Peak Oil and the Fading of the Oil Economy
High Petrol Prices and High Gas Prices - unfolding
Period: In the year 2008

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


Outlook for 2008

January 1 - Mexico  -major oil exporting ports are shut-in due to bad weather.

January 2 - oil prices  - Tapis crude is $US99.60

January - Russia - Transneft's 30-million-tonne capacity pipeline for crude oil from Russia's East Siberia Vankorskoye field to the Chinese border is delayed until mid 2009. It was to have been complete by the end of this year, when the Vankorskoye field starts production. Vankorskoye crude will have to be shipped west, not east; presumably by rail.

January - Nigeria - Anglo Dutch Shell Petroleum Development Company (SPDC) operations in the Delta and River States are cut by about 50% (around 500,000 barrels a day) due to on-going damage to various wells and installations from  disaffected locals. The only field to be producing at full capacity is the offshore Bonga field. Shell hopes to "improve relations" with locals and militants in order to be back to full capacity in the Delta by mid year.

January 2 - oil prices  - Tapis crude is $US103.96, a record high.

January 3 - Iran - The  Minister of Economy and Finance announces that the Iranian oil bourse will commence in early february, during the Ten-Day-Dawn festivities marking the 29th anniversary of their 'Islamic Revolution'.

January - Nigeria - Russia - Gazprom continues talks with Nigerian officials to jointly develop Nigerias underperforming gas assets. Gazprom hope to provide both financing and technical expertise to Nigeria in return for permission to develop Nigerian gas and build further liquified natural gas (LNG) plants to export gas. Nigeria curerntly exports LNG to both Europe and America. Nigeria also
burns (flares) about 24 billion cubic metres (0.84 trillion cubic feet) of  natural gas associated with its oil wells every year.

January 3 - Saudi Arabia - the start up of the Khursaniyah field is delayed again, with no date given for commencement, other than 'beyond the first half of this year'.

January - Angola  - production is currently 1.7 million barrels a day. Production is expected to be 1.8 million barrels a day by end of 2008. New production is expected at the end of the year, or beginning 2009.

January 4  - Mexico - Oil export ports commence re-opening after being shut in from about 1st january due to storms pushing waves to 7.3 metres (24 feet).

January 5 - OPEC - OPEC president Chakib Khelil says that oil demand was being pushed up by "China and India but also by the Middle East whose consumption has risen immensely"...but that the price should be considered "in relation to the real price" which, taking the inflating US dollar into account is "between $102 and $110 depending on estimates". He said "The rise [in oil prices] is likely to continue until the end of the first quarter 2008 and will stabilise in the second quarter," he claimed the cause as "political tension in Pakistan, escalating violence in Nigeria and decline of oil inventories in the United States". While he may have more information available then most of us, prices in 2008 are likely to be volatile.

January 5 - OPEC - Mohammad Ali Khatibi, deputy director of international affairs at the National Iranian Oil Company says "Because most members are currently producing at full capacity it seems that even if there is a decision to increase the output ceiling, not all members would be able to increase their production capacity". He goes on suggest lack of refinery capacity might be the bottleneck ""First it should be [made] clear whether the market's current problem is a shortage of crude oil or not, because in many instances in winter and summer a shortage of crude products is the main factor behind the rise in prices" .

January - Iran  - Iranian gasoline rationing continues. Private motorists rations are now increased to120 liters (31.2 gallons) a month for the next four months. In the 6 months since rationing was introduced, daily consumptions has been around 59 million litres (about 15 .5 million US gallons), a fall of 22% over the same period the previous year. Gasoline is heavily subsidised, costing only about 33 cents a US gallon. Iran plans to convert as much of the fleet as possible to run on compressed natural gas (CNG). Iran has vast supplies of natural gas.

January 8 - Iran - bad weather causes domestic demand for natural gas to spike sharply upwards. Iran stops natura gas supply to Turkey as it has insufficient reserves to meet demand. Turkey cuts off supplies of Azari gas to Greece in order to meet its own demands. Turkey uses natural gas in about half its electricity generating plants. Its main suppliers are Iran and Russia. Demand in Turkey is up about 17% over last year.

January - UK - Diesel cars now make up 40% of all new car sales in UK because they are fuel effciient. In 2000, diesel cars made up 10% of new car sales.

January - Iraq -  the USA's Iraq resumes pumping Kirkuk crude oil via the northern pipekline to Turkey. The pipeline now carries around 72,000 barrels a day. Iraqi crude oil stocks in the Turkish port of Ceyhan have accumulated to six million barrels.

January - Iran - production from the Darkhovin oil field in southwest Iran has now doubled, to 100,000 barrels per day.

Jan 20 - Mexico - all Mexicos main oil exporting ports (Dos Bocas, Cayo Arcas and Coatzacoalcos in the Gulf of Mexico and Salina Cruz  on the Pacific side) close once again due to bad weather. Over 80% of Mexico's exports are shut in.

Jan - Mexico - Oil exports are now 1.434 million bpd.

January 19 - fuel conservation - The maiden voyage of a kite-assisted commercial ship commences. The 10,000 tonne 'MS Beluga SkySails' set sail from Bremen, bound for Venezuela. The inventor of the giant computer-guided kite, Stephan Wrage, believes the added 'pull' of the kite might trim the ships daily fuel cost of $US8,000 by 20% ($1,600).

January - fuel conservation - Hapag-Lloyd will reduce the speed of its ships from 20 knots to 16 knots for voyages across the Atlantic. Every 5 knot reduction in speed results in substantial fuel savings - nearly 50% in the very best cases.

January 25 - Quote of the month where Shell Oil admits the reality of peak oil and takes an oblique swing at USA intransigence while hat tipping Roscoe Bartletts campaign:

"...we are experiencing a step-change in the growth rate of energy demand due to population growth and economic development, and Shell estimates that after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand. As a result, society has no choice but to add other sources of energy - renewables , yes, but also more nuclear power and unconventional fossil fuels such as oil sands. Using more energy inevitably means emitting more CO2 at a time when climate change has become a critical global issue.

In the Scramble scenario, nations rush to secure energy resources for themselves, fearing that energy security is a zero-sum game, with clear winners and losers. The use of local coal and homegrown biofuels increases fast.

Taking the path of least resistance, policymakers pay little attention to curbing energy consumption - until supplies run short. Likewise, despite much rhetoric, greenhouse gas emissions are not seriously addressed until major shocks trigger political reactions. Since these responses are overdue, they are severe and lead to energy price spikes and volatility.

The other route to the future is less painful, even if the start is more disorderly. This Blueprints scenario sees numerous coalitions emerging to take on the challenges of economic development, energy security and environmental pollution through cross-border cooperation.

Much innovation occurs at the local level, as major cities develop links with industry to reduce local emissions. National governments introduce efficiency standards, taxes and other policy instruments to improve the environmental performance of buildings, vehicles and transport fuels.

As calls for harmonization increase, policies converge across the globe. Cap-and-trade mechanisms that put a cost on industrial CO 2 emissions gain international acceptance. Rising CO2 prices accelerate innovation, spawning breakthroughs. A growing number of cars are powered by electricity and hydrogen, while industrial facilities are fitted with technology to capture CO 2 and store it underground.

Against the backdrop of these two equally plausible scenarios, we will only know in a few years whether December's Bali declaration on climate change was just rhetoric or the beginning of a global effort to counter it. Much will depend on how attitudes evolve in Beijing, Brussels, New Delhi and Washington.

Shell traditionally uses its scenarios to prepare for the future without expressing a preference for one over another. But, faced with the need to manage climate risk for our investors and our grandchildren, we believe the Blueprints outcomes provide the best balance between economy, energy and environment.

For a second opinion, we appealed to climate change calculations made at the Massachusetts Institute of Technology. These calculations indicate that a Blueprints world with CO2 capture and storage results in the least amount of climate change, provided emissions of other major manmade greenhouse gases are similarly reduced.

The sobering reality is that the Blueprints scenario will only come to pass if policymakers agree a global approach to emissions trading and actively promote energy efficiency and new technology in four sectors: heat and power generation, industry, mobility and buildings. It will be hard work and there is little time.

For instance, Blueprints assumes CO2 is captured at 90% of all coal- and gas-fired power plants in developed countries in 2050, plus at least 50% of those in non-OECD countries. Today, there are none. Since CO2 capture and storage adds cost and brings no revenues, government support is needed to make it happen quickly on a scale large enough to affect global emissions. At the very least, companies should earn carbon credits for the CO2 they capture and store.

Blueprints will not be easy. But it offers the world the best chance of reaching a sustainable energy future unscathed, so we should explore this route with the same ingenuity and persistence that put humans on the moon and created the digital age.

The world faces a long voyage before it reaches a low-carbon energy system. Companies can suggest possible routes to get there, but governments are in the driving seat. And governments will determine whether we should prepare for a bitter competition or a true team effort."
- Jeroen van der Veer, Chief Executive Shell Oil Company, in an email to company staff

China - January 27 - Coal shortages in northern and Central China close 90 power stations, dropping 20,000 megawatts off the national supply. The record cold winter (coldest in 50 years) has boosted demand right across China. The cold weather has also disrupted rail deliveries, and damaged some parts of the grid. Averaged across the nation, only 3 days of coal stocks remain. China has an electric power demand shortage of 70 gigawatts (equivalent to about Britain’s total electric power supply capacity). In response, the government has banned coal exports for the next two months, seventeen ships of China's international merchant fleet are diverted to local coal carrying, and  some coal mines previously closed because they are unsafe have been allowed to re-open.

China - controls on coal prices have been freed up, with the result coal prices have increased by about 14% over last year. But electricity prices that can be charges by the (mainly) coal fired power stations are unrealistically capped by the government.

China - a tonne of coal now sells on the Asian market at over $US120.  It was around $US45 a tonne last year.

World coal - About 40% of the worlds electricity generation is fuelled by burning coal.

UK - January - wind farms are more profitable due to electricity price rises and subsidies. A typical onshore 2 megawatt (2MW) turbine (costing around £2 million to build) is potentially able to generate power worth £200,000 on the wholesale market. The same turbine will also attract a taxpayer subsidy of up to £300,000 - plus another £300,000 of subsidy from taxpayers. According to the British Wind Energy Association, there are 1,944 turbines currently operating in the UK, with another 34 being built, and 118 with planning permission but not yet started.

January - this month marks the highest ever production of 'liquid fuels', at 87.2 milion barrels a day. The increase is not coming from conventional crude oil and lease condensate, but mainly from ethanol and liquids from the increasing amounts of natural gas now being produced.

South Africa - February - power supply is being cut by 4,000 megawatts for a month to try to stabilise the power grid.5.4 million tonnes of coal are needed within the next 3 months to ease the power supply shortage.

January - Japan - crude oil imports for the month are now 4.12 million barrels a day. This is higher than the same period last year, and may be due to increased fuel oil use for electricity generation since the shutdown of the earthquake damaged Kashiwazaki-Kariwa nuclear plant in july last year. This nuclear electricity plant is the worlds biggest. It was built over a deep fault line previously 'considered' to be stable.

February - Brent crude - production has now dropped to about 5,250 barrels a day. Brent is in terminal decline from its peak of 500,000 barrels a day in the early 1980's.

February 7 - Saudi Arabia - USA - Saudi Arabia sells crude oil to USA for a discount of  between US60 cents and US1.50 per barrel. USA will pay $2.60 less for a barrel of Arab extra light. USA demand is muted at the moment, and Saudi Arabia sells only to refineries. At the same time, the price of Arab Extra light has been increased to $US2 above the benchmark for its northwest European customers, while Arab heavy has been discounted. Saudi Arabia appears unable (or unwilling) to produce more light oil, and lack of specialist refinery capacity to deal with heavy oil means it must discount them to sell.

February - Venezuela - The trend for countries to nationalise their oil and gas reserves continues. Exxon Mobil refuses to accept a re-write of their contract to develop the Cerro Negro project in Venuzuela's Orinoco heavy oil belt, sues Venezuela, and has UK, Netherlands, USA, and Netherland Antilles courts award them damages, recoverable from Venezuela's UK, Netherlands, USA, and Netherland Antilles oil assets. Venezuela may have to find another refiner to process that part of their heavy crude that was sent to USA to be refined by ExxonMobil. However, a large part of the Venezuelan crude is refined by its own Citgo refineries in USA, and some may be diverted to China.

Exxon Mobil's Venezuelan operation made a nett profit of $362 million. The ExxonMobil operation was extremely profitable, in fact the ratio of profits to sales for Venezuela was four times the company's worldwide operational average. Venezuela was attempting to re-write the contract to take into account the recent large increase in world oil prices, currently a windfall profit to ExxonMobil, and to gain a higher percentage control of the operation.

Most major oil companies now have reducing asset bases, and 90% of the worlds oil reserves are now controlled by the countries in which those reserves are found (with one important exception). Oil companies argue that future oil production is threatened because they are being shut out from applying capital and new technology to nationalised fields. While new technology and development will hasten production, it cannot replace the shortfall as global reserves deplete. In fact, it can only increase the rate of depletion. Ironically, reserves that remain undeveloped due to nationalisation and slow investment may help to buy a little time to adjust to a world of high oil costs.

February 1 - ExxonMobil - ExxonMobil, the worlds largest publicly traded oil company, reports a record profit of $US40.61 billion last year This is almost $US1,300 a second.

February - Conoco - Conoco, the United States third-largest oil company announced a profit 25% than expected.

February - Royal Dutch Shell PLC - Shell, Europe's largest oil company, reports a 60% increase in profits.

Oil company profits are up on high oil prices, but, as mentioned above, replacement of reserves is problematic. Shell oil is now exploring the difficult Arctic Barents Sea for oil basins. Oil produced in these regions is not cheap oil. Costs are high. Shell also wants the American Security Exchange Commission to allow it to count oil sands as oil reserves in its books. These 'reserves' have a high cost of production, as extraction depends on energy inputs of natural gas or nuclear power. The only 'cheap' to produce large oil fields left may be in America's recently acquired Iraqi properties.

February - USA - BP's super giant Prudhoe Bay field continues to deplete at 6% a year. This field is the largest oil producer in USA. Production has now fallen to less than 400,000 barrels a day. Of this, 50,000 barrels a day is slow-producing heavy crude, which flows 100 times as slowly as normal crude.

BP is now aggressively re-working the wells with modern technology to maintain field pressure (and thus production rates) and to extract as much 'tight' and residual oil as possible. BP hopes to ultimately extract a further 1.5 billion barrels of oil more on the 'long tail' than it otherwise would have through application of these techniques. BP is also exploring working some of the the extra heavy crude in the Ugnu formation. While there are 20 billion barrels in the formation, only about 8% might 'possibly' be extracted economically.

February 12 - Venezuela - ExxonMobil - Venezuela cuts off supply of heavy crude to ExxonMobil.

February 14 - oil prices - Tapis crude climbs to $US99.14

February 19 - West Texas Intermediate crude oil futures close above $US100 for the first time ever, partly due to a fire and temporary shutdown at a Texas oil refinery (Alon Energy USA's Big Spring refinery, capacity 70,000 barrels of oil a day).

February 21 - oil prices - Tapis crude briefly climbs to $US102.98

February - Russia - Russia's Gazprom, Frances's Total, and Norway's StatoilHydro finally sign an agreement forming a company - Shtokman Development AG - to develop phase one of the Shtokman gas field. Phase one is designed to eventually produce  23.7 billion cubic metres of natural gas a year. Shtokman, in the harsh environment of the Arctic Barents Sea has total gas reserves of around 3.8 trillion cubic metres, and will likely yeild 37 million tons of gas condensate. The joint venture shareholdings are Gazprom 51%, Total 25%, and StatoilHydro 24%. Pipeline delivery is hoped for in 2013, with LNG delivery the next year.

February - Indonesia - Indonesia is forced to import an additional 600,000 barrels of diesel and 370,000 barrels of fuel oil for February to use as fuel to generate power. Although Indonesia produces crude, it imports between 200,000 and 300,000 barrels of crude a day. Bad weather prevented delivery of coal to Java and Bali for use in the coal fired power plants, and some coal burning plants have switched to burning fuel oil. Java and Bali suffer a 1,000MW power deficit in the shortage, and supply has to be shut down. Arounf 30% of Indonesia power plants burn fuel oil. Electricity rices have been frozen by the state for several years, in spite of the rising cost of fuel. Indonesia is the world's largest exporter of thermal coal, but with electricity demand in Indonesia growing by 10% a year, increasing amounts will have to be diverted to domestic use.

Indonesia's state run Pertamina oil company says crude oil imports will be cut by 50,000 barrels a day, starting in april, due to the increased cost of crude.

February - China - after 3 months of increased diesel imports (an average of 140,000 barrels a day between november 2007 and january - a record for diesel imports), finished diesel imports have been cut dramatically to about 25,000 barrels a day. The cut is the result of refineries increasing domestic production of diesel to near record levels (around 7.6 million barrels a day), coupled with reduced demand due to the holiday season closing factories and cold weather closing down some roads and rail lines.

February - China - gasoline exports have fallen as refineries ramp up diesel production at the expense of gasoline production and stocks of gasoline are held back for domestic consumption in the lunar New Year festival period. PetroChina and Sinopec Corp terminate all gasoline exports, leaving West Pacific Petrochemical Corp (WEPEC) to export a low of  850,000 barrels of gasoline for the month.

February - Singapore - lower Chinese petroleum exports increase the price of finished gasoline at the Singapore regional oil hub, especially as demand from Indonesia, Vietnam and Australia remains strong.

February - USA - wind power - Texas now generates more than 3% of its electricity from wind turbines. This is enough electricity for about one million homes.

February - USA - For the first time ever, USA imports liquified natural gas (LNG) from Europe. Gas from from Norways  Snøhvit field in the Barents Sea is shipped to StatoilHydro Oil and Gas Companys gas storage facility at Marylands Cove Point gas terminal. Cove Point has storage capacity of 7.8 billion cubic feet (220,000,000 m³). The journey took 12 days. The Snøhvit field, operated by StatoilHydro, is expected to produce 4 billion cubic metres of gas a year at peak production.

February  - Russia - Gazprom, the Russian gas domestic (supplying 90% of domestic) and export major, invests in Russias largest by volume coal producer. The idea is to swap some electricity generation plants from natural gas to coal, supposedly in order to release more natural gas 'for export'. Gas is used to generate 43% of Russia's electricity. Coal is used to generate 23% of Russia's electricity (in comparison, USA generates 49% of its electricity from coal). Gazprom is both an electricity generating company and a gas company. Most of Russias gas fired stations are old, lacking combined-cycle efficiencies, resulting in a relatively poor thermal efficiency of about 30%. Gazprom's domestic gas resources have peaked, and the new gas supplies are in cold and remote Siberian and Arctic areas, and require massive investment and time to develop. Russia is likely to have a domestic gas shortfall in future. This is likely the real reason Russia is turning to coal.

Gazprom is the major buyer of State electricity companies, which are being sold into private hands. Gazprom will ultimately control almost all Russias electricity supply.

February - Iran - Russia - Gazprom and Iran's State Oil Minister agree that Gazprom will extend its involvement in Iranian gas production to develop "two or three" blocks of the giant South Pars gas field (the world's largest). Iran supplies 1% of the world's gas supplies, exporting only to Turkey and Armenia. Iran aim to supply 10% of the world's gas by 2028, when phases 17, 18 and 19 of South Pars are expected to be fully developed. Iran currently produces about 73 billion cubic meters, but is expected to more than double production over the next few years.

February - Iran - Russia - Gazprom has agreed to help Iran extend its pipeline system from the south to Tehran in the far north. Currently Tehran has to import natural gas from Turkmenistan. Gazprom has invested over $US4 billion in Iran since 2000. It is largely free of competition, as the USA refuses to allow European companies to invest in Iranian gas development. Europe currently depends largely on Russian gas, and in future will certainly depend on Iranian gas, as Iran has the largest gas deposits in the world.

February 26 - USA - despite prices, USA now continues to add 70,000 barrels of oil a day to its strategic stockpile. The stockpile is expected to reach over 700 million barrels by the end of march.

February 27 - Iran - The Iranian oil bourse, while officially commenced, has become largely inconsequential. Chris Cook, architect of the bourse, says "the trading 'system' is the rudimentary one used by the Tehran Metal Exchange. As far as we know it is not even web-enabled. There may be the odd 'spot' trade in petrochemicals, but these will probably be existing business - done over the phone - which would use the system for registration. There is no clearing house, nor is there likely to be, as the skills do not exist in Iran: therefore you can forget forwards or futures trading, even were they Islamically sound, which they are probably not. The long and short of it is that the recently launched Iranian oil bourse is an illusion. There is no real interest among the Iranian elite in any further transparency than exists now."

February 29 - oil prices - oil reaches a new historic high of $US103.05

February 29 - Mexico - Cantarell oil field will now produce "between 1.2 million and 1.3 million barrels a day this year", according to Carlos Morales, director of exploration and production for Pemex Oil Company. Cantarell produced 1.243 million barrels a day in january. As its annual decline rate is at least 15% (and likely more), it is more likely to be producing around 1.06 million barrels a day by the end of the year. Canatarell now produces only around 43% of Mexicos oil production.

February - ExxonMobil - in an unusual twist, ExxonMobil may cut its production of oil by around 3% in some countries with production sharing agreements in place, because the share to the producer in part depends on dollar value of the oil as well as production. Higher dollar value leads ultimately to a reduced volume share for ExxonMobil, so reducing production to spin out the term of the share makes sense for ExxonMobil.

February 29 - biofuels - Weyerhaeuser Forestry company and Chevron oil company sign a joint venture agreement to investigate making ethanol from cellulosic sources such as wood and straw.

March 01 - oil prices - as the dollar weakens, oil reaches a new historic high of $US104.53 for Louisiana sweet. Other sweet crudes are not too far off. Only heavy blends, for which refinery capacity is limited, remain around the mid nineties.

March 2 - Saudi Arabia - Ali Al Nuaimi, Saudi Arabia's oil minister, claims that by the end of 2009 Saudi Arabia will have production 'capacity' of 12.5 million barrels a day, and with 'spare' capacity of 1.5 to 2 million barrels a day. Most of this will have to come from new developments in the Khursaniyah, Khurais and Shaybah fields. Currently Saudi Arabia produces around 8 million barrels of oil a day and 'claims' additional capacity to produce if it wanted. Ali Al Nuaimi claims Saudi Arabia "exports" 10 million barrels a day. Up to now, the Saudi exports have been a 'state secret'. Presumably he means 'produces', not exports.

The oil minister  makes these claims "to reassure the world that we are not going to run out of oil in the next five to ten years as peak oil theorists say." In fact peak oil 'theorists' DON'T say "the world is going to run out of oil in the next five to ten years."
The reality of peak oil is that "the importing countries of the world are going to run out of CHEAP oil in the next five to ten years."

The reasons are one part declining global (not Saudi) crude oil production, and one part declining exports from the producing countries - as producing countries allocate more and more of oil to their rapidly expanding domestic populations. For example, Saudi Arabia now has a population of around 27 million people, and is expected to add at least another 7 million people within 10 years.

While exported oil will be expensive in the years to come, the oil that the oil producers like Saudi Arabia put on their domestic market is very cheap - and is likely to remain so until all the domestic oil is substantially depleted.

March - Yemen - diesel is sold at government subsidised ultra-cheap prices, around US 17 centres per litre. As a result, diesel is used to pump water from Yemens 21 aquifers so fast that 19 of them do not have time to recharge. 90% of the water is used to grow the drug quat (Catha edulis) for sale. At this rate, the aquifers will soon be unable to supply all of Yemens current water use. The government says it is powerless to enforce water restrictions on the tribal leaders, military and rich who benefit from quat growing. The area in quat is growing at over 10% a year. The Yemeni population of 22.4 million is growing out of control, at over 3% a year.

March 03 - oil prices - light sweet oil reaches a new historic high of $US105.95 for Tapis light. The spread between light and heavy grades continues to widen.

March 04 - oil prices - light sweet oil briefly reaches a new historic high of $US106.59 for Tapis light before falling back to around $US104.

March 09 - oil prices - light sweet oil reaches a new historic high of $US109.21 for Tapis light. Heavy oil such as Dubai and Oman 1M is stuck around the $96-$97 mark.

March 10 - oil prices - light sweet oil reaches a new historic high of US$109.69 for Louisiana Sweet.

March 11 - oil prices - light sweet oil reaches a new historic high of $US110.93 for Tapis light.

March 11 - USA - gasoline prices are now $US3.22. averaged nationwide. This is an historic high.

March - Russia - the value of oil and gas exports is now approaching $US1 billion per day. About 70% of the value of Russia's exports is from oil and gas.

March - Saudi Arabia - The Saudi plan to boost 'value added' refinery capacity to about 3.7 million barrels a day by 2012 is under review as costs escalate. The projected 400,000 barrel a day Jubail refinery may cost in the region of $US10 billion to build, rather than previous industry estimated costs of around $US6 billion. The proposed Jubail refinery would handle heavy oil, including about 75% of the difficult heavy crude from the Manifa offshore field, due about 2011.

March - non-OPEC oil - According to the International Energy Agency, production from non-OPEC oil fields (when all are averaged) is declining at an annual rate of about 7.7% a year. Generally, non-OPEC fields are smaller and have a shorter lifespan than OPEC fields. If this decline rate doesn't increase even further, non-OPEC oil production will drop by half within ten years.

Non OPEC oil produces around 56% of the worlds oil.

March 13 - oil prices - light sweet oil reaches a new historic high of  $US111.47 for Tapis light.

March 14 - oil prices - light sweet oil reaches a new historic high of  $US113 for Tapis light.

March 17 - USA - Iraq - Dick Cheney visits Iraq to push for better access by 'International' oil comanies to 'Iraqi' oil. 'Progress' in developing Iraqi fields for the Americans remains slow, in spite of the best laid plans.

March 17 - India - Tata BP Solar, joint venture between Tata Power Co and BP Solar announce plans to expand their  production of photovoltaic panels with a total nominal capacity of 60 megawatts (MW) to 180 MW. The ultimate aim is to produce panels with a nominal capacity of 300 MW per year.

March 17 - Saudi Arabia - an unamed official claims Saudi Arabia produces about 9.2 barrels a day, and has produced at this levels for the last several months.

March - 'Oil Sands' - Shell reveals that costs in its Athabasca Oil Sands Project in Alberta have increased by nearly 50% since 2005. Production at the bitumen sands project has been more or less static. Shells 'oil reserves' are now counting bitumen sand 'reserves' as economically producible oil. Natural gas is needed to refine these sand/bitumen deposits. The rising price of natural gas is likely to make the extraction of liquid from these sands increasingly expensive.

March 20 - China - Sinopec oil refining company continues to make "extremely heavy losses" as it is obliged by the Chinese government to sell oil products at far below the world oil price, and at the same time must import oil for refining. The Chinese government gives Sinopec $US1.7 billion dollars as a subsidy to cover Sinopecs losses due to government price controls. Sinopec processes 80% of China'a imported crude. Sinopec produces 70% of China's refined oil.

March 27 - Iraq - USA - An oil pipeline from the Zubair oil field to the Al-Faw export storage facility near Basra is blown up by saboteurs. The pipeline, Zubair-1, is one of two major export pipelines to the export terminals at al-Umaiya and Basra. These two pipelines carried 1.54 million barrels a day of oil for export in february. Over 500,000 barrels a day is directly for USA. Around 80% of Iraqi oil is from fields in southern Iraq, exported through Basra. About 500,000 barrels a day is immediately unavailable for export until the pipeline is repaired. Military operations in the area mean oil workers cannot get to their work place. All oil exports may end up being temporarily suspended if the insurgency continues.

March - USA - While gasoline and diesel prices are still much lower in USA than Europe, the higher gasoline and diesel prices have led to reduced consumption. Americans drove 11 billion fewer miles this march than last march, according to the US Department of Transport. The last time petroleum use declined in the month of march in USA was in march 1979.

March - UK - petroleum sales in the year to march are down 20% over last year in volume.

April - Iraq - the oil pipeline from the Zubair oil field is now repaired.

April 5 - Saudi Arabia - Aramaco, the Saudi state oil company, once more drops the price of crudes for may delivery to refineries in USA. USA refineries have reduced their throughput to the bare minimum, stockpiles are high, and refinery margins are low. Oil company owned refineries make profit both on the oil produced from the wells, and from the refinery margin from their own refineries. Private refineries must buy crude on the world market, and the up-front cost of buying and holding crude oil inventory is squeezing them hard.

The Saudi crude is discounted against the current price of the benchmark West Texas Intermediate crude.
April - Asia-Pacific regional refineries are now shutting down units for routine maintainance. In all, roughly 1.4 million barrels a day of distillation capacity will be offline in the second quarter of this year, with the peak of shutdowns being in may. This is a significantly larger fall in refinery output capacity than last year.

But at the same time demand for the lighter 'middle distillates' - diesel and kerosene - in Asia is very strong. India's demand for oil is increasing by around 10% a year, but produces only 25% of its consumption domestically. Indian private oil producers are required by law to sell kerosene and diesel at below cost. As a consequence, much of the privately produced oil is sold overseas. Both China and Indonesia are also experiencing domestic production shortfalls, and demand is rising. The cost of importing crude oil at world prices and selling it domestically at below cost is an increasingly heavy burden on China and India. Indonesia also subsidises the price of oil products on the domestic market. In face of these pressures, China has allowed its domestic refineries to increase prices. Reductions in state subsidies have now pushed the price of diesel and kerosene to historic highs, albeit way below the true market price.In spite of this, demand is surging in these markets.

April - The benchmark for margins by unsubsidised refinery is the 'Singapore Complex' margin. The Singapore Complex margin is now at about $US11.06 per barrel of oil processed.

In the face of the demand for light oils in Asia, Saudi Aramco now increases the 'price premium' of Arab Light - the main crude refined in Asia - by US40 cents, to $US1.45 for its Asia-Pacific term-contract regional customers.

Asia-Pacific regional customers will also now have to pay an additional premium of US80 cents for Arab extra light crude, making the total premium for this crude $US5.25 a barrel.

Asia-Pacific regional customers will also now have to pay an additional premium of US70 cents for Arab super light crude, making the total premium for this crude $US7.05 a barrel. This is $US1.73 higher than last year.

April - Saudi Arabia - Iran - Kuwait - While demand for lighter crudes that yeild high amounts of diesel and kerosine surges, demand for heavy grades that require specialised refineries and yeild less of the desirable 'middle distillates' continues to fall. No new substantial heavy-oil refinery capacity is on the horizon until later this year, when India's Reliance heavy-oil refinery is due to come into operation.  The profit margin on these heavy oils continues to slip. The bulk of the 'spare' oil capacity from Saudi Arabia, Iran and Kuwait is in heavy and sour crudes. Asian buyers don't want them, as, after higher refining costs, the profit margins are very low due to higher production of unwanted heavy fuel oils and other heavy products.

April - Saudi Aramco further deepened its discounts to Asian refiners for Arab medium and Arab heavy crudes (discounted relative to Oman and Dubai heavy crudes).

April - Europe - Saudi Arabia - faced with falling consumption in Europe, Saudi discounts most of its may-delivery crude oil shipments to both Europe and the Mediterranean relative to regional benchmark crudes.

The discount for Arab light has been increased to US70 cents, making a new total rebate of $US3.95; Arab medium has been discounted by an additional US75 cents, making a new total rebate of $US6.95; Arab heavy has been discounted by US85 cents making a new total rebate of $US9.30.

The existing discount on the very much in-demand Arab extra light has been reduced by US60 cents, to 40 cents a barrel.

April 8 - oil prices - light sweet oil reaches a new historic high of  over $US115 for Tapis light.

April 10 - oil prices - light sweet oil reaches a new historic high of $US116.20 for Tapis light.

April 10 - oil prices - light sweet oil reaches a new historic high of $US116.84 for Tapis light.

April 21- oil prices - after a series of historic highs over the last week, light sweet oil reaches a new historic high of   $US123.78 for Tapis light.

April 22 - oil prices - light sweet oil reaches a new historic high of  $US124.18 for Tapis light.

Late April - Nigeria - Shell shuts 169,000 barrels a day of of Bonny Light crude oil output due to damage to a pipeline by MEND rebels.

April 25 - UK - BP begins to shut down the 700,000 barrel-a-day Forties oil pipeline due to a strike planned for this weekend at Grangemouth oil refinery in Scotland. The shutdown takes about 24 hours. The pipeline processing terminal at Kinneil uses power and also steam from the Grangemouth refinery to operate. If the refinery closes, the pipeline must close down. If the refinery does close fully, it will take about a month to bring it back into full production.

The Forties pipeline carries about half of Britains production from the North Sea.(The other half is mostly piped to BP's Sullom Voe oil terminal in the Shetland Islands. This terminal then ships this crude to refineries worldwide) Some crude piped to the Kinneil oil terminal near Grangemouth is piped to the Dalmeny oil export terminal at Hounds Tooth, laded onto tankers and shipped out. Most of the oil, however, goes to Grangemouth.

Grangemouth is the sole oil refinery in Scotland to produce and distribute gasoline, diesel, fuel oil and jet fuel. It supplies product to Scotland, Northern Ireland and the northern of England. Grangemouth can process 210,000 barrels of crude a day. The rest of the UK has good supplies of of refined fuel from other sources.

Scotland and the northern UK sees a 'rush' on gasoline, forcing some petrol stations to limit purchases. Some run out in the face of panic buying. Once the strike ends, it is estimated it will take about 3 weeks to bring gasoline supplies back to normal.

April 27 - UK - The Forties pipeline is now shutdown. Grangemouth oil refinery is now shutdown. As a result, over 60 North Sea oil and gas fields are now shut in. The North Sea fields currently supply about 30% of UK's crude oil needs, and it is now all shut in. Imported refined products are 'supposed' to make up the shortfall. About 70 million cubic metres a day of natural gas supply - around 25% of the current British natural gas demand -  is now shut in. Stored gas (roughly 30 days worth) and reducing spring demand will make up the lost capacity.

April 28 - oil prices - light sweet oil reaches a new historic high of  $US126.94 for Tapis light.

April - Russia - oil production for the month has fallen from the 2007 peak of production - for the fourth straight month in a row.

April - Indonesia - prdiction was 860,000 barrels a day, whereas at peak in the 1990's it was well over 1.6 million barrels a day. Indonesia is now considering dropping out from membership of OPEC.

April - India - India will be short of about 86 million tonnes of coal for power generation this fiscal year (2008-2009). Over 60% of India's power is generated in coal-fired power stations. Even if stocks are found from overseas, rail infrastructure and rolling stock is likely to be insufficient to keep all power stations adequately supplied.

May 6 - Scotland - the Grangemouth refinery is now back in operation, with about a third of its normal production back on line. Full production will not be reached until about may 18th.

May 8 - oil prices - light sweet oil reaches a new historic high of  $US128.58 for Tapis light.

May 11 - oil prices - light sweet oil reaches a new historic high of  $US131.43 for Tapis light.

May - Tanzania - the price of herosene, the predominant fuel used in cooking, has nearly doubled in the last two months. Supplies in some areas are now unavailable. People turn increasingly to charcoal as a fuel source. There are 5 million people in Dar es Salaam alone. The ultimate result will be accelerated deforestation and erosion.

May - UK - wind - The 180 megawatt capacity Lynn and Inner Dowsing wind farm connects to the national grid. The 54 turbine project, off the coast of Skegness.

The rising cost of materials and limited number of manufacturers for the turbines have made the future of the 1,000 megawatt capacity London Array wind farm project uncertain. Costs were estimated at £1 billion in 2003. The estimated cost is now double that, partly due to rising costs of steel and copper. The profitability is now said to be 'marginal', and Shell, one of the three major partners, has now pulled out. The windfarm, planned for offshore Kent, would be the world's largest.

May 21 - oil prices - light sweet oil reaches a new historic high of  $US134.12 for Tapis light.

May 24 - oil prices - light sweet oil reaches a new historic high of  $US139.37 for Tapis light.

May 24 - Indonesia - in the face of high oil costs, the government reduces the subsidy on gasoline, causing the price to increase by 33%. Indonesia still has some of the cheapest gasoline in the world, as the state oil firms are required to sell oil at hugely discounted prices.

May - China - crude oil costs have meant private refineries have cut throughput to avoid losses in China's heavily price-controlled market (gasoline has risen only 9 cents in the last 18 months). To compensate, and to build fuel stocks ahead of the Olympics, China doubled its gasoline imports relative to last month. China sells gasoline to Asia, and for the first time imported more gasoline (338,572 metric tonnes) than it exported (160,000 metric tonnes). China has foreign reserves of $US1,300 billion of which $US27 billion was used to subsidise pump prices in 2007. China can afford to subsidise cuurent consumption for the next 50 years - as long as it doesn't have to import larger amounts on the world market. Which it will. And as long as the US dollar doesn't slide further in value. Which it will.

May  - Norway - Production of all liquids from oil and 'wet' natural gas fields for this year is forecast by the Norweigan Government to average about 2.4 million barrels a day (crude oil, condensate, and natural gas liquids).

May 24 - Mexico - Production from the Cantarell oil field is declining rapidly, and has now dropped by 416,000 barrels a day (26%) relative to a year ago. This must mean it is now producing in the region of 1 million barrels a day.

May - Mexico - The average oil production for the first 4 months of this year is now 2.87 million barrels a day, a drop of 9% over last year. Mexico's supplies to the USA are falling.

May - USA - As Mexico's vitally important supplies to USA fall (coupled with rising internal consumption) more oil is now being purchased from the Middle East. USA is bidding against the world for oil. This, plus the flight to oil as a value-retaining investment commodity (oil is the 'new gold') keeps the price of oil high.

May 25 - Saudi Arabia - after a few preliminary trials earlier in the year, Khursaniyah is still not in production. Saudi Aramco say it could be bought into production now, but as the gas plant is not yet complete, the gas would have to be wasted by burning off. The gas plant is expected to be complete within a few months.

May - USA - Sales of the Toyota Prius hybrid drop - because all stock is sold out. Ford Motor Companies sales of of SUVs have fallen from 47% of all new sales 3 months ago to 34% now. General Motors is closing 4 truck plants and adding more shifts to small car assembly lines. Production of hybrid vehicles by American companies is capped by an absolute shortage of nickel-metal-hydride batteries.

May - Iraq - oil production is now 2.5 million barrels a day once more. The Iraqi Prime Minister claims production has returned to pre-US-invasion levels because of better security.

June - Iraq - the Iraqi government announces it will let tenders for the development of several prime Iraqi oil fields to foreign companies. The American companies ExxonMobil, and Chevron are expected to be top tenders, with something for the British BP and perhaps the Dutch Shell oil company.

June 7 - Russia - Russian President, Dmitri Medvedev says in a speech to international investors at St. Petersburg "Failure by the biggest financial firms in the world to adequately take risk into account, coupled with the aggressive financial policies of the biggest economy in the world, have led not only to corporate losses, most people on the planet have become poorer...No matter how big the American market and no matter how strong the American financial system, they are incapable of substituting for global commodity and financial markets." He went on to announce that Russia planned to become a global finance centre, and to to establish the ruble as a reserve currency for the region. Making the ruble a currency in demand for payment for oil and gas would make imports into Russia cheaper. Medvedev believes there needs to be a group of reserve currencies, not just the greenback, and better regulation of money markets.

June - Frances TOTAL estimates that the cost of discovering and bringing replacement oil reserves on-line is today at least $US80 per barrel. That cost will rise further as oil prices themselves rise.

June - USA - Oil inventories become very low, nearing the minimum required for safe distribution pipeline operation. The USA Gulf refineries process 50% of USA's oil. In recent weeks, USA Gulf Coast oil inventories have been falling at the rate of around 750,000 barrels a day. It is uncertain whether this reflects a need for additional storage capacity to deal with a 'switch over' from Mexican to Middle Eastern supplies, or if some other factor is at play.

As oil from Mexico (and Venezuela) falls off, so the time taken for oil to arrive in USA Gulf of Mexico ports takes longer. Where it takes 5 days from Mexico, it takes 30 from the Middle East. The 'ant trail' to the Middle East is much longer than to Mexico. It requires far more 'ants', where each 'ant' is a tanker.

June - Saudi Arabia - France - Saudi Aramco and the French Total S.A. confirm a $US10 billion joint venture to complete a 400,000-barrel per day heavy crude refinery in Jubail, Saudi Arabia. Completion is scheduled for end 2012.

June 7 - Saudi Arabia - Faced with an inability to sell the unprofitable heavy and sour crudes, and having no ability to supply further light and medium grades, Saudi Arabia drops its Official Selling Price yet again for its heavy and sour crudes. The differential between heavy and light grades of crude is now $US10, an historical high.

June - Iran - In spite of steep drops in its Official Selling Price (from $US7 a year ago to $US13.05 now), Iran cannot find buyers for some of its heavy crude. The National Iranian Oil Co is forced to store about 25 million barrels of its heavy and sour crude, mainly from its
Soroosh and Norooz fields, in tankers anchored in the Arabian Gulf.

June 8 - oil prices - light sweet oil reaches a new historic high of  $US141.97 for Louisiana sweet. The American crudes are now expensive, West Texas Intermediate is $138.48, Alaska North Slope is $138.09. Tapis, from Southeast Asia, the previous price leader, is a relatively 'cheap' $135.54.

June - USA - natural gas prices now  range from $2.88 to $3.33 per therm for marketers variable pricing contracts.This is the highest ever price for gas, at a time of year when gas demand is low.

June - Europe - diesel prices have reached the equivalent of $US10 per US gallon. Around half the new cars in Europe run on diesel. The high prices of diesel make some independant trucking firms uneconomic. There are truckers strikes in France, Italy and Spain.

June 15 - USA - the national
average price per US gallon of regular gas is now a record $US4.06.

June 10 - Quote of the month:

“Now, the price is going to reach a level never-before-seen. The perspective will be $250 per barrel of oil and the competition for this resource will be strong”- Alexei Miller, head of Gazprom

June 11 - BP publishes its annual 'Statistical Review of World Energy'. But BP continues to base its figures for OPEC country reserves on the instantaneously inflated figures reserve figures self-reported by OPEC members in 1983 - when OPEC production quotas were related directly to the size of a member countries reserves. These reserves have remained unchanged ever since, no matter how much oil has been pumped out of them since... While BP continues to print these patently absurd figures, it is careful to add a disclaimer - in small print - that the information comes from "official sources and third-party data" and "does not necessarily represent BP's view of proved reserves by country". The lead author later admits that the data sources include what he quaintly describes as "some good apples and some bad apples".

June 11 - BP head Tony Hayward claims its annual summary of proven oil reserves, production and consumption is "one of the most reliable sources for energy data worldwide"

June - Airlines - USA - extra fuel costs for American domestic (trans-continental) passenger airlines are expected to be an additional $US30 billion by the end of the year if oil prices remain over $US130. Fuel costs currently take 40% of revenue - and that percentage is increasing. Seat costs would have to be increased by 20% 'across the board' to retrieve the rise in fuel costs since 2007. With current seat overcapacity in US domestic airlines, this is simply not possible. It appears many billions will be wiped off global airline income once again.

June 13 - Airlines - The USA Business Travel Coalition says a study it commissioned suggests the top 10 U.S.domestic airlines will have losses of $17.6 billion in 2008 and 2009. The report suggests that if oil remains over $US130 a barrel for the rest of the year, all major US 'legacy' domestic passenger airlines (now run as low cost airlines) will run out of cash and be in default on debt covenants by early 2009. It suggests some airlines will be forced into liquidation, and others will have to file for bankruptcy. At this price point for oil, the report suggests US domestic airlines would remain viable if at least 15% of seat capacity was permanently removed, and fares increased by around 20%.

June - Mexico - Cantarell production has now fallen to 1.017 million barrels a day - 35% lower than june 2007.  Production at the Ku-Maloob-Zaap field has been ramped up by around 30% as Cantarell's nitrogen injection system is swapped over to Ku-Maloob-Zaap.

June - Mexico - exports to USA, at 1.139 million barrels a day, are down 19% relative to june 2007. Mexico is the third largest supplier of crude oil to USA.

June - Japan - Toyota can barely keep up with demand for its hybrid vehicles because of a bottleneck in battery production. Additional battery production capacity won't be available until 2009 when a joint venture with Matsushita Electric Industrial Co. will begin producing next-generation lithium-ion batteries. The smaller lithium-ion batteries produce more power than the nickel-metal hydride battery, and are better suited to 'plug-in' recharging at home. 'Plu-in' charging is a developing trend by Prius owners, and there are now 'after-market' entrepreneurs converting the existing Prius models to allow them to be 'plug in' charged from a domestic supply overnight.

Full-scale production won't be in place until 2010, when it expects to be selling 1 million hybrids a year. In the meantime, Toyota will work on building another plant to produce the existing nickel-metal hydride battery. Toyota will also develop its own battery research unit, in an effort to further improve battery performance.

June - Japan - Honda announces it expects hybrid production of 500,000 a year after 2010. Honda has 4 hybrid vehicles at the moment, and plans a fifth.

June - Japan - Nissan Motor Co announces it will produce a hybrid vehicle by 2010. Nissan plans to start mass-producing lithium-ion batteries in Japan in 2009 with joint venture partner NEC Corp.

June 22 - Nigeria - recent attacks by MEND rebels (including Shell's 225,000 barrels a day Bonga oil field 120 kilometres offshore ) have now shut down between 900,000 and 1 million barrels a day of oil production. Nigeria is now producing between 1.2 million and 1.5 million barrels of oil a day, the lowest level in over 20 years.

June 24 - oil prices - light sweet oil reaches a new historic high of $US142.74 for Tapis light.

June 28 - oil prices - light sweet oil reaches a new historic high of $US147.30 for Tapis light.

June 30 - International Energy Agency, noted for its fantasy-land projections of world oil supply and demand, publishes its latest medium-term 'analysis' of the oil markets and projected supply, while making a few somewhat uncharacteristically realistic comment:

“Like alchemists looking for a way to turn basic elements into gold, everyone wants a simplistic explanation for high prices...Often it is a case of political expediency to find a scapegoat for higher prices rather than undertake serious analysis or perhaps confront difficult decisions.”

Uncharacteristically, the IEA admits there are no "obvious sign" that speculators are behind high prices, and the facts are that crude oil stocks are "normal to low" (sweet oil stocks are low, sour abundant), and refinery production is "very tight". The IEA notes that oil producers are "operating close to flat out". It then goes on to note "high prices reflect strong non-OECD growth and poor non- OPEC supply performance". That is, we are past the peak of supply, and, looking forward, there will be a slight reprieve in 2009 (which we agree is likely the case) as megaprojects come on stream, but as 'non-OPEC' supplies continue to fall, the supply situation will deteriorate after that, but in 2013 there will be more oil from More oil beyond 2013 Saudi Arabia, Khashaghan, and the Brazilian Tupi field. They omit the fact that decline in other fields, and especially Russian fields, will wipe out the effect of these other supply sources - and then some.

July 3 - oil prices - light sweet oil reaches a new historic high of $US153.98 for Minas light. Tapis is also high, at $US153.03.

Both these Asian crudes are light sweet oils. Most Asian refineries only handle sweet oils, and cannot process sour crudes. Roughly 25% of the global refining capacity is in Asia. Competition for local 'sweet' feedstock is now intense. Minas light, from Sumatra in Indonesia, is 35.3 API, and has a sulfur content of 0.09%. Tapis light, from Malaysia, is 45.2 API and has 0.03% sulfur. As local Asian sweet crudes cannot meet Asian refinery demands, Asia will have to import greater amounts of light crudes from elsewhere. Sweet crude production from declining Asian fields is expected to drop by around 60,000 barrels a day by years end. And major non-Asian sources are in very volatile regions. New Asian regional heavy-oil refinery capacity is not yet on-stream.

July - oil - well over half the world oil production is heavy sour crude. The trend in the Asian region is to mandate lower sulfur fuels. Indonesia, Australia, and Vietnam have all mandated that retail fuels contain lower amounts of sulfur. This has put increasing demand-pressure on low sulfur crudes. If Asian 'straight-run' refineries (that cannot handle sour crude) cannot obtain enough low sulfur crude, it necessarily creates a bottleneck, as around 25% of world oil production goes through these refineries, and other refineries are operating at near full capacity. Under these conditions, the high price of sweet oil will likely make some refineries unprofitable.

Only refineries that are processing crude from their own oil fields are likely to remain economically viable.

And as the demand for light sweet oil is so very high, the profitable refineries can set the wholesale refinery profit margin very high - and have done so. The price spread between sour heavier crudes and light sweet crudes in Asia is at historic highs. It is unlikely to come down until 2009, when around 600,000 barrels a day of new heavy oil refining capacity in India (Reliance's Jamnagar refinery) and additional capacity from expansions in China (Zhenhai, Quanzhou, Wuhan, Yanshan, Jinling, Qingdao, Luoyang, Dushanzi etc ) and from some of China's offshore refineries (Sudan) comes on-line.

The retailer selling to the public has an unchanged small profit margin, but pays a huge amount more for supplies. And so has to put the price at the forecourt up.

July - oil - Currently, fuel oil is in over-supply, and cheaply available due to lack of suitable refinery facilities for heavier oils. But as refineries upgrade to deal with heavy and sour crudes, they produce less fuel oil. At the same time, Middle East countries are increasing the use of fuel oil to generate electricity. While their generators can switch between fuel oil and natural gas, natural gas supplies have now become more difficult, with significant new sources now diverted to the chemical feedstock industry, and greater demand for gas in Europe and Asia. Paradoxically, in future, refineries could produce more fuel oil quite easily, but as as upgraded refineries produce less percentage of fuel oil per barrel of crude processed, the refineries would have to increase throughput in order to expand fuel oil production. This is unlikely to be possible.

July - petrodollar investment - About 60% of Gulf oil producing countries income now goes to US dollar denominated investments, and about 20% to Euro-based investments.

July 4 - oil prices - light sweet oil reaches a new historic high of $US154.11 for Minas light.

July 10 - Iran - France's Total oil company announces it will pull out of joint developement of phase 11 of the South Pars gas field due to political risks. In an on-going re-run of its Iraq technique, USA continues its accusations that Iran of trying to develop nuclear weapons, rather than consider Iran's statement that it needs to exploit its uranium deposits to generate electricity. Iran controls the world's largest natural gas deposit, and if exports eventuate, the price will not be in dollars, particularly if partnership with Russia eventuates. USA may have control of Irans oil and gas distribution, income, and currency on its agenda - as well as Iraqs.
Shell has already pulled out of the joint venture, and Malaysia Petronas company is the last foreign company working on the field phase expansion. Total is said to have the most advanced technology to capture and process natural gas. Iran hopes to export natural gas as LNG. Iran says it will continue to develop the field by itself, if it has to. Analysts believe that Totals pull-out will mean this phase of the vast Pars field expansion will now not be fully in place for around 8 to 10 years. It is likely that other strategically important regional partners will be found, as domestic demand for natural gas from Iran's rapidly expanding population is likely to match any expansion in available gas production.

July - USA - demand for low-sulfur lighter crudes to make (government mandated) low-sulfur diesel increases. Lighter crudes also yeild more diesel than heavier crudes (which yeild more petroleum, for which, in USA, there is currently less demand). USA has to bid against strong demand from Asian refineries for price-supply. Diesel in the USA now costs $US4.66 per American gallon, making diesel more expensive than petrol for the time ever. The average price of petrol (all grades) is now $US4.15 per American gallon.

July 13 - Iran - Russia - Gazprom signs an agreement to help Iran develop its oil and gas fields. Alexei Miller, CEO of Gazprom, expressed interest in participating "in big oil and gas projects; in South and North Pars, Azadegan and the Caspian Sea fields." Gazprom also suggests Russian expertise could help in the North Azadegan oil field in southwestern Iran. Iran commenced production from the very large Azadegan field by itself after its Japanese partner pulled out.

July 13 - UK - A speech by British Prime Minister Geoffrey Brown is the closest thing to public admission of peak oil and the fading of the oil economy that a leader of country has yet given. It is a remarkable speech (edited and emphases added):

We must now leave behind the ...oil dependent ways of yesterday and embrace the new cleaner and sustainable energy future of tomorrow. The years of cheap energy... are behind us. We need a new strategy. Past total dependence on oil must give way to a clean energy future...
...improving the functioning of the oil market can be only one half of our strategy. The other must be to set ourselves on a new energy path - a path from our economies that are today over-dependent on oil towards the post-oil energy economies of the future.

Today in Europe more than a third of our energy comes from oil, and a further 40 per cent from other fossil fuels - gas and coal. Only around 20 per cent of our energy comes from...renewables and nuclear. Europe is on a path to increase the proportion of renewable energy in its energy mix by 2020 from under 10 per cent to 20 per cent....we must also become much more efficient in the way we use energy.

So let me set out the five main points of an oil replacement strategy.

First, since 70 per cent of future oil demand is from transport, we need a step change in the fuel efficiency of vehicles. ... we will need to see the mass production of electric vehicles - conventional hybrids, plug-in hybrids, and fully electric vehicles. I want to see the mass production of hybrid and electric drive technology in ordinary family models.

Already initiatives are under way in several countries to accelerate the commercialisation of electric vehicles by supporting the required charging infrastructure and automotive technologies.

...we need all countries to commit to taking rapid action to improve energy efficiency in households and businesses. The G8 nations this week committed to implementing the IEA's 25 recommendations on energy efficiency. If implemented globally these could cut oil consumption by 15 per cent

We need agreement on lower levels of [value added tax] for energy saving goods...we will also introduce new measures to encourage the installation of household insulation and energy efficiency appliances...

...we need a renaissance of nuclear power. Britain is now moving quickly to replace its ageing fleet of nuclear power stations.... I see renewed interest in this technology, as countries contemplate the alternative - [is] continued oil dependence....we need a massive expansion of renewables. Britain is fully committed to the EU target that 20 per cent of all energy must come from renewable sources by 2020.

 ...Britain will become the global centre for offshore wind.

We will see major investment in energy from waste and biomass and in new forms of microgeneration.

We are pushing ahead with the development of marine and tidal technologies, including an examination of a tidal scheme on the River Severn, which could supply 5 per cent of all the UK's electricity. is time for a major investment in the development of solar power. The IEA suggests that additional investment of up to 215 million square meters of solar panels will be needed every year to 2050. And particularly in the Mediterranean region, concentrated solar power ...[in] those sunnier countries ...could become a vital source of future global energy by harnessing the power of the sun.

...the EU is committing at this summit to work with its neighbours - including Egypt, Jordan, Morocco and the League of Arab States - to explore the development of a new 'Mediterranean Solar Plan' for the development and deployment of this vital technology from the Sahara northwards.

So I call on the European Investment Bank to use its 3 billion euro sustainable energy fund to support a clear strategy for the reduction in global dependence on oil and traditional fossil fuels and for the development and deployment of new low carbon energy technologies. 

We live in a new era. Today our globalised, energy-hungry and warming world requires a shift from oil dependence to sustainable energy.

Only with political leadership from all of us will we be able to move towards a new sustainable economy. This is now Britain's goal. It must be Europe's destiny." - exerts from a speech made by UK Prime Minister Gordon Brown, on 13th July at 'The Union for the Mediterranean Summit'.

July - a new historic peak of conventional oil supply - So far, this month marks the highest ever production of conventional crude oil, at 74.83 million barrels a day.

July  - a new historic peak of production of crude oil plus condensate is reached - 74.94 million barrels a day.

August 5  - Turkey - Azerbaijan - Caspian Sea Oil - The 1,000 mile long Baku-Tbilisi-Ceyhan oil pipeline closes due to a fire from a bomb attack by Kurdish seperatists in Turkey. Oil from Caspian sea fields is also shut in, as it feeds into the BTC pipeline from subsidiary pipelines. Output is cut from 800,000 barrels a day to 250,000 barrels a day. Around 80% of Azerbaijani production is shut in, causing significant economic loss.
The pipeline was to be a key element in the American-backed 'east-west' corridor to take Caspian Sea oil to Turkey, and then Europe. The pipeline transits through Georgia, recently under attack from Russia after Georgia's attempt to 'blitzkrieg' its (largely Russian ethnicity) break-away South Ossetia region into submission. Russia drops bombs adjacent to the pipeline, in a clear warning to all parties.

September 1 - USA - Hurricane Gustav hits the Gulf of Mexico. The hurricane does only minimal damage to offshore rigs, but as 100 rigs in its path were evacuated, oil production from the 21 rigs not evacuated is relatively small. About 96% of the USA's Gulf of Mexico oil output is shut in, along with around 82% of  Gulf of Mexico natural gas output. Oil and liquid condensates from gasfields in the Gulf of Mexico make up roughly a quarter of all the oil produced in the USA. Modelers estimate that about 40% of Gulf of Mexico oil and about 30% of Gulf of Mexico natural gas will be unavailable for the next 30 days.

The Louisiana Offshore Oil Port is closed, shutting out the1.2 million barrels a day of crude oil that is imported from overseas through this hub.

In addition, 27% of the USA refining capacity is affected, with 11% of refineries shut, and 16% operating at reduced rates. The hurricane closes down power stations in some areas, leaving 1.5 million people in Louisiana without power. Petroleum shortages result, as  gas stations don't have power for their pumps.

September 3 - USA - The Louisiana Offshore Oil Port commences very limited offloading of imported crude using stand-by electricity generators. Return to full capacity is expected once commercial power is restored, a process that might take one or two weeks.

September 8 - oil prices - Tapis light sweet crude is $US113.11 as prices temporarily spike down. Minas is now $US110.46.

September - India - Coal shortages and distribution problems continue to hamper the reliability of India's electricity supply. Half of India's electricity is generated by burning coal. India produces around 380 million tonnes of coal a year, with production increasing annually. The state-owned coal monopoly, Coal India Ltd, now plans to import coal for the first time ever. India is arranging to import 4 million metric tonnes, with imports expected to increase to 60 million tonnes a year by 2012. Coal India, in conjunction witht the Steel Authority of India, is working to buy coal mines in Indonesia, Mozambique Zimbabwe and Australia. It is also attempting to secure thermal coal from Indonesia and South Africa.

September - Japan - High oil prices and reduced demand for gasoline and diesel have led to Nippon Oil Corp, Japan's top oil refiner, refining 3% less crude this month, relative to september 2007. Other smaller refiners are also affected, some down by as much as 10%.

September - Japan - Nippon Oil Corp, faced with excess capacity, signs a deal to export 3,446 barrels a day of diesel to Mexico. The contract is for a year, after which Nippon Oil may sell diesel on the spot market, demanding on the shape of domestic demand.

September - USA - Ford Motor Company releases a 5-seater diesel car (the 2009 Fiesta ECOnetic ) that does 65 miles to the gallon. But as diesel in America costs from 40 cents to $US1 a gallon more than petrol, it won't be released in America. The USA has the 'distinction' of having the most fuel-inefficient domestic fleet in the world. About 3% of the cars in USA use fuel-efficient diesel, whereas about 50% of European cars are highly fuel-efficient diesels.

September - Saudi Arabia - SA officials admit that the long-delayed 500,000 barrels a day Khursaniyah field is actually "operational and producing crude". It is uncertain how much has, or will, be produced per day. Khursaniyah produces light crude.

September 13  - USA - a larger, but less powerful hurricane hits the coastal Gulf of Mexico USA refinery belt.
14 Texas refineries are shut down, mainly due to damaged power supply.  These refineries have a total capacity of about 3.8 million barrels of crude a day, roughly 20% of the USA's total production. Gasoline prices in the region soar as supply is disrupted. It reached $US5 in a few places, and outlaying areas have difficulty receiving fuel from the reduced flows in some pipelines.

September 21 - oil prices -A combination of the USA credit bubble popping and weather and political interruptions to supply cause oil prices to briefly spike from about $US100 a barrel to $US130 a barrel. This is the largest ever one day movement in oil prices. Crude oil trading is briefly suspended. Crude prices closed at about $109, up about $18 a barrel. Volatility in players betting on oil price changes (a 'watching from the side-line' money market 'game' unrelated to actual physical delivery of oil) can be expected to remain high from now on. Supply and demand remain closely matched, but there are now far higher fluctuations around supply than there are around small fluctuations in demand.

September 22 - Nigeria - crude oil production has now dropped by 280,000 barrels a day since Sept. 13, due to attacks by MEND (Movement for the Emancipation of the Niger Delta) in the Niger Delta region. Several major pipelines have been blown up in the past week. Shell declares force majeure, freeing it from its contracts to supply crude oil from Shells Niger Delta facilities. Oil industry representatives say that if the fighting ends production could be brought up to a new high of about 3 million barrels a day.

September 23 - USA - About 870,000 barrels of oil a day remains shut-in in the Gulf of Mexico due to damage sustained in hurricanes Gustav and Ike. Around 4.56 billion cubic feet of gas is also still shut in.

September 23  - Mexico - Production from Cantarell oil field has now dropped to to 998,000 barrels a day. Mexico's oil exports have now dropped to 1.43 million barrels a day.

September 29 - Russia - Russia opens an internet-based oil and gas exchange (bourse). The aim is to remove intermediaries, make oil and gas sales transparent, and make prices cheaper at the pump. As this is the world's first oil exchange that is not denominated in dollars, it helps to strengthen the Russian ruble. Government majority owned Rosneft oil and gas company intends to put 50% of its production through the bourse. Rosneft produces 20% of Russias crude oil, and is the major refiner in Russia.  Prime Minister Putin says this is the first step to making the Russian ruble an international reserve currency.

September - China - low oil prices allow China to increase its oil imports - imports surged in september to 4.87 million barrels a day, almost double the volume imported last september.

October 15 - Russia - The Russian government provides $US9 billions to 4 major oil and gas companies to help pay off foreign debt obligations. Its is uncertain if this is 'creeping nationalisation' of Russia's oil industry.

October 15 - oil prices - Brent crude drops to $US71.36 a barrel, the lowest price in the last 13 months. The enormous financial sector  pyramid schemes - loosely based on the assumption of endless increases in property, currency, fuel, and commodity values - finally collapses (precipitated by the failure of 2 large global betting rings, usually known as 'hedge funds'). Bank ponzi scheme paper 'assets' become near worthless, banks become technically bankrupt, credit dries up, governments issue paper ('money') to wipe out the losses caused by these so-called 'assets' revealing their true nature and being instantly shifted to the red ink side of the balance sheet as what they always were - liabilities.

The 'smart money' fund managers, bankers, and 'clever' investors  have changed the slope of the existing slide into recession (due to oil prices) from gentle to precipitous. They are now culpably responsible for a sudden flood of business failure, and consequent unemployment. They have stalled productive investment, and severely damaged the retail sector. Demand for oil will probably drop year on year.

Demand is likely to drop below the drop in combustible liquid production (oil, ethanol, tar, gas liquids, biofuel etc) that would have been expected about 2010. Oil is more likely to bounce/spike around the $US80 a barrel mark from now until about maybe 2010/2011. After that date, increasing internal consumption within oil exporting countries is likely 'short the supply' to the export market, pushing up prices once again.

October 16 - USA - Around 40% of USA Gulf of Mexico crude oil production remains offline due to hurricane damage. About 36% of the Gulf's natural gas production is still off-line.

October 29  2008 UK companies known as the 'Peak Oil Group' launch a report 'The Oil Crunch: Securing the UK’s energy future'. The group warn cheap oil production is likely to end by 2013, posing a huge risk to the UK and world economy.

"Plentiful and growing supplies of oil have become essential to almost every sector of today’s economies. It is easy to see why, when we consider that the energy locked into one barrel of oil is equivalent to that expended by five labourers working 12 hour days non stop for a year. The agricultural sector perhaps makes the case most starkly: modern food production is oil dependent across the entire value chain from the field to the delivered package. Within modern cities, for example, life in the suburbs will become extremely challenging without plentiful supplies of affordable oil.
Yet in recent years, a growing number of people in and around the energy industry have been warning that global oil supply will soon fail to meet demand, even if the global demand drops, because the world is on or close to its peak of
oil production.
Peak oil production is the point at which the depletion of existing reserves can no longer be replaced by additions of new flow capacity.
Conventional wisdom holds that the peak is many years in the future, allowing a timely transition to alternatives that can replace falling oil supply. However, the International Energy Agency has warned of an oil crunch by 2013. Other authoritative voices warn of severe problems earlier than this.....The immediate conclusion from the analysis is that the peaking of oil supplies is imminent and will occur in the window 2011-2013. In planning terms 2011-2013 is effectively tomorrow. This means the crisis is already upon us and companies and individuals need to be planning their response now."

November 15 - Mexico - Production from the massive Cantarell oil field has now dropped by 300,000 barrels a day so far this year. The decline rate was expected to be 15% a year from now on, but it is collapsing more rapidly than thought, and the decline rate is now closer to 20%. It is estimated that Canterell will now be producing only 700,000 barrels a day by the end of next year.

December - oil prices are now about $US36.73 a barrel for West Texas Intermediate. This steep fall from record high price in july reflects sharpening drop in demand due to the sudden onset of recession, particularly in the USA, coupled with traders caught in the financial crisis bailing out of their bets on oil prices (with the strong possibility of a major European player selling assets frantically to cover oil bets gone bad).
As the costs of exploration and development are said by some commentators to be around at least $US50 a barrel, smaller exploration and development companies cannot continue developing new small fields. And the new fields in politically relatively stable countries and non-polar/non-deepwater environments are predominantly smaller fields.

December - Frances Total oil company CEO announces Total will seek partners to develop nuclear power and solar power. Total has decided not to diversify into windpower.

December 25th - oil prices are now about $US30.03 a barrel for West Texas Intermediate.

Year End
World - Average global production of all liquids in was 86.59 million barrels a day (IEA.)

World - new wind power installations in 2008 totalled 27,000 megawatts nominal capacity. This is about 36% more than the capacity installed in 2007. Globally, there is now 120.8 gigawatts of wind energy capacity.

USA - United States installed 8,358 megawatts in 2008 - 50% more than 2007. This capacity is nominally enough energy to power two million USA homes. However, the October financial debacle has severely constrained investment in wind power.

China - Wind - China added 6,300 megawatts of new wind energy capacity in 2008. China's total capacity has now doubled, reaching 12,210 megawatts. China has a goal of hitting 30,000 megawatts by 2030. China aims to double its existing capacity again next year.

China - Coal - China now produces 300,000 megawatts by burning coal.

India - Wind - India added  1,800 megawatts new wind energy capacity in 2008. Installed capacity is now 9,645 megawatts.

USA - Gasoline consumption fell 3.5%, the steepest decline since 1965. Diesel consumption fell 6.8 %, the steepest decline since 1980.

Go to 2009

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