Friday, December 4, 2009


I want to try my hand at a bit of prognostication.

The world is flooded in oil due to a lack of demand brought on by the world wide economic collapse. The dollar is going down in value which should cause the price of oil to go up. It can't seem to get past $80 per barrel, most of the time staying in the 70's. The retail price of gas spikes upward occasionally but is forced back down by the lack of demand. This is creating a situation for the refiners that will not allow them to be profitable without major cost cutting. The first thing to go will have to be refinery capacity and drilling new wells.

As the dollar continues its slide the price per barrel will have to go up. This increase in cost to the refinery coupled with the lack of demand will force further reductions in cost to remain even marginally profitable. As refining capacity diminishes the law of supply and demand will kick in. Prices at the retail level will rise. The weakened economy will not support this causing refiners to shut down entirely. We are looking at massive energy disruption on a scale that will not allow our society to function.

Peak Oil is here. Not because we are running out but because we lack the financial resources to continue consuming. As our access to oil disappears we will begin a death spiral of collapse that will fundamentally change the way we live. For a long, long time.

"Oil product tankers idling in quiet waters of the world's oceans are unlikely to move on until well into 2010 when more refinery shutdowns could curb production and force vessels to unload.

Floating oil product volumes, comprising mostly distillates such as diesel and the heating fuel gas oil, have surged to unprecedented levels of about 100 million barrels, but refiners are still pumping out more than the world can consume."...

...“It is tough to see an end to this situation. We need to see further shutdowns of refineries,” said Petromatrix analyst Olivier Jakob.

Many refineries in Europe and the United States are already up for sale or idled because of depressed demand since the start of the global economic slowdown.

For some analysts, sea storage at present levels is so high it could meet all of the expected oil demand growth for next year.

“The current stocks afloat should meet most of next year's demand increase, which would leave onshore stocks basically unchanged from the current record highs,” said Mr. Jakob.

The Globe and Mail

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