing domestic inflationary spiral. (Paradoxically, as inflation takes hold, USA banks will be forced to put up interest rates anyway to try to recover the value of their money deposits.)

Recessionary conditions for USA are now well in place, but not yet apparent.

August - US Treasury data showed outflows of $US163 billion from all types of US investment. Asian investors sold $US52 billion of Treasury bonds. This is the first time in the last 8 years that more bonds were sold by Asian investors than bought them.

September - Qatar - inflation in Qatar, home to the USA's command base in the Middle East, hits 13%. The Qatari currency is pegged to the USA dollar.

September 20 - USA - a tropical storm bearing down on the USA Gulf of Mexico causes 27% of the crude oil productive capacity (total Gulf productive capacity is about 1.3 million barrels a day) to be shut down as a precautionary measure.

September 20 - oil prices - USA oil briefly hits a new record high of  $US84.10 on the NYMEX before settling at $US83.32. Brent crude hits a new record of $US79.09. Gold hits $US739 an ounce - its highest since January 1980.

September 21 - USA - as the US tropical storm gets closer, around 62.% of the oil production in the US Gulf of Mexico  is shut down (roughly 800,000 barrels per day). About a third of the Gulf's natural gas production is also shut down.

September - Qatar  - The Qatari government seeks $US2.5 billion to build a 2600 Megawatt gas burning power plant. Qatar has the third largest gas reserves in the world. Qatar uses 3500 MW of power a year, and population growth is putting increased demands on electricty consumption. The new power plant will also be used to desalinate 55 million gallons of water a day. The population of Qatar is slightly over 900,000 people.

September  - Syria -  production of crude oil has now fallen to 385,000 barrels a day. Natural gas production has increased to about 20 million cubic metres a day. Syria has signs a 20 year contract with a Canadian company to explore for oil in the provinces of the provinces of Latakia, Hamah, Hims and Idlib. The population of Syria is exploding, with the population increasing by about 3 million in the last 7 years.

September - USA - According to John Hofmeister, a top Shell executive, the USA now consumes 10,000 barrels of oil per second. And as USA now imports 60% of its oil and gas needs, current tightly matched global supply and demand for crude means USA is "one hurricane away from energy scarcity and volatile, high prices".

September - quote of the month from James Schlesinger, former Director of the Central Intelligence Agency, Secretary of Defense, and first Secretary of Energy:

"... I was recently at a conference in New Mexico, sitting next to one of the recent CEOs of a major oil company. In response to a question from the audience, he said: "Of course I'm a peakist. It's just a matter of when it is coming." ... Once one is retired as a CEO, one is freer ... to say 'I am a peakist'. And what you hear privately from almost all people is  - 'we're coming to it'.

...the American public has been coached into believing that we can have energy independence - which is not obtainable as long as we have the internal combustion engine - and at the same time as we get energy independence, we can lower the price of energy. These are simply unattainable - but they are regularly promised.

...There is not going to be a [policy] turnaround until you have public support; and the public has got to be frightened by a serious crisis which persuades them that indeed the wolf is at the door.

... I think that many of these politicians will ultimately find that the public blames them for failure to warn them. Of course, in a sense, the public is responsible because it's the present public attitudes to which politicans play up - tell them what they want to hear. But when the view of the world changes, what the public wanted to hear some time ago is no longer what they want to hear in the future.

... We are going to face a great difficulty in the near future. Whether or not it is defined as a crisis depends on how you define crisis. But there is difficulty, great difficulty ahead."
-  from an interview with David Strahan, author of the book 'The Last Oil Shock'.

September - USA - Iraq - The USA senate votes to split Iraq into 3 autonomous provinces. The criteria for the proposed 'carve up' is seperate religous sect and seperate ethnic background. The reason for the split is supposedly to keep the groups in conflict apart in their own fragmented 'homelands', where they can 'develop seperately'. The real reason is to facilitate USA control of Iraqi oil.

September 30 - UK - unleaded 95 octane petrol (gasoline) is UK95.2 pence.

September - all liquids - according to the International Energy Agency (IEA) total world liquids production is 85.10 million barrels a day. This is 450,000 barrels a day more than August. Increases in liquids associated with increasing natural gas production is the important factor in 'holding the line'. This is 1.03 million barrels a day lower than the historic maximum all liquids production.

September - world oil and 'liquid oil equivalents' (including ethanol) production - according to the International Energy Agency world 'liquids' production over the year to date is 85.03 million barrels of oil/oil equivalent a day. This is almost identical to 2006 production. The world is on a 'all liquids fuel' plateau, and supply and demand appear about matched, with the only unused capacity being heavy oil for which there is no refinery space at present.

September - according to the International Energy Agency crude oil stocks fell from July to September by 33 million barrels (360,000 barrels a day). Oil stocks usually increase by about an additional 25 million barrels in the third quarter of the year, ahead of the Northern hemisphere winter.

September  - USA - consumers buying fuel oil for winter find prices high even as summer petroleum blends sell low as refineries switch to winter production. Fuel oil supply has tightened as refineries shut for maintenance and as USA and Europe compete on price for supply. If the winter is cold, there could be a repeat of the year 2000 in USA.
September - Norway - production is now 2.179 million barrels per day. Norway is the world's fifth largest exporter of crude oil. 

October 1 - UK -  the duty on a litre of petrol and diesel is increased by by two pence. Total government duty is now 50.35 pence per litre. Duty is planned to be increased by a further 2 pence per litre on the 1st of april 2008 and increased again 2009. At 97.2 pence, fuel prices in UK are now very near £1 per litre ($US2 per litre, or about $US7.57 per US gallon).

October - UK - oil consumption is now 1.7 million barrels per day. Consumption is increasing at the same time that imports are now increasing as North Sea oil fields fade.

October - Dubai - Iran - Dubai crude jumps by $US2.05 a barrel, (2.8%), to $US74.60 a barrel mainly due to Iranian cuts to marine fuel oil exports to Dubai's bunkering port of Fujairah. Fujairah is the Middle East's largest supplier of ships bunkering oil, normally selling about 700,000 metric tonnes a month, sold mainly to the Asian region. The cut in Iranian supplies meant only 180,000 tonnes were sold in August. Supplies from Europe and Asia have been substituted for the reduction in Dubai refined fuel oil. This has somewhat shorted the world market for fuel oil.

October  - Japan - Iran - Two Japanese oil import companies now commence paying for oil in yen. This may elicit the 'Saddam effect'.

October - Qatar - Qatar's $US50 billion 'sovereign wealth fund' reduces its dollar based holdings from 99% to 40%. Other countries, such as Vietnam, are making similar moves. The global dollar index is now at a record low. US is deeply indebted, with external debt now about 35% of gross domestic product. USA is now a nett debtor nation.

October - USA - Refinery maintenance and repair, coupled with relatively low inventories and fuel company service station pull-outs from outlaying areas causes diesel shortages in isolated rural areas at the end of extended supply lines. In rural North Dakota, farmers needing diesel to harvest autumn crops have to wait up to several weeks to receive their full diesel needs.

October 2007 - USA - the Atlantis deepwater field in the Gulf of Mexico commences production. Initial production is about 10,000 barrels a day. When all 11 wells are eventually producing, expected production is around 200,000 barrels a day. Production was due to commence in 2006, but the 2005 Gulf of Mexico hurricanes led to delays and cost over-runs.

October 15 - oil prices briefly hit a new record high of $US86.22 on the NYMEX. Brent is trading at $US82.75. Oil has reached a new record high for 3 months in a row. Prices are high because supply is tight due to flat production, increased demand, and the continuing refinery bottleneck as the world's supply of 'sweet' crude drops as 'heavy' crude increases. Over 50% of world trade is now in heavy and/or sour crudes. As heavy crudes require specialised refineries, increasing amounts are sold under bilateral arrangements, reducing the amount available on the spot market, which in turn means speculators are better able to 'corner' large volumes of 'spot' oil, thus shorting the market and influencing overall price (bilateral oil price is largely tied to spot price). Speculators are also stepping in to bet on future rises in the reducing volume available for the spot market. This sort of 'spiking' of prices is expected when there is more demand for a commodity than supply. The demand is in the USA, ahead of the winter fuel-oil season. Additional of 2 million barrels a day of crude refining capacity and a further 1.5 million barrels a day in cracking capacity in Asia to bring heavier grade products up into lighter gasoline and diesel are due some time in 2008. This, plus four new refineries in the Middle East due 2010 will ultimately ease the pressure, as will on-going modernisation and upgrades at existing Middle East refineries.

October - USA - gasoline stocks are at near historic lows of about 193 million barrels.

October 16 - oil prices - Tapis crude, a 'sweet' crude, is now trading at an historic high of $US89.39 a barrel. Brent crude is now trading at $US85.09.

October 17 - oil prices Tapis crude, a 'sweet' crude, is now trading at a new historic high of $US89.44 a barrel. Speculators have been partly responsible for driving up the price, and refineries are reluctant to buy speculative oil, so let their inventories fall. Falling inventories give an impression of shortfall in oil (there isn't), driving further speculation...

October - Saudi Arabia - Saudi Aramco shuts down its Red Sea Rabigh oil refinery for routine maintenance. Rabigh has a nominal crude distillation capacity of about 400,000 barrels per day. Almost all of the products of the refinery are consumed locally, except for naptha.

Most of Saudi Arabia's fuel oil comes from Rabigh. The fuel oil is used for power generation. Power generation demand peaks from June to August. As the refinery is shutting down, Saudi Arabia is buying fuel oil for november delivery.

The refinery will also be altered to allow it to link to a joint-venture petrochemical complex constructed in conjunction with Sumitomo Chemical Company of Japan. This project guarentees Sumitomo a reliable supply of polyolefin feedstock for further processing. The aim is to produce 2.4 million tonnes a year of refinery products, gasoline, and petrochemicals, both solid products and liquids. Production will include 1.3 million tons of ethylene, 900,000 tonnes of propylene, and 60,000 barrels of gasoline a year. The joint-venture complex extends Saudi Arabia on-going plan to 'add value' to its refined product stream within Saudi Arabia and provide jobs. Production of petrochemicals and gasoline is expected 2008.

The shut-down will be at least a month.

October - United Arab Emirates - Abu Dhabi announces it will begin a major maintenance programme at its three major offshore oilfields of Upper Zakum, Lower Zakum and Umm Shaif  to commence in november. About 600,000 barrels of crude production per day will be removed from production for an undefined period, but probably not more than 3 weeks. Three Japanese and one Southeast Asian refinery will be most affected.

October - .United Arab Emirates - The emirate of Abu Dhabi produces roughly 2.6 million barrels of oil per day.

October - United Arab Emirates - The Abu Dhabi National Oil Company announces scheduled maintainance at its Ruwais refinery will commence end of december and run until end january. Over 83,000 barrels of crude production per day will be temporarily removed from production.

October - Japan - Japan relies on United Arab Emirates for around a quarter of its oil supplies. The peak demand in Japan is in the Japanese winter.

October - biofuels - India - India imports over 5 million tonnes of its domestic dietary vegetable oil requirements of 12.5 million tonnes. But vegetable oil diverted to subsidised biofuel use has driven up the price. Argentine soya bean oil was $US542 a tonne at this time last year, but is now $US863 a tonne. Rape seed oil ('canola') has gone from $US784 a year ago to $US1,177, while palm oil has increased from $US436 to $US795 over this period. India's import bill for edible oils will be over 1 billion US dollars. Next year it is expected to be over 3 billion US dollars.  India's Solvent Extractor’s Association complains that 'even if the entire quantity of vegetable oil available in the world is converted into biofuel it will address only 2-3% of fossil fuel oil requirement', but shifting even of 5%-10% of existing edible vegetable oils to biofuel use will have a serious impact on the price to the consumer - generally the poorest segment of India's population. The diversion of food oils to fuel will also impact availability, as Indian edible oilseed production is static at the same time as demand is increasing as the population size blows out, meaning the ration of imports to local supply must increase every year.

October - biofuels - Global oilseed production (all purposes) is expected to fall to 391 million tonnes this year. Last year production was 404 million tonnes. While an increasing amount of the seed is expected to be used for oil extraction in the year 2007-2008 (global vegetable oil supply is expected to be 159 million tonnes, up 7 million tonnes on the previous year) availability is still expected to drop, as 8 to 9 million tonnes will be diverted to biofuel use. Installed capacity to convert edible oils into biofuel has now reached around 23 million tonnes, so the trend of decreasing availability and higher price for edible oils is likely to continue.

October  - USA - In an historic move, the USA Energy Department switches from talking about the future availability of 'oil' to the future availability of 'liquids'. This politcally motivated deceit is a risible attempt to smokescreen the peak of conventional oil production.

From now on, the US department will talk about liquids - 'Liquids' includes 'conventional' crude oil (petroleum) plus 'unconventional' liquids. Unconventional liquids include tar sands (bitumen), oil shale, biofuels, coal-to-liquids and gas-to-liquids.

The US Energy Department projects an increase in unconventional liquids production from 2.4 million barrels of oil equivalent per day in 2005 to 10.5 million barrels of oil equivalent per day in 2030. Most of these 'unconventional' sources are very expensive to produce, and many cause extensive environmental damage. Most also require large sources of heat and hydrogen to form fuel from the tars and bitumens. Natural gas adjacent these deposits is declining.

In any event, even if all these sources were eventually produced to the rosy 'projected' levels of the US Energy Department, they would still not make up for the inexorable decline in conventional oil.

October - Europe - in an historic move, the International Energy Agency (IEA) says the basis of all previous IEA forecasts has been faulty.The Chief Economist, Fatih Birol, says the change in the rate of growth in demand for oil is much less important than decline rate in major oil fields. In other words, geological reality trumps 'demand'. The IEA will in future base its forecasts on a 'bottom-up' analysis of the production of the 200 largest oil fields in the world. In other words, world demand for preferred oils exceeds the fading oil fields ability to supply. He also admits non-OPEC oil is past peak, and that the reserves OPEC claims are no more than that - claims.

Fatih Birol admits that even if all OPEC investments in enhanced and new production are made and come in on time, by 2015 the projected demand will not be able to be supplied. There will be a demand for 12.5 million barrels a day that cannot be supplied.

October 19 - oil prices - Louisiana sweet crude, is now trading at a new historic high of $US90.29 a barrel.

October - Europe - Russia - The coming shortfall in diesel supply for europe is discussed at the Platts European Refining Markets conference. Wood McKenzie agency estimate the shortage in Europe in 2006 was relatively small at 17 million tons, but that this shortfall will increase to around 55 million tons by 2015, and to 60 million tons by 2020. Russia and former Soviet Union states are major suppliers of diesel to Europe. The current Russian supply of of around 25 million tons of diesel is 'expected' to increase to 50 million tons by 2030. This is extremely unlikely.

October 25 - Mexico - Hurricane Noel causes huge seas in the Gulf of Mexico, forcing Mexico's main oil exporting ports (Dos Bocas, Cayo Arcas and Pajarito) to close. Only the minor oil exporting port of Tampico remains open. About 1.1 million barrels a day (roughly 40%) of Mexico's oil production is shut in. Off shore oil production platforms and drilling rigs are hit by waves 8 metres high and winds gusting to 128 kilometres an hour, driving a mobile oil drilling rig into the Kab 101 light production platform, killing at least 18 workers, breaking a valve assemby, and spilling oil and gas into the Gulf of Mexico. In a perfect co-incidence of speculation and Mexican vunerability to high energy storms, USA is temporarily shorted for cheaper crude. Ample supplies of European gasoline artificially hold down USA gasoline prices.

October 26 - oil prices - Tapis sweet crude is now trading at a new historic high of $US93.41 a barrel.

October 29 -  oil prices - Oil futures hit $93.80 on the NYMEX, the level since futures trading began in 1983. Brent oil hits $90.49, the highest price in nearly 20 years.

October 31 - Mexico - weeks of heavy rain causes rivers to overflow and cause massive flooding in low-lying Tabasco state, putting 70% of the state under water, including the city of Villahermosa. Like New Orleans, the water has to be pumped out. Villahermosa is the 'epicentre' of almost all of Mexico’s oil and gas. Most of Mexico's oil and about 90% percent of its natural gas is produced within a 22 kilometer radius. There are 1,013 producing oil wells on the plains of Tabasco.

October - Russia - production this month is 9.9 million barrels a day, the highest monthly production Russia has ever achieved. Growth in monthly production has, however, been slowing as Russias mature oil fields begin to plateau. Tax breaks for the rejuvenation of old fields have meant private oil companies have been applying every oil production 'enhancemnet' methods available to these fields, but gains are now slowing. Private companies are taxed to almot 90% of profits on developement of new fields, so there is almost no private investment in replacement. In addition, new prospects are generally in difficult terrain, and very expensive to develop. This may be the beginning of the decline of the worlds largest oil producer.

November 1 - China - the government is finally forced to raise unrealistically low domestic fuel prices, raising them by 10%. Prices had been frozen for 17 months.

November 1 - France - France releases 285,000 metric tons of crude oil from its strategic petroleum reserve. Planned Maintainance at two major refineries - Total SA's Feyzin and Gonfreville refineries - has caused a short term fall in diesel and oil products.

November 2 - oil prices - Tapis sweet crude is now trading at a new historic high of $US96.67 a barrel.

November 3 - oil prices - Tapis sweet crude is now trading at a new historic high of $US97.13 a barrel. Brent oil hits $93.24. The US dollar hits a record low against the euro.

November 6 - oil prices - Tapis sweet crude is now trading at a new historic high of $US97.45 a barrel.

November - Indonesia - The cost of subsidising fuel is now expected to hit 90 trillion rupiah this year (roughly $US9.8 billion) due to high oil prices. The projected figure for the year was originally 55 trillion rupiah ($US6 billion). The government is considering limiting sales of subsidised oil to private motorists if oil is over US$100 in 2008.

November 6 - UK - workers are evacuated from ConocoPhilips Ekofisk A, B and C, and Eldfisk A and B North Sea oil platforms in the face of a looming storm, shutting in its 140,000 barrel a day production. BP evacuates workers from the Valhall field, shutting in its 80,000 barrel a day production temporarily. Nexen closes its Buzzard field, which produces around  170,000 barrels a day. Total shut in production is about 390,000 barrels of oil a day.

November 7 - oil prices - Tapis sweet crude is now trading at a new historic high of $US100.57 a barrel.

November 7 - UK - The average price of unleaded petrol passes £1 per litre for the first time. Over half the price is made up of government taxes.

November 8 - oil companies - BP's new Chief Executive Tony Hayward semi-admits oil has peaked, but fudges the truth, saying only that "For the medium term, it's very clear the era of cheap energy is behind us," and adding that it isn't clear just how long "the medium term" will be. He admits "about half" the worlds oil has been produced (i.e. oil has peaked) but then goes on to say that he doesn't believe oil has peaked! This is the first public admission by an oil major that world oil supply has reached the peak of production - even if he rebuts his own statement with the next breath.

ConocoPhillips (COP) Chief Executive James Mulva publicly re-states oil supply is limited by geology " "Demand will be going up, but it will be constrained by supply, I don't think we are going to see the supply going over 100 million barrels a day and the reason is: Where is all that going to come from?".

The world uses all available cheap oil, which right now is around 85 million barrels a day. The chances of an additional 15 million barrels a day of crude oil supply on top of that is precisely zero.

November 9 -USA - the Mars crude blend produced by Royal Dutch Shell from several platforms in the Gulf of Mexico is shut in due to damage to a valve. Production of around 150,000 barrels a day is shut in.

November 18 - OPEC - Iranian President Mahmoud Ahmadinejad reports that OPEC’s members discussed moving their cash reserves out of the steadily depreciating US dollar, observing “They get our oil and give us a worthless piece of paper”. The sentiment of some OPEC members was to "designate a single hard currency" to use for oil trade.The euro was suggested. In the end, OPEC members decided to form a committee to investigate the possibility of pricing oil using a basket of different currencies, rather than relying soley on the dollar or the euro. Oil has 'always' been priced in US dollars on the world market, although payment is not necessarily in dollars.

November 21 - oil prices - sweet crude is now trading at $US99.29 a barrel.

November -  China - imports of crude have now reached 13.61 million tonnes a month (equivalent to 3.31 million barrels a day). The domestic fuel shortage continues throughout the country, with fills rationed to 200 yuan per stop. Cities are hardest hit, and army and police are stationed at many filling stations to ensure order.

November - China - Chinese refineries export over 1.8 million barrels of finished gasoline.

November - Mexico - PERMEX state oil company reports that this months production is down 8% on november 2006. Average exports across the year so far are down 5% on last year.

December 31 -  Mexico - Cantarell oil field has produced 1.47 million barrels of oil a day, down on initial expectations. Cantarells production is 18% lower than last year.

November - Saudi Arabia - Full contract volumes to Asia are restored, dropping the about 130,000 barrels a day cut to the Asian region.

December - China - December new car sales grew nearly 12.5% (to 635,400) relative to last year, according to the China Association of Automobile Manufacturers.

December  - Iraq - oil production climbs to 2.475 million barrels per day this month - almost reaching the level of oil production in place before the USA invaded Iraq. Of this amount, 1.8 million barrels a day is exported. The repairs to the northern pipeline have been responsible for most of this increase.

December - Nepal - Fuel shortages continue as India has sharply reduced fuel supply to try to force the Nepali Oil company - owned by the Nepali government - to pay its $US50 million debt. Even although prices have been increased to $US4.25 a gallon, the Nepal Oil company has no prospect of repaying its existing banks loans of $US25 million, let alone any further loans to pay down its debts. All credit lines have been cut. Winter is approaching, and gas stations rapidly sell out when the infrequent tanker arrives with fuel. Consumers sleep in their vehicles in the long queues at the pumps in the ope of supply.

December 10 - Pakistan - oil reserves have dropped to the lowest level ever recorded. Only 6 days of Kerosene and diesel stocks are on hand. Gvernment policy is to maintain a 21 day supply in store at all times. Pakistan uses around 22,000 tons of  transport diesel and 920 tons of kerosene per day. The draw down in stocks is said to be due to oil company 'cash problems' /competition for Middle East diesel supply, and refineries producing more jet fuel at the expense of kerosene. Kerosene must be sold at a fixed price, where jet fuel is sold to American and NATO forces  for use in Afghanistan. Oil imports are now expected to cost over $US10 billion for the year.

December 13 - oil prices - Tapis sweet crude is now trading at $US100.50 a barrel, a record high.

December  - Iran - Around 70% of the payment for Iran's crude oil exports is now denominated in euros, and 20% is denominated in Japan's yen. The remaining 10% is denominated in US dollars. Iran plans to stop taking any US dollar currency as payment for oil in 2008. Other oil producers are likely to follow the same trend. This will continue to weaken the dollar, andthe unfavorable exchange rate for imports will automatically raise the price of petroleum products in USA.  On the other side of the coin, USA exporting manufacturers will benefit by the weakening dollar.

December 28 - oil prices - Tapis sweet crude is now trading at $US102.30 a barrel, a record high.

December 31 - oil prices - Tapis sweet crude ends the year at $US102.13 a barrel. Excluding China, Asian sweet crude production from mature fields dropped by around 60,000 barrels a day.

December  - crude oil production (including lease condensates) is an estimated 74.2 million barrels a day (International Energy Agency, 02/08).This is an increase of 450,000 barrels a day from november, but still 96,000 barrels a day lower than the 'peak amount of crude oil ever produced in history', reached in may 2005 - 74.3 million barrels a day.

Year End
World liquids - average production of conventional and unconventional crude oil, plus condensate, plus ethanol, plus biodiesel, plus synthetic fuel from coal etc over the year 2007 was 85.41 million barrels a day, according to the International Energy Agency's 'looking back' from february 2008 report.

Saudi Arabia - internal crude oil consumption is now 1.56 million barrels a day. This is an increase of over 15% on 2006. Saudi gasoline consumption increased by nearly 10% over 2006, to 347,000 barrels a day. Refined gasoline exports are down by 40% as a result.

China - imported just over 163 million tonnes of oil - a new record. China now imports about half its crude oil needs.
Saudi Arabia is China's largest supplier, Angola its second largest supplier, and supplies from Iran jumped by over 22% to 410,000 barrels a day, making Iran China's third largest supplier.

China - now exports just 2 million tonnes of coal a year.

USA - 5,244 megawatts (MW) of wind-derived energy was installed over 2007 - record amount. While electricity generated from wind is small (about 1% of all electricity generated in USA), this amount increases the USA wind power capacity by about 45%. New wind projects accounted for around 30% of the new power generating capacity for the USA in 2007.  and will power the equivalent of 1.5 million American households annually while strengthening U.S. energy supply with clean, homegrown electric power. This new capacity is sufficient to power the equivalent of 1.5 million domestic homes, according to the American Wind Energy Association.

USA - Saudi Arabia now supplies about 1.4 millions barrels of crude a day to USA, edging up over 14% of USA imports. Mexico's exports to USA continue to decline, from about 15.8% down to about 14% -  a drop of over 180,000 barrels a day over last year. Cantarell's slow collapse is the reason.

USA - domestic crude oil production rose 1.1%, to 5.16 million barrels of oil per day, according to the American Petroleum Institute (API). The number of oil wells operating in the USA is now the highest it has been for twenty years. USA oil production continues its trend of around 2% less produced year on year.

USA - domestic natural gas liquids was 2.427 million barrels per day.

USA - according to the API, USA imported 13.7 million barrels of oil (including oil products) per day. This is about 65% of America's oil use. Although this is nearly 2% less than last year, it is still the third highest amount ever imported.

USA- ethanol production is now roughly 420,000 barrels per day. Ethanol used to blend into the crude-oil derived gasoline. The ethanol component is counted as part of domestic oil production...

USA - according to the USA Department of Energy (EIA), in november 2007

74% of USA crude oil imports came from 5 countries only -
Canada - 1.919 million barrels per day
Saudi Arabia - 1.530 million barrels per day
Mexico - 1.484 million barrels per day
Venezuela - 1.227 million barrels per day
Nigeria - 1.215 million barrels per day

The next five countries accounted for an additional 15% (the top 10 supply 89% of USA crude oil)
Iraq - 0.508 million barrels per day
Angola - 0.408 million barrels per day
Colombia - 0.197 million barrels per day
Algeria - 0.184 million barrels per day
Ecuador - 0.154 million barrels per day

The top ten changes when total crude oil and petroleum product imports such as refined gasoline, diesel etc are added in:

Canada - 2.428 million barrels per day
Mexico - 1.581 million barrels per day
Saudi Arabia - 1.609 million barrels per day
Venezuela - 1.375 million barrels per day
Nigeria - 1.276 million barrels per day
Iraq - 0.508 million barrels per day
Russia - 466 million barrels per day
Algeria - 0.477 million barrels per day
Virgin Islands - 0.414 million barrels per day
Angola - 0.408 million barrels per day

Iraq's half million barrels of  crude oil a day is worth around $US80 per barrel x 500,000 x 365 = 14,600 000,000 = $US14.6 billion dollars a year. How much of this goes to the Iraqi 'government', and how much goes to USA to pay for 'administration costs' and repayment of 're-construction' debts isn't known...

Iran remains the world's 4th largest oil exporter, with an increasing focus on exports to Asia. Iran has signed a contract to send an additional 100,000 barrels a day to China's Sinopec oil refineries in 2008.

South Korea - imports of Iranian crude rose 15% this year.

Oil companies - Exxon Mobil makes a net profit of $US11.66 billion for the last quarter. This is the highest quarterly profit in history for a USA company. Exxon Mobil is the world's largest publicly traded oil company.

World grain supply - Global stockpiles are now down to about 53 days of supply. This is the lowest level since 1960 - when records began.

Go to 2008

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