October 2007 Archives

(A review of Rigged can be found here.)
The Barrel heard that this newly-released book was a #1 bestseller. It is...under the almost comically subdivided category of Business & Investing/Industries & Professions/Oil & Energy. What's funny is the number two book in that category is Daniel Yergin's The Prize, which was published when the first George Bush was in office. So there doesn't seem to be a lot of fresh competition.

What we first heard here at The Barrel was that Rigged was about the founding of the Dubai Mercantile Exchange. But if you look over the advertising blurbs on Amazon, it looks a lot more personal than that. In fact, the book also is a number 2 bestseller in the category of Business & Investing/Biography & History.

So we note the book here at The Barrel, because it's certainly a subject of recent buzz.

The record run-up in crude futures prices on the New York Mercantile Exchange over the past month has been attributed to speculators, US-imposed sanctions on Iran, a deep draw in US crude stocks, mounting tensions between Turkey and the Kurds in northern Iraq or pick a reason, any reason.

But few commentators have focused on the role of options on the price of crude futures. Open interest in NYMEX crude options on futures hit a record 3,903,651 lots as of October 29, handily feeding into prices soaring to an all-time high of $93.80/barrel.

If this story looks familiar, that's no surprise.

It's been written many times. Saudi Arabia tries to diversify its economy away from oil. In fact, while looking for the online version of the October 26 story, we stumbled across another story with a headline so simiilar to this one that at first we thought it was today's piece. But it wasn't. It just looked like it.

Chinese energy statistics have long been considered at best somewhat unpredictable and at worst just flat out wrong. Huabin Lu is the president of 3-E Information Development & Consulting, and he tries to get them right.

Lu spoke to a small gathering Wednesday in New York under the auspices of the New York Energy Forum. He touted his connections "on the ground" as the basis for his statistics and projections. He didn't harp on the fact that Chinese energy demand is growing; that's old news. What he looked at instead was the face of shifting demand trends in that country, and how the market there is being affected. Among the points he touched on:

As the United National climate conference draws near (December 3-14 in Bali, Indonesia), it's worth considering some basic greenhouse gas emissions data that will inform the negotiations.

According to some estimates, China has just surpassed the US as the world's largest annual emitter of carbon dioxide. Neither the US nor China is covered by the Kyoto Protocol: the US because the Bush administration rejected the protocol; and China because the protocol does not cover developing countries, even rapidly industrializing countries such as China.

The Barrel, Platts' oil blog on platts.com, last week published two recent entries discussing the level of the highest real-time price of crude. This subject has been under much discussion and speculation in recent weeks as the current price of WTI touched $90/b.

At least one newspaper, Newsday, said the highest real-time price ever had been crossed. The Wall Street Journal declared that current prices would need to be in excess of $101 to set a new record.

Below are excerpts from Platts' analysis of "the highest ever." We've tweaked our analysis from what appeared originally.

It is difficult to walk out of the peak oil meeting here in Houston and not feel miserable.

Yes, there are some attendees who might be considered a bit offbeat, ex-hippie types who see their long-held dreams of "the end of oil" nearing reality.

But the majority of the 500+ attendees at the US meeting of the Association for the Study of Peak Oil are not in that category. They are geologists, economists, professors, consultants, economists. And no matter who steps up to the podium to make a presentation, the forecast is grim.

At The Barrel, we're eating crow. Our numbers in this entry were wrong.

We have discovered that the posted price of WTI did not top out at $38/b in April 1981. It actually had hit that level a year earlier, and then climbed to $39.50 in March and April of that year. So not only is that higher than the $38/b price we set as the basis for determining the inflation-adjusted high, it also has another year on the inflation calculator.

(Please note: the findings in this posting have been superseded by this entry. But we are leaving this up here anyway).

At Platts, we often get queries for the data records of the spot price of crude oil for the years prior to the commencement of NYMEX trading in 1983. These requests often come from the media.

What they want is a precise apples-to-apples comparison of the current NYMEX price to an inflation-adjusted price for the first three or four months of 1981, when it is widely agreed that real crude prices reached their all-time high.

Ethanol is playing an increasing role in the US gasoline market, extending its reach beyond reformulated and into conventional blends. The amount of ethanol-blended conventional gasoline hit a record high last week, according to the latest Energy Information Administration weekly oil data.

That's hardly a shock, considering how cheap ethanol has become relative to conventional unleaded. According to Platts data, ethanol in Houston Wednesday was worth $1.655/gal, compared to $2.03485/gal for conventional 87 unleaded.

Ten years ago, the Clinton administration was a driving force in Kyoto, Japan, to negotiate the first international agreement to limit emissions of greenhouse gases. The impetus for the Kyoto Protocol's market-based emissions- trading provisions came from the US, which had to overcome stiff opposition from the European Union. The EU, of course, has since embraced emissions trading with the fervor of a religious convert.

And it took the dues ex machina intervention by then Vice President Al Gore who parachuted into Kyoto for about a 24-hour visit to help end a stalemate that had stalled and stymied the UN negotiations.

No doubt about one of the hot jobs of tomorrow: anything involved in getting oil out of the ground.

In a report that is mostly significant for who it came from, Cambridge Energy Research Associates this week released a study that talks about the long-discussed squeeze on the supply of the type of people needed to make upstream projects a success.

Several environmentalists suggested that the European nations attending last week's White House-sponsored meeting on climate change would refuse to attend any future sessions unless the Bush Administration agreed to mandatory limits on US greenhouse gas emissions.

Turns out the US did not agree and the Europeans did not trash the meeting. In fact, Mogens Peter Carl, the European Commission Director General for Environment, told a concluding press conference Friday that France has offered to host the next meeting some time next year. The US objective is to reach a consensus on a "global goal," in time for a meeting of heads of state US wants to convene next summer.