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EnCana, a mid-sized player in the North American oil&gas business (with about 700,000 boe/d of production, mostly gas in Canada, it is about one seventh of the size of ExxonMobil; same thing with its approx. $50 billion market cap) has posted late last week some financial guidance for next year, i.e. their estimate of future income and results.

Boy, it makes for depressing reading.

First, the good news:

  • cash flow per share is expected to increase by a cool 16%
  • dividends will be doubled in 2007
  • number of wells is increasing by 17%
  • production from the oil sands is set to increase by 44% in 2007.

Now the actual news:

  • overall production is declining by 1% (would be stable without a sale of 50% of an oil sand project)
  • investment is declining, from $6.3bn to $5.9bn (would be increasing slightly to $6.6bn without same sale)
  • share buy backs will cancel about 5% of shares.

This with price hypotheses of oil in the $50-70/bbl range.

Which means that:

  • despite a fast growing number of wells, production is stagnant. They are running ever faster to stay in the same place. Not a good sign;

  • despite record oil prices, and despite increasing costs (or because of them), this oil company is seriously limiting its investments, and its production is shrinking. Those that argue that higher oil prices would lead to higher investment as producers take advantage of improved market conditions to increase production need to explain this one. Why aren't they investing more to take advantage of excellent market circumstances? Not a good sign either.

  • of course, this does not prevent them from improving their returns on equity and blessing their shareholders with increasing returns. Existing production does generate cash, it's just that this money is used to buy back shares and pay dividends, i.e. give back money to shareholders. Which means that the company does not think that it can put that money to better use than investors. Again, this means no decent investment prospects;

Or to sum it up:

Big Oil is shrinking.

It is not finding places where to invest to increase production despite record prices, and is in the process of decommissioning itself slowly, returning its capital to investors.

Peak oil is already in the past for these guys.

Originally posted to Jerome a Paris on Mon Dec 18, 2006 at 12:48 PM PST.

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Comment Preferences

  •  Tip Jar - December 18 (130+ / 0-)
    Recommended by:
    Alumbrados, vicki, Go Vegetarian, SteveLCo, Rayne, RonV, markymarx, RunawayRose, sphealey, Shockwave, Arthurkc, billlaurelMD, byoungbl, Jim W, ericy, eeff, gecko, RFK Lives, object16, Norwegian Chef, mataliandy, givmeliberty, Plan9, jpiterak, Hatu, bronte17, groggy, SecondComing, grassroot, poemless, rabel, corncam, splashy, wader, emmasnacker, oldjohnbrown, mrkvica, Farugia, cometman, HeyMikey, johnnygunn, The Termite, LeftyLimblog, lcrp, Dood Abides, side pocket, Man Eegee, jcrit, DarkSyde, Irish Patti, bibble, Marc in KS, Jersey Joe, sxwarren, Recovering Southern Baptist, Doolittle Sothere, bluewolverine, ignorant bystander, irate, kamarvt, ChemBob, catleigh, mojo workin, HugoDog, dunderhead, GreyHawk, eaglecries, lotlizard, QuickSilver, Yamara, The Raven, LithiumCola, Nineteen Kilo, sylvien, viscerality, thiroy, melvin, Drocket, Asinus Asinum Fricat, Prof Dave, redstar, Major Danby, trashablanca, atdnext, SFJen, tobendaro, cookseytalbott, cnyc, victoria2dc, Hear Our Voices, Jordan LFW, luckydog, A Siegel, warringtonclan, CF Perez, ER Doc, Dinclusin, rage, doingbusinessas, Clive all hat no horse Rodeo, sarayakat, Dreaming of Better Days, scoff0165, nyc in exile, bstotts, Autarkh, The House, seabos84, One Pissed Off Liberal, dotsright, Cronesense, offgrid, fairleft, ebilm, Catrina, Mary Mike, deepeco, DWG, RosyFinch, newhorizon, manwithnoname, Carib and Ting, keikekaze, willb48, Hens Teeth, BustaVessel, MKinTN, skymutt, Louisiana Fiddle Gal, irrational number
    •  Who will Bush-Cheney invade now? (13+ / 0-)

      When domestic oil sources dry up, Bush-Cheney look to invade.  Last little "adventure" in Iraq didn't go so well, hey, maybe it's time to try a whole different continent, how about Nigeria?  The natives just "love" the big oil companies there!

      OKERENKOKO, Nigeria //  This riverside village along remote creeks of the Niger Delta is a base for a violent insurgency that has forced a 20 percent to 25 percent cut in Nigeria's oil output - the fifth-biggest source of petroleum imports for the United States - and helped fuel this year's higher gas prices.

      The winding path through the creeks is so dangerous that scores of oil workers have been evacuated to guarded compounds in Warri, a rundown city 90 minutes away by speedboat. Those brave or naive enough to travel the creeks risk being detained by the Nigerian navy and strongly urged to turn back.

      The village itself is near the spot where militants held nine foreign oil workers hostage this year, a brazen move praised by villagers like Mosco Johnny, a scowling 37-year-old. "I don't like Shell," he said. "They cause so much problems. We have youths who don't have work to do. Sometimes they get up and say, 'Look at these people taking oil; let's go and meet them.' "

      •  Stepped-up presence in Africa (13+ / 0-)

        We've actually stepped up our military presence in Africa over the past few years, providing military training to dictatorships like Chad which just so happen to have oil.  Look up the Pan Sahel Initiative, and Trans-Sahahara Counter-Terrorism Initiative if you want details.

        There isn't a lot of money involved by US military standards, but by the standards of military expenditures in Africa, it is huge.

      •  Car bombings of oilco compounds (today)... (8+ / 0-)


        PORT HARCOURT, Nigeria - Militants seeking a greater share of oil revenues for their impoverished region detonated two car bombs nearly simultaneously Monday in southern Nigeria, the latest in a series of attacks that have cut crude production in Africa's oil giant by one quarter.

        One blast, at a compound belonging to Italian oil firm Agip, blew out windows of a medical facility and cracked compound walls. Agip said the car bomb was parked outside the compound wall and that no injuries were reported.

        Residents of a Shell compound hit by the other blast said several cars caught fire. Both explosions occurred in high-security residential areas around lunchtime, when most employees would be at work. Witnesses reported chaos at the scene.

        The Movement for the Emancipation of the Niger Delta claimed responsibility in an e-mail to reporters, saying the bombs contained a mix of commercial and military-grade explosives and were triggered by mobile phone. A third attack was aborted because many civilians were nearby, it said.

        "That bombing was aborted at the very last minute to prevent loss of innocent lives," the group said. "We haven't descended that far into the abyss."

        MEND's attacks have already cut one quarter of the normal 2.5 million barrels pumped per day in Africa's largest producer of crude. Much of the Niger Delta oil-pumping infrastructure is away from highly populated areas like Port Harcourt — making it unlikely Monday's blast would result in large production cuts. Neither Shell nor Agip officials commented on any production cuts.

        •  They Need Better Weapons (0+ / 0-)

          Unfortunately, the ONLY way the people of Nigeria will ever see any of the obscene oil profits being pillaged from their nation is through the use of force.  That is the system of the world, a truth which cannot be denied.

          I applaud MEND for publicly stating their desire to spare innocent lives.  It does nothing but help them get more support in their cause.

          •  Unfortunately unless we get on a fast track to (0+ / 0-)

            renewable energy we are in for perpetual wars over oil resources. It has already been the cause of much of the unrest and fighting in the world.

            It will only get worse as oil supplies get tighter and more expensive.  Even in the smallest of nations the natives are getting tired of having their resources stolen or siphoned off for pennies on the value.

            Our country had better wake up and start a crash program to move us to a renewable energy economy on a rapid pace.

            I dream of the America that can be and not the one that it is.

            by eaglecries on Mon Dec 18, 2006 at 06:51:16 PM PST

            [ Parent ]

  •  Yep, But Today - - (6+ / 0-)

    Every major oil and gas corporation took a beating in the markets.
    It's stunning how short-term most investors - even institutional investors - seem to be.
    But it seems that - this week - everything appears rosy in Oil City.

    •  yea (2+ / 0-)
      Recommended by:
      irate, trashablanca

      Time of year--profits to be taken.

      What liberals fail to recognize is that regime change in Iraq is not some distraction from the war on Al Qaeda. That is a bogus argument. -- Thomas Friedman

      by markymarx on Mon Dec 18, 2006 at 12:58:53 PM PST

      [ Parent ]

      •  that and many just don't believe (12+ / 0-)

        in this level of pessimism on oil price.  Jerome and Bonddad (much as I have agreed with them and positioned myself accordingly) are mega bears.  In Bonddad's case, the negative assessment keeps being wrong month in, month out.  Maybe this is the top if pessimists like me are beginning to crumble.  The OilDrum crew are equally pessimistic bordering on doomsday.  Also hard to swallow.

        On oil, there are estimates from reasonably intelligent folks that say we'll have a healthy increase in supply next year and OPEC will have to cut production.  Historically that meant a price war.  I doubt that this time, but it still could mean price moderation rather than bang, zoom to the moon.  This is really going to be a slow emergency emerging over a decade or so.  Investors these days rarely invest based on 10 yrs out.

        Plus if we actually do have a worldwide recession, energy use would drop off again hitting prices.

        •  so (0+ / 0-)

          Will prices be high enough to justify really expensive, speculative projects?  Or not.  

          What liberals fail to recognize is that regime change in Iraq is not some distraction from the war on Al Qaeda. That is a bogus argument. -- Thomas Friedman

          by markymarx on Mon Dec 18, 2006 at 01:19:16 PM PST

          [ Parent ]

          •  they already are (7+ / 0-)

            Look at the Sakhalin mess Shell is in.  It's ballooned up to $20 billion with terrible political risk.

            Do keep in mind that it's only been 8 years since oil was down around $10 (in today's dollars) during the last OPEC battle.  the oilcos are being much more tentative about raising capital spending as they've been burned repeatedly since 1980.

            I'm a believer in the idea that we can wind farm the hell out of this globe and drive personal transport to electric vehicles.  I do only 5-6000 miles per year and never more than 50 round trip. An electric car would be ideal.  And we've enough wind/solar on my property that for $50K I can make my power and fuel bills go away.  It's still just a lot cheaper to wait though so I'm foot dragging.

            •  Sakhalin project (0+ / 0-)

              was inked in the early 90s, so it is not really a good example.  Also, although it has turned out to be expensive and politically risky, it is not speculative in the sense that there is a lot of proven oil and gas there.  

              Most Profound Man in Iraq: farmer in a remote area who, when asked by Marines if he had seen any foreign fighters in the area, replied "Yes, you."

              by johnny rotten on Mon Dec 18, 2006 at 01:53:31 PM PST

              [ Parent ]

              •  risk is risk (3+ / 0-)

                political risk is just as painful to the bottom line as a dry hole.

                And as you point out, these projects take decades to put together.  This current price spike is just 4 years old.  The pipeline for other big projects is just beginning to fill.

                The oilcos are a bit gunshy.  The decision makers are my generation now.  They cut their teeth in the 80's collapse.  While there may not be a collapse this time, the institutional memory remembers the pain of laying off half the staff and losing their asses on the mega projects of 1978-85

                •  Of course (2+ / 0-)
                  Recommended by:
                  wader, RosyFinch

                  Political risk is still risk.  But I don't think that the Sakhalin project was "speculative" in the sense that the original question was framed.  It's no more speculative than oil and gas deals in places like Nigeria, Venezuela, Ecuador, Algeria, etc. where you have unstable governments or goverments that are going to try to grab back part of the profits.  

                  Despite the cost overruns at Sakhalin, the project would have been respectably profitable for Shell if the Russian government hadn't manufactured the dispute and forced Shell to cough up control.

                  Most Profound Man in Iraq: farmer in a remote area who, when asked by Marines if he had seen any foreign fighters in the area, replied "Yes, you."

                  by johnny rotten on Mon Dec 18, 2006 at 02:11:31 PM PST

                  [ Parent ]

                  •  you'd be wrong in my opinion (0+ / 0-)

                    Russia was a mess in the early 90's when this project was proposed. There was always huge political risk same as in Venz/Nigeria/others.

                    There is very little rank wildcatting on mega projects.  The existance of the oil is pretty well assured before the big $ get spent.  The risks are price and political.

            •  well, (0+ / 0-)

              that takes care of everything except fertilizer production, I guess.

              Every good Christian should line up and kick Jerry Falwell's ass. - Barry Goldwater, 1981

              by Doug in SF on Mon Dec 18, 2006 at 04:24:10 PM PST

              [ Parent ]

              •  you didn't read those (0+ / 0-)

                diaries about pig shit production.  It's going through the roof.

                •  Oh, so that's what they were about.... (0+ / 0-)

                  ...I thought it was about all the factory pig farms that are wreaking havoc with the environment (which I already had heard about, so didn't read the diary). But now I'll go and do that. Thanks.

                  Every good Christian should line up and kick Jerry Falwell's ass. - Barry Goldwater, 1981

                  by Doug in SF on Tue Dec 19, 2006 at 07:30:38 PM PST

                  [ Parent ]

                  •  nothing preventing the farmers (0+ / 0-)

                    from doing the right thing and treating the wastes for re-use as fertilizer.......

                    Not to mention if we stop trying to export so much cereal grains and stop using most of our own consupmtion to feed cows/pigs in the first place, we can feed ourselves with far less production allowing crop rotation to replace dumping so much chemical fertilzers on the ground instead.

            •  Well ... (0+ / 0-)

              Since, I occasionally go farther, I desire a plug-in, serial hybrid, fly-by-wire, light-weight vehicle.  Would end up, perhaps, at 500-1000 miles per each use of liquid fuel.  Cool -- maybe 8 gallons of liquid fuel required per year. And, well, that could come from industrial hemp (after it is legalized, of course) growing along my fence line.

              The Energy Conversation: Learn - Connect - Share - Participate: For a new dialogue on Energy issues.

              by A Siegel on Mon Dec 18, 2006 at 05:49:41 PM PST

              [ Parent ]

      •  Very true, if you exercised options (2+ / 0-)
        Recommended by:
        mataliandy, A Siegel

        and do not sell now, you will be taxed on this year's gains even if the stock plummeted next year before you sell. In other words in theory if your holdings value increased $200,000 this year and you did not sell and next year the value drops to $10,000, you will still have to pay tax on $200,000 even though you really only made $10,000. A lot of people got burned this way when the dot com bubble burst.

        "I count him braver who overcomes his desires than him who conquers his enemies; for the hardest victory is over self." --Aristotle

        by java4every1 on Mon Dec 18, 2006 at 05:33:13 PM PST

        [ Parent ]

  •  Now if we can finally get... (10+ / 0-)

    our own government to admit this, we may be able to get out of this fossil fuel mess before it is too late.

    However, since it has been in the 40-60 degree range here in Maine for most of this month and the last, with hardly a snowflake in sight, I'm not sure it isn't already too late...

    The meek shall inherit nothing. -F.Zappa

    by cometman on Mon Dec 18, 2006 at 12:51:10 PM PST

    •  It hit 78 degrees (9+ / 0-)

      here in Virginia, today.  We have had 4 cold nights.  The rest of November and December have been like late Spring.

      •  With these mild temperatures in NY (1+ / 0-)
        Recommended by:
        A Siegel

        I may be able to finish my deck in the Winter, rather than wait for Spring.

        So, please stay where you are. Don't move and don't panic. Don't take off your shoes! Jobs is on the way.

        by wader on Mon Dec 18, 2006 at 05:36:21 PM PST

        [ Parent ]

        •  more tulips sprouting in albany, ny today (1+ / 0-)
          Recommended by:

          And that was on the north side of the street that doesn't get much sun.  Perhaps they'll really be flourishing by christmas.   Not sure what is going to happen but i have a feeling "tulip fest" next spring is going to have a dark edge to it.  

          I'm expecting them to jack up my natural gas prices since we are using much less of it.   I am a firm believer in price rigging in the energy markets despite what some here say.  Tomorrow i should get the lastest info on what they charge me the past month.  if supply and demand works the prices should be much lower.  We'll see.   Last year the prices were lowest in the coldest months when we used the most.  

          •  the numbers are in (3+ / 0-)
            Recommended by:
            wader, jcrit, verb

            So last year this time period (month ending 12/15) of my heating gas bill was the third highest usage period.  

            Last year:  875 therms

            This year:  441 therms

            Overall prices were higher last year because they used Katrina to artificially inflate prices so I did pay more last year per unit for the same time period while using more energy.  

            But what happened to my per unit cost this month compared to last month?  Anyone want to guess?

            it went up ten cents a therm.  Anyone want to tell me how this is an efficient market?   If i used almost half what i used last year for the month everyone in the north east had a similar decrease.   As a market we bought half of what we normally would.  And the prices went up.  Give me a fucking break.

            this is not an efficient market.  I pay what they charge.  I only know what they are charging after the fact.   There is only one supplier in the market.  If it isn't rigged, the people running it are the most honest people in the world.  

  •  Again ... (7+ / 0-)

    How little does American society recognize this?  Or, even world society?

    As per our Energize America work, this is a delicate needle to thread:

    • Coping with peak oil amid demands for energy
    • Reducing (drastically) GHG emissions

    Not dealing with first in a sound way makes the second far harder to achieve.

    The Energy Conversation: Learn - Connect - Share - Participate: For a new dialogue on Energy issues.

    by A Siegel on Mon Dec 18, 2006 at 12:54:16 PM PST

  •  Not Good (0+ / 0-)

    Unless we continue to see major break troughs in alternative fuels, the United States would do well to open more of it's own natural oil wells to drilling.

    Can anyone argue that dependence on Mideastern Oil isn't a raging national security threat?

    •  Is that you Richard Pombo? (5+ / 0-)

      "Our sweat and our blood have fallen on this land to make other men rich." Cesar Estrada Chavez

      by bic momma on Mon Dec 18, 2006 at 01:09:16 PM PST

      [ Parent ]

    •  Why on earth would you drill more (14+ / 0-)

      It will give you a few months or, at best, years, of consumption, just pushing the problem back a tiny little bit at great environmental cost, witohut resolving the underlying problem which is that demand needs to slow down and be reduced.

      Plus don't you think the USA shoud keep its last remaining reserves for when it really needs them, i.e. when imports won't be available at any price?

      •  Because (0+ / 0-)

        Corporations are fickle creatures, there desire is well known.


        There interest is in making money, and there are ways that the U.S. Government can ensure that they place environmental concerns at the very top of their list.

        With the promise of strong congressional oversight, combined with recent technological innovations and the very real threat of stiff fines for any type of environmental hazards I believe the risk justified.

        Especially considering this.

        DOI's Bureau of Land Management (BLM) recently published its Scientific Inventory of Onshore Federal Lands' Oil and Gas Resources and the Extent and Nature of Restrictions or Impediments to Their Development. The report concludes that onshore federal lands are "estimated to contain 187 trillion cubic feet of natural gas and 21 billion barrels of oil, which represents 76 percent of onshore Federal oil and gas resources." That 187 trillion cubic feet of natural gas is enough to supply all of America's households for 39 years, and 21 billion barrels of oil represents over 30 years' worth of current imports from Saudi Arabia.

        I suggest you read this article.

        The United States can no longer afford to be at the whim of foreign tyrants, are continuing dependence on foreign oil forces us to constantly be forced to meddle in the affairs of the middle east to maintain our energy security.

        We must break the oil addiction, that is no longer a
        wistful dream but a known fact.

        •  We must break the oil addiction... (3+ / 0-)
          Recommended by:
          wader, bic momma, Hens Teeth

 drilling more oil wells?

          Say hello to my little subpoena!

          by The Termite on Mon Dec 18, 2006 at 02:04:57 PM PST

          [ Parent ]

        •  I don't follow you (3+ / 0-)
          Recommended by:
          Thom K in LA, wader, bic momma

          We should break the oil addiction by tapping into what we have left? Certainly you jest. How about taxing the hell out of the oil we are getting from over seas so we can develop existing and attainable technologies for ending our addiction once and for all.

          Your argument doesn't make sense to me.  Maybe I am missing something.

          •  Let me rephrase (0+ / 0-)

            I should have pointed out, we can no longer be forced to depend on foreign sources of oil. The Middle East is the most unstable region in the entire world and we depend on that unstable region for a very healthy chunk of our energy.

            Until we reach the point where technology can move us beyond oil, we must look to our own natural resources.

            I know that someone will point out that they believe we contribute to the majority of those problems, and I will not seek to debate that point right now.

            If the United States withdrew all troops from the Middle East, the region would still continue to be unstable.

            A coming conflict between Israel, Syria, Iran is almost inevitable. That means a massive war in that region, even without our meddling.

            Thus we must look to our own ample resources.

            •  Any further warring in the Middle East will not (1+ / 0-)
              Recommended by:

              prevent the USA from receiving oil imports.

              It will simply cost more, which will be the equivalent of an increased use tax.

              South America, Southern Asia, etc, will still supply us, as well.

              And, as Chilipalmer appropriately noted above, a situation which ups the costs of oil-based energy will helpfully motivate USA consumers (and markets) towards a sincere emphasis - and subsequent demand - for improved efficiency and greater investment in alternatives.

              Drilling for a few years worth of oil solves nothing, and makes one wonder if the investment would be wasted for that relatively meager output AND lost opportunity to invest in more progressive, less oil-bound technology and processes.

              So, please stay where you are. Don't move and don't panic. Don't take off your shoes! Jobs is on the way.

              by wader on Mon Dec 18, 2006 at 05:48:15 PM PST

              [ Parent ]

            •  Well ... we are at that point ... (2+ / 0-)
              Recommended by:
              Chilipalmer, bic momma

              The technologies exist to "move us beyond oil" or at least get a long way there ... Check out Winning the Oil Endgame for many of those paths.

              And, your approach / recommendations seem to ignore the implications of energy policy for environmental damage, especially global warming.

              The Energy Conversation: Learn - Connect - Share - Participate: For a new dialogue on Energy issues.

              by A Siegel on Mon Dec 18, 2006 at 05:55:05 PM PST

              [ Parent ]

          •  Break the oil addiction (0+ / 0-)

            by using less.  A lot less.

            Conservation is cheaper in the long run than developing new extraction techniques.

            The trouble is that conservation is something that everybody has to do.  The way this problem is being addressed now is that somebody else has to invest money, or work harder, or come up with a solution, so that Joe Sixpack can continue to drive his Hummer to work.

        •  it's ridiculously small (15+ / 0-)

          That 187 trillion cubic feet of natural gas is enough to supply all of America's households for 39 years, and 21 billion barrels of oil represents over 30 years' worth of current imports from Saudi Arabia.

          That quote just shows how much bad faith is needed to justify that drilling.

          21 billion barrels represent exactly one thousand days of US consumption (21 million barrels per day), i.e. less than 3 years. Noting how many years of Saudi imports they represent is meaningless but allows to make the number look huge.

          Same with gas - only household consumption is used, when most gas is used for power production and industrial use, for a total consumption of about 50bcf/d, which makes your 187 tcf used in ... less than 10 years.

          My argument stands.

          •  Perhaps (0+ / 0-)

            Some links to information supporting your argument would give your opinion more credence.

            •  sigh (6+ / 0-)

              Jerome has established credibility again, and again. Who are you, and how many posts do you have?

              Sponge Bob, Mandrake, Cartoons. That's how your hard-core islamahomocommienazis work.

              by Benito on Mon Dec 18, 2006 at 02:35:43 PM PST

              [ Parent ]

            •  You mean for US consumption? (7+ / 0-)

              That's hardly a big claim I'm making, given these are the most basic numbers you can find, but here you go, courtey of the US government (trustworthy enough for you?)

              Oil consumption: 20.8 mb/d in 2005
              Gas consumption: 22.0 tcf in 2005 (of which residential is less than a fourth at 4.8 tcf)

              •  To your question (1+ / 0-)
                Recommended by:

                Benito I'm merely pointing out that some background information would add more strength to his argument. You really don't need to jump to defend an attack, where there is none.

                Yes these links are helpful, I will take some time to look at them and thank you for taking the time to dig them up.

                •  I did not provide links (9+ / 0-)

                  to these numbers because they are pretty uncontroversial and public and common knowledge for anyone following the industry. I do provide links for more specific claims or statistics.

                  Like Benito said, I do write on energy several times a week on Dailykos, so if I had to back up each individual number I write about, I'd never go anywhere...

                  But do not hesitate to question anything I write, it's the only way to catch errors or mistakes.

                •  Let me jump in as well ... (0+ / 0-)
                  1.  To me, your posts have been borderline here ... I went back and checked them all.  This might be totally unintended. But, as I read down the posts, I too read your post as an attack ...
                  1.  Jerome is a long-term professional in the energy business, a contributing editor at The Oil Drum, and the key person re energy in Daily Kos (along with a few others).
                  1.  Jerome's citations / information are basic energy information about US energy use patterns.  As per Jerome, there is a robust subsection of the DailyKos community that are seriously involved in / knowledgeable about energy issues. If you want to engage, welcome to that community.
                  1.  To reinforce Jerome, I would suggest he was being polite re the utility of these reserves. They might exist, but not 100% of these reserves are recoverable, and a substantial amount are likely not to be recoverable cost effectively.
                  1.  Would it not make MUCH more sense to drive away from oil dependence ... and reserve these reserves for our grandchildren?

                  The Energy Conversation: Learn - Connect - Share - Participate: For a new dialogue on Energy issues.

                  by A Siegel on Mon Dec 18, 2006 at 06:03:19 PM PST

                  [ Parent ]

                •  Check it out (1+ / 0-)
                  Recommended by:
                  bic momma

                  Jerome indicated how wingnut think tanks manipulate numbers to make their ridiculous ideas seem reasonable. They do this with their fucking tax cut welfare for the Uber wealthy too, averaging their rarified incomes in with "middle-cass" ones to achieve averages that allow then to claim taxpayers across the board will save on average just oodles of cash.

                  A lie by any other name. And oh, by the way, we don't get much oil from SA. Our imports mostly come from Mexico and Venezuela. Venezuela isn't letting our Corporate Overlords suck as much porfit out as they would like, they're actually using their oil wealth now to help the 80% of the population that are destitute. This is why you see so much invective hurled at President Chavez. Mexico is running out of oil. Venezuela has plenty but won't let the American Oil Companies have it cheap- he's actually making them pay taxes (gasp!) on it. So, Chavez has got to go- coups and villification all about eveything but the real reason they want him gone. It's money.

                  You shall know the truth, and the truth shall make you mad. -Aldous Huxley

                  by Dave925 on Mon Dec 18, 2006 at 07:51:41 PM PST

                  [ Parent ]

            •  Shit (2+ / 0-)
              Recommended by:
              wader, mojo workin

              Google Hubbert Peak. U.S.production peaked years ago. Geological exploration went offshore and overseas over 30 years ago because we had already found most of the U.S. oil 50 years ago.

              "It's the planet, stupid."

              by FishOutofWater on Mon Dec 18, 2006 at 03:31:12 PM PST

              [ Parent ]

            •  Is the US government credible enough for you? (2+ / 0-)
              Recommended by:
              A Siegel, FishOutofWater


              US Petroleum consumption: 20,802,000 bpd.

              x 1,000 days =

              21 billion barrels.

              Look at the EIA page for natural gas too.

        •  You can't drill your way out (1+ / 0-)
          Recommended by:
          Jerome a Paris

          The oil markets are fundamentally global.  The United States is actually a rather large oil producer.  We import 75% of our oil because we are also, far, far away, the world's largest consumer.

          Jerome can fill in the statistics much better than I, but oil consumption for electricity production and heating has declined substantially -- a large portion of total U.S. oil consumption now goes to transportation.  And we don't use that oil very wisely: SUVs shuttling around between increasingly sprawled-out exurbs and all the rest of the transportation-related excesses.  (Unfortunately, we seem to be exporting this model to Europe, which is ill prepared to handle it.)

          Assume that Iraq costs us $1 trillion (very, very conservative), and if we hadn't gone into Iraq, about $500 billion would have been allocated to other defense concerns.  That leaves $500 billion to fix this problem.  That's enough to fund a massive, fast program of electrified rail construction, both urban and intercity.  It's enough to insulate and add solar cells to every house in America, to build wind farms (not that the latter need subsidies to pay for themselves), and to pay automakers to double the average fuel economy of the U.S. motor vehicle population within a decade.  (This involves removing older vehicles and subsidizing their replacement, something that ought to please the auto industry.)  This would probably cut U.S. oil consumption in half.  (I'm not including research into more drastic improvements to vehicle oil consumption -- for example, adding catenary wires to major highways to power hybrid vehicles.  I'm also ignoring cheap-quick win proposals such as more bicycle paths, something which has a modest energy benefit but which is easy to implement, cheap, fast, and low risk.)

          The oil companies have only one business model: drilling for oil, refining, and selling it.  When they can't find economical ways to drill for more oil, they quit reinvesting profits into oil production and pay them back to their stockholders in various ways.  (And if we're past peak oil, their remaining reserves will appreciate in value, giving them an added incentive to stick with this model.)  This isn't an evil back room conspiracy, but a rational company maximizing its value.  That's why somebody other than the oil industry has to solve this problem.

        •  "Heritage" (1+ / 0-)
          Recommended by:
          Jerome a Paris

          Hahahhaaha. Gee this is funded by the same wingnuts (Scaife, Moon, etc) that ridiculed and ran Jimmy Carter out of town for actually proposing doing something about this crisis nearly 30 years ago. Now they are just noticing this is a security threat?

          I would laugh aloud were it not so tragic. A big part of the reason we are NOT prepared to get off the oil habit now is because of the power the far right has held over this country for decades now. Being enthrall to big oil and "free market solutions" is exactly why we are in this fix.

          Carter was mocked. And he was mocked not because he was wrong, but because his attempt to deal with the problem would have cost the Plutocracy some money and renewables? That's not helpful in funneling our money into their pockets either. We can't have that can we? It's much better to soak the oil for all its worth then when it gets short, we can have our puppet think-tanks make shit up about Security Threats, like it's something new, and then push to drill all over the place so we can suck some more moneyout of your pockets and the life out of several fragile eco-systems. Boy, you can always count on these wingnut think tanks bootlicking and toadying up to their beneactors, thinking of countless ideologically approved ways to deal with problems except for one, the one way that will actually work.

          Remember, St Ronnie made a big show of ripping the solar panels off the White House and now these shitheads, the same shitheads who cheered St Ronnie on as he did his oil masters' bidding are warning us of something we all knew 30 years ago? Right. Great thinking.

          Now I have to go take a shower after clicking your filthy fascist link, Mr 114164.

          You shall know the truth, and the truth shall make you mad. -Aldous Huxley

          by Dave925 on Mon Dec 18, 2006 at 07:41:19 PM PST

          [ Parent ]

      •  I like the Ben Masel solution... (4+ / 0-)
        Recommended by:
        wader, jcrit, KiaRioGrl79, Eyes Wide Open
        Turn the plains of Montana, Kansas, and Texas - those states that are in drought conditions right now - into hemp fields.  Take the resulting biomass and turn that into ethanol using pyrolysis.  The high yield of hemp produces oxygen, which helps slow down global warming.  The ethanol production helps the states that can't grow anything else.  And the fuel, when burned, doesn't produce free-floating carbons.

        Lots better than drilling for more oil, which is a losing proposition anyway.  Save that oil for plastics.

        "I believe in compulsory cannibalism. If people were forced to eat what they kill, there would be no more wars." - Abbie Hoffman

        by Jensequitur on Mon Dec 18, 2006 at 01:57:06 PM PST

        [ Parent ]

        •  Hemp, the Miracle Herb!!!! (1+ / 0-)
          Recommended by:

          I think I am as liberal as the next guy and think pot should be legalized, but I have to laugh at the whole movement where hemp will solve every social, environmental, economic and medical ill in the world.

          It feels like one of those pitches for a miracle cleaner from Amway or something.  Hempsters should stick to four or five things you can do with hemp (that doesn't involve getting baked,) and advocate like hell for it.

          I certainly don't mean to be rude and I like the hemp products I have tried, but I just crack up at the whole "elixir" element of arguments in favor of hemp.  

          •  LA Times cites study: Pot #1 US cash crop (4+ / 0-)
            Recommended by:
            Jerome a Paris, wader, jcrit, KiaRioGrl79

            LA Times today

            A report released today by a marijuana public policy analyst contends that the market value of pot produced in the U.S. exceeds $35 billion — far more than the crop value of such heartland staples as corn, soybeans and hay, which are the top three legal cash crops.

            (Also picked up at BoingBoing.)

            A cure for all ills? Hardly. But these stats are based on government findings.

            I think it's finally getting into the range of being as absurd as Prohibition...

            "To such thinking you have only to say 'the land you loved is doomed' to excuse any treachery, indeed to glorify it." -Tolkien, On Fairy-Stories, 1938.

            by Yamara on Mon Dec 18, 2006 at 04:04:21 PM PST

            [ Parent ]

          •  You ain't gettin' high on the hemp that (5+ / 0-)
            Recommended by:
            Jerome a Paris, wader, jcrit, bic momma, verb

            would grown for ethanol. It has nothing to do with pot. My personal preference would be to see a nation wide assault on exotic invasive plants and use them for ethanol. Start with Kudzu and Garlic Mustard.

            "I count him braver who overcomes his desires than him who conquers his enemies; for the hardest victory is over self." --Aristotle

            by java4every1 on Mon Dec 18, 2006 at 05:48:06 PM PST

            [ Parent ]

          •  Hemp is for industrial use (3+ / 0-)
            Recommended by:
            Jerome a Paris, jcrit, bic momma

            not inhalation/ingestion.

            It is actually a very useful crop - not a miracle cure for our ills, but Jensequitor mentioned the top areas of contribution, I feel.

            Which was about four major positives to investigate relative to growing hemp crops, actually :) .

            So, I'll add a fifth: it's also been considered a more environmentally-friendly alternative to cotton.

            So, please stay where you are. Don't move and don't panic. Don't take off your shoes! Jobs is on the way.

            by wader on Mon Dec 18, 2006 at 05:53:19 PM PST

            [ Parent ]

    •  When the pigs come home to roost.... (3+ / 0-)
      Recommended by:
      Dave925, mattes, verb

      Exxon CEO Lee R Raymond


      "One of the difficult things for Egocentric man to face is that he is a minor character in every biography but his own..." - Trevanian

      by SteveK on Mon Dec 18, 2006 at 04:01:07 PM PST

      [ Parent ]

  •  and yet wasn't the high price of oil at about $70 (1+ / 0-)
    Recommended by:

    a barrell believed to postpone PeakOil almost indefinetely because it made the exploitation of previously uneconomic reserves, such as oilsands,worthwhile?

    we're shocked by a naked nipple, but not by naked aggression

    by Lepanto on Mon Dec 18, 2006 at 12:56:42 PM PST

  •  Not a great example for your thesis (3+ / 0-)

    First, since they are mostly gas, they've not seen a huge price spike but rather experienced a collapse after Katrina.  Nat gas dropped from $15 ($90 oil equivalent) to $5 ($30 equivalent) this summer before rising back up heading into winter.  

    These are the same prices they were getting a couple of years ago so they haven't experienced any big price spike.
    Moreover, since this gas is Canadian, it trades at a discount to Henry Hub I believe.

    I think your conclusion is correct, but this example is weak.

    •  short term collapse (4+ / 0-)
      Recommended by:
      Rayne, HeyMikey, atdnext, ER Doc

      Prices have nicely increased over the past 4 years. $5 is still a lot higher than the $2-3 which were standard under 2002.

      And they could have invested more in oil, if they had any opportunity to do so. The whole point is there: they have very few opportunities.

      The fact that their investment budget is stagnating, and that their production ditto, depsite increasing number of wells, are relevant bits of information, I think.

      •  $6 billion (1+ / 0-)
        Recommended by:
        Jerome a Paris

        is hardly a collapse in investment. And you know how gas is.  the declines are sharp so you are always drilling like mad just to hold ground.

        $2-3 Henry hub isn't what I remember either.  you have to go back to the 90's for that sort of wellhead level see:

        HH was more like $3.5-4 in 2002 so we're higher but not to the same extent as oil. (roughly doubling vs. tripling+)

        Overall I agree with you.  Big oil is not finding enough (or are just avoiding)  investments.  But that's not surprising in the US/Canada.  We've been over the hump on Hubbert's Peak for 30 years.

    •  No, Jerome has it about right. (3+ / 0-)

      The first companies to get squeezed in a dying market are the smaller ones.  Exxon just has a bigger pie to eat before it gets to the crumbs.

      And yes, we are running to stand still.  I don't know about Jerome, but I work in oilfield services.  We can't drill fast enough.  My job is to secure suppliers for machineed parts.  I am shopping in New England because Houston is maxed out.  Machine shops can't buy tools fast enough because Mazak can't build them fast enough.  We can't buy enough nickel alloy because the mines can't dig it fast enough because CAT can't make mine trucks fast enough.

      If I were in venture capital, I'd be thinking about what Houston is going to do with a pile of $1.5M (ea)german machine tools in 10 years.

      "Out here in the middle, where the center's on the right, and the ghost of William Jennings Bryan preaches every night..."

      by Nineteen Kilo on Mon Dec 18, 2006 at 01:29:37 PM PST

      [ Parent ]

      •  Another symptom of an economy out of whack? (3+ / 0-)
        Recommended by:
        Odysseus, jcrit, bluewolverine

        I've been hearing quite a bit recently about a machine tool shortage. If I have put the bits and pieces of info together correctly, the story goes something like this:

        • US manufacturing moved offshore
        • Foreigh competitors in machine tool market began to appear
        • US machine tool makers lost market and market share
        • A lot of US machine tool makers left the industry
        • Many categories of machine tools cannot be bought from US maker
        • Machine tools have become steadily more complex
        • Despite resurgent demand, its hard for US makers to get back in once they left due to technical entry cost and higher wage rates
        • US manufacturers are increasingly at the mercy of foreign suppliers - just like in oil

        Does this accord with your knowledge. If not, how would  you edit or amend my understanding?

        P.S. I teach university courses on manufacturing, so accurate intel will be passed on to people with a need to know.

        -2.38 -4.87: Maturity - Doing what you know is right even though you were told to do it.

        by grapes on Mon Dec 18, 2006 at 01:51:53 PM PST

        [ Parent ]

        •  oil patch boom and bust (0+ / 0-)

          for 5 years you can't beg borrow or steal a rig, then they are all stacked up rusting away.  Go have a look at drilling rig counts in the EIA data.  It's amazing how they swing.

          •  Oil patch volatility, yes - machine tools? (0+ / 0-)

            I was wondering about the demand and sourcing for machine tools. These are now being pulled not only by the oil industry, but also by a host of other industries (pulp & paper, food processing, auto, etc.)

            I was curious if my intel is right about the large-scale off-shoring of this critical supplier network. When you lose your domestic factory equipment infrastructure, it makes it that much harder to compete, let alone rebuild, manufacturing.

            -2.38 -4.87: Maturity - Doing what you know is right even though you were told to do it.

            by grapes on Mon Dec 18, 2006 at 02:09:59 PM PST

            [ Parent ]

            •  Machine tools went global 30 years ago. (2+ / 0-)
              Recommended by:
              bluewolverine, esquimaux

              If I want to build a factory in the US, I can get the tools from Germany.  What I can't get is venture capital.

              "Out here in the middle, where the center's on the right, and the ghost of William Jennings Bryan preaches every night..."

              by Nineteen Kilo on Mon Dec 18, 2006 at 02:35:06 PM PST

              [ Parent ]

              •  nah (1+ / 0-)
                Recommended by:

                there is so much private capital around it's not funny.  What you don't have is a business plan that those boys wish to fund.

                •  VC (7+ / 0-)

                  If I want to build a factory in the US, I can get the tools from Germany.  What I can't get is venture capital.


                  What you don't have is a business plan that those boys wish to fund.

                  and the reason they won't fund it is he wants to build it here and employ Americans.
                  I'm in silicon valley and have talked to VCs. If it involves hiring in the US, it does NOT get any money. What gets funded are plans that make a few american executives and VCs richer, while the jobs are created in India or China.

                  •  nope (0+ / 0-)

                    there's no jingosim in the mix. Lou Dobbs be damned. It's about profitability only.

                    Why should making a job for a Chinese or Indian person be a bad thing?  

                    the original complaint was he/she can't find the money.  To that I say bollocks.  What he/she can't show is an adequate rate of return.  If there was one, there be piles of money to be had.

                    •  And all we have to do (4+ / 0-)
                      Recommended by:
                      wader, onemadson, Nineteen Kilo, dgone36

                      is lower our wage expectations to the range of $2/day, the rate they like to pay. That's jingoism, its greed, its evil and its got to stop.

                      "If I pay a man enough money to buy my car, he'll buy my car." Henry Ford

                      by johnmorris on Mon Dec 18, 2006 at 05:00:34 PM PST

                      [ Parent ]

                    •  The adequate rate of return (2+ / 0-)
                      Recommended by:
                      wader, Nineteen Kilo

                      Can be had for the price of outsourcing your (otherwise HUGE) labor costs to a 3rd world country.

                      So yeah, let's go ahead and fund that business idea, because it will be profitable in the short run, enriching us few top-level business people, while further impoverishing our nation at a critical time - oh and by the way, if the dollar crashes then our profits won't be worth as much anyway.

                      But, what am I saying? Capitalistic thinking when applied to nations dictates clearly that America has had its shot and is nearing the end of its turn at bat anyway. If the country failed to stand up and compete, why should I care? I'm moving to Europe.

                    •  It's about profitability only. (3+ / 0-)

                      And there is plenty of money to be had if you can guarantee a profit.  

                      Do you know you can dump the chemicals right in the river in India and no one can do a fucking thing?   You won't have to pay for the care for the kids with birth defects.

                      You break unions because unions cut into your profits.  That is a good thing.    

                      Have you seen haliburton's profits lately?  

                      There is money to be had for profitable ideas.  Plenty.  This economy has been very good to the people who understand what it is about, like HiD.  It about profitability only.  You people just aren't willing to play the game.  Listen to your man HiD.  He brings the TRUTH.   When you are willing to get your hands dirty and you start to enjoy a little blood with your money, then you can come to the table and talk.  until then, keep your silly values and go sit at the kiddie table.   Maybe you can start an organic food co-op or something.  

                      it is about profitability only.  Are we clear?

                      •  this is what I object to (0+ / 0-)

                        and the reason they won't fund it is he wants to build it here and employ Americans.

                        there is no overt racism.  It's just simple greed.  The problem is big enough without dragging in this sort of crap.

                        The problem is if building it here doesn't make as much money as funding a satellite radio system, they get the money instead.  

                  •  Also, I want to make mechanical parts. (0+ / 0-)

                    VC's are, like all lower life forms, fascinated by small, shiny objects.  The bread and butter of carving slabs of metal into useful shapes is not glamorous to them.  (Although the best machine shops look and smell a lot like a chip fab.)

                    Unfortunately for the US and the oil industry, the shapes needed are increasingly complex and we are not investing in the tools to make them.  My best new vendor is one that got abandoned by Boeing in the last downturn.  They have some of the best milling centers in the business, but their bank won't lend them the money to buy (US made) lathes to support our product mix.  We are self-financing them.  Think about that next time you get your panties in a bunch about our profits.  If we didn't have a big pile of our own cash to invest, we'd be screwed.  Wall Street hates us.

                    "Out here in the middle, where the center's on the right, and the ghost of William Jennings Bryan preaches every night..."

                    by Nineteen Kilo on Tue Dec 19, 2006 at 08:45:54 AM PST

                    [ Parent ]

                    •  wall street is entirely cannibalistic (0+ / 0-)

                      did you make the quarter???   that's the limit of the attention span.

                      much as the street puppeteers rail against private capital, at least those people have a slightly longer time horizon.  Closely held companies can resist the short term thinking.

              •  We should be talking (0+ / 0-)

                We have capacity up the wazoo here in Michigan, lots of people looking for jobs, seasoned machinists.  I can find a CEO with finance background right now, got one who retired far too early and needs something to do.

                The money may be already be right here, too, but it needs demand before it'll get invested.

                Who else in the thread has demand?

                •  I am painfully aware of this. (0+ / 0-)

                  I used to work in Grand Rapids.  My contacts up there are telling me horror stories.  I have been pushing my boss to let me explore shops up there, but the good ole boy system is deeply entrenched and they, like every other industry, think they are so special that nobody but their own buddies can make their parts.

                  It looks like I may win my argument is a month or 2, so send me some contact information.  We mostly need medium sized lathes with live tooling.  The killer for us is lead time, and we pay handsomely for those who can turn stuff around fast (<4 weeks.)</p>

                  "Out here in the middle, where the center's on the right, and the ghost of William Jennings Bryan preaches every night..."

                  by Nineteen Kilo on Tue Dec 19, 2006 at 08:27:12 AM PST

                  [ Parent ]

                  •  Email me (0+ / 0-)

                    My addy is in my profile.

                    I'm going to do some digging for the right kind of folks.

                    Had a chat with someone I know well who works with Cat, confirmed the demand issue, gave me some other insights.  The challenge I think we're facing is flexible manufacturing; how do we scale up and down to meet need, and train a workforce to be that adaptable?

                    Michigan folks are pretty motivated, though.  You think GR is hungry, you ain't seen nothin' until you've been over here on the Sunrise side from Bay City to Detroit.  

                    •  I refer again to the Europeans. (0+ / 0-)

                      They are the model we should emulate, not China.  That is why their machine tools are so good for US use.  Most of them are designed to make the widest possible variety of products and to change over quickly.  From the orient, only Mazak gets this concept.  But both they and the Germans build and service right here in the US.  Contact info on it's way.

                      "Out here in the middle, where the center's on the right, and the ghost of William Jennings Bryan preaches every night..."

                      by Nineteen Kilo on Tue Dec 19, 2006 at 08:50:18 AM PST

                      [ Parent ]

          •  Not this time. (3+ / 0-)
            Recommended by:
            wader, Benito, bluewolverine

            The bust is driven by the oil industry's hisorical ability to outproduce the demand.  Those days are over.  As long as China and India keep adding cars, we won't be able to produce fast enough.  The next bust won't come until a massive paradigm shift in energy use.

            And I'm not saying that won't happen.  It will happen good and damn fast once the price of oil stays over $100/bbl for a while.  But ShrubCo has delayed the shift for at least 6 years.  If we had spent all the Iraq war treasure on a moon-shot style technology invesment, the paradigm shif would be over by now.

            "Out here in the middle, where the center's on the right, and the ghost of William Jennings Bryan preaches every night..."

            by Nineteen Kilo on Mon Dec 18, 2006 at 02:40:06 PM PST

            [ Parent ]

            •  I agree (1+ / 0-)
              Recommended by:

              longer term you are dead right.  The number of people on the globe getting positioned for the western lifestyle is way above the planet's fossil fuel supply.

              But we can have short term puke pretty easily.  Just had one in nat gas.  If China has a big recession or political instability we could head down pretty fast.

        •  From where I stand, re-entry isn't the problem. (5+ / 0-)

          Most of the old US machine tool manufacturers still exist, albeit under foreign ownership.  In many cases, their ownership is european, and since the Europeans have been forced for over half a century to compete on a high-wage/high-productivity model, the US offerings are very good.  Instead, I see the american base being eroded from two sides:  basic infrastructure and MBA weasel customers.

          On the cusomer side, the quarterly weasel can't be made to see the value in a complex, high-productivity tool.  MBAs see all capex as generic and interchangeable, so in their world, a Mazak Integrex is only better that a crappy chinese engine lathe if it can make more round parts per dollar.  Things like complexity, accuracy, and repeatability are not easily quantified in Wall Street dollars.

          On the basic infrastructure side, it is very difficult to source the quality grey-iron castings needed for machine bases.  Most of the good US foundries are dead, run out of business by a failure to modernize (more quarterly MBA thinking.)  The really good grey iron foundries are in northern Europe, mostly Germany.  You can import a cheap casting from India, but don't X-ray it for flaws.  So that puts the large-format guys like G&L and Ingersoll in a major bind.  There is a killing to be made in CNC retrofit of pre-1950s US castings.

          But now that I look back on my little brain dump, it looks like we concur for the most part.  I would put the timline a little different, though.

          • Mazak got here before Cincinatti Milacron died.
          • Mazak, like Toyota, builds in the US and for the long haul.
          • Flexible manufacturing no longer demands diverse offerings, rather it demands a high diversity of capabilities in one machine.
          • US factories under German ownership offer such tools.
          • The oil patch, with few exceptions, is populated by low-wage conservative robber barrons who don't want to pay for these offerings, nor the skilled labor to run them.

          "Out here in the middle, where the center's on the right, and the ghost of William Jennings Bryan preaches every night..."

          by Nineteen Kilo on Mon Dec 18, 2006 at 02:30:54 PM PST

          [ Parent ]

    •  What is this "Winter" of which you speak? (2+ / 0-)
      Recommended by:
      poemless, bluewolverine

      There were 2 cold weeks all last winter, & one semi-cold week so far this one. Its 50s from Boston to Chicago most days. I saw roses this weekend!

      With industrial demand crushed, and electric replaced as much as possible by coal, gas is more a heating fuel than ever. When there's no need for heating, storage builds up & the price suffers.

      Overall production in North America has only declined a little in the last 5 years, thanks to more new wells than ever. When a more rapid decline set in (either tomorrow or in 5 years - check it out )we'll be into panic time pretty fast.

  •  hmmm (2+ / 0-)
    Recommended by:
    johnny rotten, HiD

    I welcome this news, but can we really draw that sweeping conclusion from this example?  

    What liberals fail to recognize is that regime change in Iraq is not some distraction from the war on Al Qaeda. That is a bogus argument. -- Thomas Friedman

    by markymarx on Mon Dec 18, 2006 at 01:00:51 PM PST

    •  Others are the same (5+ / 0-)
      Recommended by:
      markymarx, groggy, wader, HeyMikey, Granny Doc

      That graph is not on an authorised image site, so I'll just link to it, but it shows oil production for the big 5 oil majors: the BP bump comes from its purchase of 50% of Russia's TNK; otherwise all are stagnant or declining over the period:

      And all are returning massive amounts to shareholders, while only slightly increasing their investment budgets, despite soaring costs.

      The case of EnCana was interesting because it's a midsize player (supposedly more nimble), and the numbers were available.

      •  big oil (2+ / 0-)
        Recommended by:
        Jerome a Paris, wader

        is indeed trying to maximize share price instead of production.  better bonus payments for the top deck.

      •  Oops (0+ / 0-)

        What's this?

        Chevron Corporation has announced a $19.6 billion capital and exploratory spending program for 2007, a 20 percent increase from expected outlays of approximately $16 billion in 2006.

        "Our 2007 capital and exploratory program is a record level of investment by our company," said Chairman and CEO Dave O'Reilly. "About 75 percent of next year's budget is for oil and gas exploration and production projects worldwide," O'Reilly added. "Another 20 percent is dedicated to the company's global refining, marketing and transportation businesses which manufacture and sell gasoline, clean diesel fuel, biofuels and other refined products in the company's marketing areas." O'Reilly said the 2007 budget includes $6.7 billion of total investment in the United States.

        The majority of the planned increase is related to the company's exploration and production operations. The higher investment reflects the impact of several large, multiyear development projects being in their most capital-intensive phases and the effect of higher costs for materials and services currently experienced by the oil and gas industry worldwide. "Our long-range focus on capital discipline in executing our excellent project queue is critical in this environment," O'Reilly said.

        Most Profound Man in Iraq: farmer in a remote area who, when asked by Marines if he had seen any foreign fighters in the area, replied "Yes, you."

        by johnny rotten on Tue Dec 19, 2006 at 04:57:30 PM PST

        [ Parent ]

  •  Maybe they could buy a circus! (0+ / 0-)
       Well, maybe not.

    "Weaseling out of things is important to learn. It's what separates us from the animals ... except the weasel" Homer Simpson

    by irate on Mon Dec 18, 2006 at 01:01:55 PM PST

  •  Investing (0+ / 0-)

    I've been planning on switching to an energy based portfolio after the holidays, and news like this makes me think that investing in oil companies may not be the best way to take advantage of peak oil. Maybe it would be better to go with an ETF like the U.S. Oil Fund (USO)?

  •  Baloney... (6+ / 0-)

    the United States would do well to open more of it's own natural oil wells to drilling.

    Like the Arctic National Wildlife Refuge? The California Coast? Marine Sanctuaries? It is a slippery oil slope you are speaking of. And it SUCKS to pit wildlife and pristine wilderness against national security.

    I sure a s hell hope this is not what you are sayin cuz we just got rid of Richard Pombo...and we certainly do not need any more of his ilk among our ranks.

    "Our sweat and our blood have fallen on this land to make other men rich." Cesar Estrada Chavez

    by bic momma on Mon Dec 18, 2006 at 01:03:12 PM PST

  •  Share buy-backs can often also be seen (2+ / 0-)
    Recommended by:
    wader, oldjohnbrown

    under a corporate governance light, eg, structure managment incentive programs with EPS targets incent just such a behavior. This acts as an offset to shareholder/investor cashflow.

    'Course, if markets were as efficient as their boosters claim, we'd expect to see the money which is theoretically flowing back to more liquid forms of capital (eg cash buybacks of shares) re-allocated to investments in alternative energies.

    Freedom is merely privilege extended unless enjoyed by one and all -9.50, -5.74

    by redstar on Mon Dec 18, 2006 at 01:03:17 PM PST

  •  The problems of one small oil company (3+ / 0-)
    Recommended by:
    johnny rotten, groggy, daisycolorado

    How do the problems of one small oil company mean that "big oil is shrinking"??

    "My paramount object in this struggle is to save the Union. If I could save the Union without freeing any slave I would do it." -- Abe Lincoln

    by munky on Mon Dec 18, 2006 at 01:30:59 PM PST

    •  Plotting a trend from a single point? n/t (0+ / 0-)

      Everything is funny as long as it is happening to somebody else. --Will Rogers

      by groggy on Mon Dec 18, 2006 at 01:37:02 PM PST

      [ Parent ]

    •  It's a $50 billion company (4+ / 0-)

      and as I point out elsewhere in the thread, it is quite representative of the industry.

      If there was any money to be made form investing more in oil production, these guys would do it. Instead, they are returning money to shareholders, just like ExxonMobil, Chevron, Conoco and everybody else is doing.

      Investing in oil production does not pay enough today.

      •  Correction (3+ / 0-)

        Investing in oil production does not pay enough today.

        Investing in oil production does not pay enough tomorrow.

        The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.

        by deathsinger on Mon Dec 18, 2006 at 03:33:03 PM PST

        [ Parent ]

      •  sorry, I jumped the gun on you J à P... (1+ / 0-)
        Recommended by:
        Jerome a Paris

        ...but my details on the Alberta gas depletion rates may be new to you? I can point you to the person who did the analysis, or to some of my own work. Ecologists care about this because the energy sector is trashing the western boreal, and we try understand the broad outlines of it's likely future behaviour.

        It's a lousy world, Sir Magnus. A few happy fish will make it better. (Le Carré)

        by Boreal Ecologist on Mon Dec 18, 2006 at 07:06:29 PM PST

        [ Parent ]

      •  COP Has Invested Big (1+ / 0-)
        Recommended by:
        Jerome a Paris

        I can't speak for the rest, but COP has basically invested all profits back into the business for a long time. That's one reason the stock trades at a discount to its peers: Wall Street says they are investing too much back into the business.

        Here was the blurb from the recent Fortune article recommending COP:

        Unlike many oil industry executives, CEO Jim Mulva isn't sitting on the piles of cash he's built up over the past few years from high energy prices. Instead he's aggressively reshaping the company to spur growth. Mulva will spend $13 billion in 2007 to finance new drilling projects and upgrade investment-starved refineries. He also plans to reduce debt, repurchase stock and increase the dividend; the current yield is 2.1 percent.

        Cheers, RR

    •  EnCana is not 'small'... (1+ / 0-)
      Recommended by:
      Jerome a Paris is mid-sized, and quite a large player in Canada.  Jerome a Paris' point was that although the company is making money, it is not acting as if reinvestment in its own industry is a very good place to put that money. Which is the behaviour one would expect if the executive suite essentially agreed with Jerome. And, as Jerome pointed out, one would expect to see this manifest in small and medium players first, because they have less capital to spend buying their supply.

      In the particular case, that supply is simply not available. I can tell you with a high degree of certainty that the natural reserves in the Western Sedimentary Basin are tapped out. Well-level depletion times have dropped from about 20yr to less than 2yr. They are still drilling like mad, but they're finding peanuts.

      It's a lousy world, Sir Magnus. A few happy fish will make it better. (Le Carré)

      by Boreal Ecologist on Mon Dec 18, 2006 at 07:04:08 PM PST

      [ Parent ]

  •  Need another reason to cut our addiction to oil? (6+ / 0-)

    Well, we're running out of it!

    However, sunshine never runs out...
    Wind never runs out...
    Plants never run out...

    It's time for us to just end our addiction to oil! I'm trying to use less, and at the same time I want to keep the pressure on this new Congress to do something about this impending crisis...

    Let's not sit on our asses any longer...
    For the sake of our nation and our planet, we need renewable energy!

    [Btw, thanks for yet another compelling diary, Jerome! : ) ]

  •  have you noticed? (5+ / 0-)

    Wherever American oil interests lie that there are "terrorists"? That's a pretty funny metric...if you buy it.

    Liberté, égalité, fraternité, ou la mort!

    by VoiceFromTheOuterWorld on Mon Dec 18, 2006 at 01:36:21 PM PST

  •  Can't they just invest in longer drills? (2+ / 0-)
    Recommended by:
    groggy, liberaldregs

    I mean, didn't they say that the entire planet is filled with oil? Or we could drill on Mars where the martian dinosaus died--And they made OIL!

    And Leon's getting LARRRRRGER!

    With great jackassery comes great responsibility...Jackass!

    by The Gryffin on Mon Dec 18, 2006 at 01:38:16 PM PST

  •  That's just another way for the rich... (0+ / 0-)

    Existing production does generate cash, it's just that this money is used to buy back shares and pay dividends, i.e. give back money to shareholders get richer!

    The essence of Liberalism is an attempt to secure a social order not based on irrational dogma. Bertrand Russell

    by Asinus Asinum Fricat on Mon Dec 18, 2006 at 01:52:26 PM PST

    •  capitlalism is what it is (2+ / 0-)
      Recommended by:
      Jerome a Paris, deathsinger

      the owners of the company have first rights to the revenue stream.  If you expect companies to put the public first you are sadly mistaken.

      •  Until we start booting them out.. (1+ / 0-)
        Recommended by:
        Jerome a Paris

        The problem with free trade global capitalism is that it completely nueters our domestic laws. Congress has no power to regulate a foreign entity. Most multinationals now have brutally incestuous vertical integration that would be illegal here. If nonresponsible capitalism starts seriously damaging this society (which it is beginning to do), the society will have a moral imperative to enact limits. I'm not against responsible capitalism but responsible has to be the operative word. If it takes a form that does produce a societal net benefit it will be reworked vigorously.

        "I count him braver who overcomes his desires than him who conquers his enemies; for the hardest victory is over self." --Aristotle

        by java4every1 on Mon Dec 18, 2006 at 06:16:38 PM PST

        [ Parent ]

  •  Peak oil is the (3+ / 0-)
    Recommended by:
    bluewolverine, mojo workin, s marie

    biggest challenge the human race has ever faced. It will take all the intelligence and effort technically and politically to get through it without perpetual or even nuclear war, or mass starvation. It is an even bigger challenge than climate change. The only good news is that the solutions are the same.

    To get a sense of the scale of the challenge read George Monbiot's Heat. All of these projections of increased global energy consumption twenty and thirty years from now are nonsense. We just have to learn, and learn quickly, how to live comfortable lives on half or even a quarter of the energy we presently use especially in North America. There really is no other possibility.

    We have only just begun and none too soon.

    by global citizen on Mon Dec 18, 2006 at 01:54:24 PM PST

    •  No, global warming & CO2 is (0+ / 0-)

      However, they share the same solution - a massive change in energy policy.

      "It's the planet, stupid."

      by FishOutofWater on Mon Dec 18, 2006 at 03:35:08 PM PST

      [ Parent ]

    •  So much of that energy use is in (0+ / 0-)

      transportaion that adjustments there would pretty much assure a comfortable life style. This isn't really a huge technical challenge, it is a huge political challenge. Nothing a big can of Whoop-Ass wouldn't fix. I think they just got a preview.

      "I count him braver who overcomes his desires than him who conquers his enemies; for the hardest victory is over self." --Aristotle

      by java4every1 on Mon Dec 18, 2006 at 06:27:41 PM PST

      [ Parent ]

  •  sometimes a cigar... (2+ / 0-)
    Recommended by:
    Fishgrease, Jerome a Paris

    .. i just that.

    Theory argues that stock buybacks happen when the company cannot find good investments.

    Practice shows stock buybacks happen when company managers believe that their stock is undervalued in the here and now.  ENC CN is trading at a P/E of 10, one of the lowest among competitors.  The buyback is probably an effort to shoot up the price so managers can gain their bonuses.

    The market does not seem to be buying that though - stock is down about 2%

    Can we wait for more consistent data on stockbuybacks before we arrive at the 'decommissioning itself slowly' argumant?

    I have argued before against peak oil and continue to do so.

    •  most of the oil is in "elephants" (0+ / 0-)

      Giant fields. We just aren't finding giant fields anymore because all but a few have been found. Production has to peak because there's only so much oil, and the remaining oil is harder to find and produce.

      You can argue whatever you want. I can't stop you from being wrong.

      "It's the planet, stupid."

      by FishOutofWater on Mon Dec 18, 2006 at 05:10:38 PM PST

      [ Parent ]

    •  On what grounds? (0+ / 0-)

      And how long will you continue arguing? While oil passes $90 and $100 and $110 and $120? $150? When you are forced to stop driving because buying gas would be more expensive than making your house payment?

      What is it about the majority of the world's estimating agencies, in both industry and government, that you don't trust?

      •  M. King Hubbert Predicted the Peak (0+ / 0-)

        for the U.S. successfully 30 years ago. The world peak was a little harder to predict, but Hubbert pretty much got it right too. It's a classic geology paper. Hubbert wasn't some pretty boy academic, by the way. He led a full life and spent plenty of time in the field and travelling. FWIW, the global peak is now.

        "It's the planet, stupid."

        by FishOutofWater on Mon Dec 18, 2006 at 06:07:20 PM PST

        [ Parent ]

        •  The market will ensure that (0+ / 0-)

          peak usage will occur simultaneously. It's not that big a deal. We simply will not use what makes no economic sense. My prediction is that peak usage will follow very closely behind "peak oil".

          "I count him braver who overcomes his desires than him who conquers his enemies; for the hardest victory is over self." --Aristotle

          by java4every1 on Mon Dec 18, 2006 at 06:33:52 PM PST

          [ Parent ]

          •  Normally, I would agree with you (0+ / 0-)

            However, demand for petroleum products is not completely elastic. In fact, it is rather inelastic (in the short run) - when oil was $80 not too long ago, there was much remarking in the MSM on the fact that people were not cutting back their driving at all.

            Of course, adjusted for inflation $80 a barrel wasn't even as high as the prices in the early 70's with the rationing and gas lines and such.

            My feeling is that people won't really start feeling the hurt and being hit with hard decisions until that psychologically-important $100 mark.

            You may be right. I'd like it if you were. But I still feel duty-bound to prepare for the eventuality of you being wrong - that way I will have the luxury of feeling silly if you are right.

  •  Investment (0+ / 0-)

    It is possible that buying oil company stocks may be a good idea. Here is my thesis:

    The cost of oil is going to continue to rise. This means that the profit on existing reserves will increase while the expense of obtaining the oil won't.

    The cost of oil will be determined by the cost of supplying the least efficient source to meet demand. They will be making a profit at a marginal rate, but all the more efficient suppliers will be making a much higher profit.

    So the oil companies will be able to continue high payouts even as reserves decline. BP is selling at a P/E of about 10, Exxon is 11.5. These are low compared to other sectors. I interpret this to mean growth potential is seen as limited, but I think Wall Street misunderstands the market dynamics.

  •  jerome (1+ / 0-)
    Recommended by:

    Have you seen this?  Is it true?

    •  Heard this on NPR this morning (0+ / 0-)

      They're p*ssed off at us, been threatening for some time to move to Euros.

      Moved a chunk of my investments in to Euro-based holdings more than a year ago because this was coming.

      Ultimately, until we get shet of petroleum, everything is really denominated in oil; the currency is a purely political facade.

    •  Saw this on the (0+ / 0-)

      BBC this morning. It has been in the works for some time. According to the news story, "Most international banks have stopped dollar transactions with Iran and some firms have ceased trading with Iran altogether in anticipation of possible future sanctions."
      And,""It is something they have been saying they are going to do for quite a long time now, so I wouldn't expect any market reaction," said Ian Stannard, an economist with BNP Paribas."

      The great tragedy of Science, the slaying of a beautiful hypothesis by an ugly fact. T. H. Huxley

      by realalaskan on Mon Dec 18, 2006 at 05:29:39 PM PST

      [ Parent ]

    •  Sounds true (0+ / 0-)

      As I pointed in my recent diary on globalisation, Iran's dollar holding have been decreasing recently, despite record volumes of oil sales - in dollars: which means that they are selling (or spending) all their new dollars, and more.

  •  Never fear, Algae Biofuel is hear! (1+ / 0-)
    Recommended by:

    Anyone can grow it 10 times faster than any other crop. The technology is here now, the parts are all at Lowes hardware store.

    Eventually, many of us will have small photobioreactors on our roof or south side of our home to produce all the bio fuel we need to run our E85 cars.

    Any extra will be used to cook our food and heat our homes, or sold to the local biofuel station.

    Because it will become so easy and inexpensive to produce our own fuel, most gas stations, oil companies and fossil fuel producers will go out of business within the next 10 years.

  •  share buybacks are good (1+ / 0-)
    Recommended by:
    johnny rotten

    When a company buys back shares, that is normally a positive signal, meaning that management views the share price as low relative to the company's prospects.  Managers see the price going higher as the outside world eventually learns what they as insiders already know.  When a company sees its own shares as a worthwhile investment, investors normally follow suit because management--with the benefit of inside information--is acting in its own self-interest and in the interest of shareholders.

    Share buybacks do not imply that business is bad.  They imply the opposite.

    When managers dump shares from their personal holdings, on the other hand, that is a negative sign unless it is done for the sake of diversification.

  •  Peak oil or peak NG? (1+ / 0-)
    Recommended by:
    johnny rotten

    ~~~ Peak oil is already in the past for these guys. ~~~

    They're not the same thing. Peaks in oil and natural gas will come decades apart, perhaps half a century. Considering the huge NG reserves in Iran and Russia, maybe 70 years.

    As you note, EnCana is mostly natural gas.

    And no decent investment prospects?

    Not enough to justify holding back dividends to shareholders. That doesn't equal a complete lack of investment opportunities or a complete lack of exploration.... just an excess of profits and cash on hand.

    In fact, if I'm an investor, I'm gonna say, "If you can't throw some money my way now, then when?"

    I agree that peak oil is coming soon or has already passed. I just don't think you picked a very good example.

    It rubs the loofah on its skin or else it gets the falafel again.

    by Fishgrease on Mon Dec 18, 2006 at 06:57:08 PM PST

  •  No new refinery capacity is being built (0+ / 0-)

    or at least that's what I've been told.

    If true, this would seem to imply that the producers know we're at or near peak.

    News is what they don't want you to know. Everything else is publicity. --Bill Moyers

    by RobLewis on Mon Dec 18, 2006 at 09:27:37 PM PST

  •  Is Peak Oil a right wing Hoax? (0+ / 0-)

    I'm currently engaged in a running argument with a coworker (we work in the energy industry).  He argues that peak oil is a republican/big oil hoax to scare the people and justify energy price increases.  That the hoax is in the same vein as the Club of Rome, which he alleges (wrongly i think) calls for depopulation, that ultimately these hoaxes will form the basis for organized depopulation measures.  I tell him he's full of hooey, that he's reading too many postings at (does anyone have any insights into rense?).  There are some people who will insist on believing whatever they want, all facts to the contrary.  I surmise he, like many others, are in the initial stages that people go through when facing death.  In this case, the death of the oil and fossil fuel-based world economy, i.e., life as we know it.  That stage involves disbelief and denial.  

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