Category: Energy outlook

The worldwide economic slow down has greatly impacted crude oil and global petroleum products prices as demand destruction has occurred. The sharp sell off in prices is setting the stage for another price explosion in the near future as at current prices there is little financial incentive for oil suppliers to increase exploration efforts.

In addition, many alternative energy projects are being delayed as they would make little economic sense at current pricing. While all of this gives the world, especially the US, some short term relief, the fact is that world oil production has probably peaked and that any future upturn in demand will cause a huge price uptrend to re-establish itself.

The following is from the US government’s Energy Information Agency website. For addition energy information (and a lot of it) go to EIA.

=====================================
Overview. The increasing likelihood of a prolonged global economic downturn continues to dominate market perceptions, putting downward pressure on oil prices. World real gross domestic product (GDP) growth is projected to slow from about 4 percent in 2006 and 2007 to about 2.7 percent this year and 0.5 percent in 2009. Last month’s Outlook assumed world GDP would increase by 1.8 percent in 2009. The condition of the global economy and production decisions by members of the Organization of Petroleum Exporting Countries (OPEC) are expected to remain the crucial factors driving world oil prices.

The decline in U.S. oil consumption in the first half of 2008, reflecting slower economic growth and the impact of high prices, was the largest half-year consumption decline in volume terms in the last 26 years, when, in the first half of 1982, oil consumption dropped by nearly 800,000 bbl/d. This sudden drop in consumption reflects the slow down in the US economy, a slowdown that has not been as evident in consumption outside of the Organization for Economic Cooperation and Development. Countries outside the OECD actually had an increase in consumption which more than offset the US slowdown.

While downward pressures on crude oil and natural gas prices are expected near term the balance between supply and demand is seen as still being tight. OECD commercial inventories are expected to be about 30 million barrels below the 5-year average at the end of the third quarter of 2008 which indicates that current price weakness will last long unless there is a substantial reduction in demand.

The following information is from the US government’s Energy Information Agency.

The Russian economy made amazing advances while Valdimar Putin was president and with Putin still very much in the picture as prime minister continues to perform exceedingly well under the new president Dmitry Medevedev . Russian’s blazing performance was due in part to reforms put into place by Putin, like the 13% flat tax, and partially due to Russian’s further development of energy resources in an age of rapidly increasing prices for energy.

Russia holds the world’s largest natural gas reserves, the second largest coal reserves, and the eighth largest oil reserves. Russia is also the world’s largest exporter of natural gas, the second largest oil exporter and the third largest energy consumer. Russia’s future over at least the next few years looks to be bright as the world enters a phase of energy resource scarcity before alternative energy resources will have a chance to make much of an impact.

The following information is from the US Energy Information Administration (EIA) website.

=================================

In 2007, Russia’s real gross domestic product (GDP) grew by approximately 8.1 percent, surpassing average growth rates in all other G8 countries, and marking the country’s seventh consecutive year of economic expansion. Russia’s economic growth over the past seven years has been driven primarily by energy exports, given the increase in Russian oil production and relatively high world oil prices during the period. Internally, Russia gets over half of its domestic energy needs from natural gas, up from around 49 percent in 1992. Since then, the share of energy use from coal and nuclear has stayed constant, while energy use from oil has decreased from 27 percent to around 19 percent.