Real Wealth Society

Saturday, January 13, 2007

I’ve been thinking about P-oil-ITICS By Fred Cederholm

Column for on/after Jan. 7th, 2007

I’ve been thinking about P-oil-ITICS. Actually I’ve been thinking about our October energy imports, proven reserves, Iraq, nationalization/ de-privatization, pipelines/ diversions, Russia, Iran, Venezuela, the Saudis, and the “weaponization”. Politics is driven by policy and policy seems driven more and more by energy needs. In 2007 we will find politics morphing into p-oil-itics as policy morphs into p-oil-icy. What had been the focus/concerns behind “the closed doors of government(s)” in the past will become more obvious to us all in the light of day and the news stories on page one this coming year.


You see, the biggest markets (and the emerging markets) for energy consumption – the US, Western Europe, Japan, China, and India – find themselves well (pun intended) on the short side of their own domestic production. Energy has clearly evolved into a sellers’ market – if indeed THAT has not already been the case for some time now. As “buyer competition” increases, the global clout of the sellers can only continue to rise. Trust me… the sellers are very aware of that fortuitous fact of life!


We are more dependent on foreign oil than ever before - with a slightly different percentage mix of the recent suppliers. In October 2006 our domestic production of crude was 161.0 MILLION Barrels per MONTH – up from our February 2006 and (62 year low) domestic production of 141.4 MILLION Barrels per MONTH. The top eight sources of Uncle $ugar’s crude oil imports for October 2006 were: Canada (1.704 MILLION barrels per DAY--MBPD), Mexico (1.481 MBPD), Saudi Arabia (1.322 MBPD), Venezuela (1.125 MBPD), Nigeria (1.049 MBPD), Angola (0.506 MBPD), Iraq (0.505 MBPD), and Algeria (0.449 MBPD). Uncle $ugar’s top eight sources of total petroleum imports for October 2006 were: Canada (2.144 MILLION barrels per DAY--MBPD), Mexico (1.646 MBPD) Saudi Arabia (1.382 MBPD), Venezuela (1.354 MBPD), Nigeria (1.088 MBPD), Algeria (0.813 MBPD), Angola (0.536 MBPD), and Iraq (0.505 MBPD). These figures for the October 2006 imports were made available by the Energy Information Agency of the US Department of Energy on December 27, 2006.


In December of 2006, a NEW ranking of proven oil reserves by country of origin was released. These are as follows: Saudi Arabia #1 with 264.3 BILLION BARRELS (BB), Canada #2 with 178.8 BB, Iran #3 with 132.5 BB, Iraq #4 with 115.0 BB, Kuwait #5 with 101.5 BB, United Arab Emirates #6 with 97.8 BB, Venezuela #7 with 79.7 BB, Russia #8 with 60.0 BB, Libya #9 with 39.1 BB, Nigeria #10 with 35.9 BB, and the United States #11 with 21.4 BB. It should be noted that despite the fact that Iraq is sitting on the fourth largest proven oil reserves, their output/sales continues to set new record LOWS with each passing month. Just what light does this ranking shed on who is in the news, and why?


In 2007 we shall continue to see more and more countries (on the producing side) nationalizing their domestic oil/gas/energy industry sectors. Whether one calls it “nationalization, de-privatization, or re-negotiation of contracts with the major global oil companies;” the sovereign states sitting on the “reserves” will increase their owners’ rights and their share of the profits from exploration, extraction, and distribution from their crude, natural gas, and distillates. This has been an ever increasing trend from 2005 and 2006 in South America, the Middle East, Russia, and the former Soviet Republics.


Some nations - who by the luck of their geographic positioning - will enter into the mix of saber rattlers on the energy front in 2007. This will be true whether they have any subterranean oil or gas reserves/production at all. Here… the producers “need” the right of ways of those third parties to get their energy resources out to the consumers; or, the consumers “need” the right of ways of those third parties to get their energy resources from the producers – in a timely, cost effective, and strategic manner. Announcements (or even rumors) of pipeline agreements or multinational contracts of promises to provide future crude, distillates, or natural gas can rattle the world’s markets. Right of ways/ thru-put negotiations and/or disputes will only complicate and de-stabilize an already shaky situation globally.


Energy demand will continue to grow - as will the competition for the finite and proven sources of that energy. There are alternatives out there, but bringing them from concepts on the drawing board into viable realities will take time. In the owner/seller market as we face it now, they can use their clout as both a carrot and a stick. When you use any tool or surrogate “item” to get what you want (or prevent what you don’t want), does that not effectively “weaponize” the said tools or surrogate items? Policy becomes p-oil-icy, and politics will become p-oil-itics. I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.


Copyright 2007 Questions, Inc. All rights reserved.

To “audit” this column and to learn more about the subjects discussed, check out:

Crude Oil and Total Petroleum Imports Top 15 Countries
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html

U.S. Crude Oil Field Production (Thousand Barrels)
http://tonto.eia.doe.gov/dnav/pet/hist/mcrfpus1m.htm

Greatest Oil Reserves by Country, 2006
http://www.infoplease.com/ipa/A0872964.html

Iraq's Oil Production at Post-Invasion Lows. Cui Bono?
http://www.huffingtonpost.com/raymond-j-learsy/iraqs-oil-production-at-_b_18351.html

Belarus Blocks Transit of Russian Oil
http://apnews.myway.com/article/20070108/D8MH37GG0.html

Russian oil supplies to Poland, Germany caught in Belarus dispute
http://www.breitbart.com/news/2007/01/08/070108124819.kkhgowaq.html
Blackmail fear after Russia doubles the price of its gas http://www.dailymail.co.uk/pages/live/articles/news/worldnews.html?in_article_id=424434&am p;in_page_id=1811

Iran threatens to stop oil flow via Hormuz strait
http://www.jpost.com/servlet/Satellite?cid=1167467686686&pagename=JPost%2FJPArticle%2FShowFull

World's Largest Gas Pipeline Proposed to Run Through Amazon
http://news.nationalgeographic.com/news/2007/01/070104-gas-pipeline.html
Securing the U.S. Energy Supply http://www.heritage.org/Research/features/issues/issuearea/EnergySupply.cfm


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