An oil expert

Iwerbak marshal

The ability of the Saudis ran out . That is my opinion ... He does not have an infrastructure or surplus tubes and no gas and no oil and no barriers of the waters [ high tanks the cost with terrific size it uses to a class what goes out of the injection wells by the waters ] . They have a very heavy oil that results from it the asphalt by the usual refineries . We do not need an asphalt . We need the gasoline . The matter requires a complicated refinery for the extraction of the gasoline and the event needs 7 - 10 years for the construction of the single laboratory .- Simons died, Simons Wshrkah, one of the oil analysts the pioneers ( from Michael Si Robert, Peak Oil Revisited )

At the beginning of July, the Saudi officials declared that they are satisfied with the level of the current international oil prices, about 35 dollars of the barrel - and she is clearer referring to that the kingdom has abandoned their support of the old OPEC prices ceiling that was ranging between 22 to 28 dollars to the barrel . Ali Al-Nuaimi, the Saudi Oil Minister pointed to that the oil prices, at the present level, she is fair prices .That implies two results :

The Saudis stand now by a line of remainder Cartel the OPEC that suggests clearly that the old syllogistic prices limits from 22 to 28 dollars were less who if it is fair . He comes from that a simple deduction but it is dramatic : it is not likely strongly we will see the surprise of October in which the Saudis floods the crude oil markets until they reduce the prices severely and hence they help in offering class to Bush 's reelection . The kingdom consequently, and she faces a rise in the social security cost that provides it, and escalating political tensions, needs an additional capitalist spending for the sake of the increase of its oil capability . Goldman Sacs is appreciated that the Saudis need the average of the price of 30 dollars to the barrel at least in through the five next years just for keeping the ratio of the true spending to each individual .

Perhaps what it had a greater significance, that the Saudi statement speaks many about the true state for the display and the request in the oil markets . The kingdom behaviours may establish actually a complete truth, an acceptance of their inability in the increase of the production in a tangible way over the current levels, the terrible Maglin with reach today to the production top more and more .

The other point is the connection document by these who continue under the auspices of the ideas of the return to a cheap oil . It is the consensus continuous between the investors of Wall Street and between a number of the making of the politics in the West that the current high prices are a temporary exaggeration . This optimism that he in other than its place it reflects the state of the declared targets ( the inflated ) to the oil companies and the nations productive to it . The oil companies show continuously their optimism all along the line because of their desire for the transfer of a message of the investors their content they are an attractive investment field . This is the state with a paralysis, that overthrew the first executive official in it and also the search manager because of their exaggerations continuous in the company reserves .

She is still the countries productive of the oil the members in OPEC put in front of them targets ambitious for the production in an attempt of the negotiation on better shares to breath inside OPEC . To this degree, the accurate analysis of these optimistic expectations is a revelation that these assumptions are established on the guesses of an inquiry place concerning the investment and the technology in addition to the timetables the others is a realism . All they assume low exhaustion rates to the current result . Finally, the historical record shows that this kind of the optimistic prejudice has dominated for some time, while the growth of the actual production weakens continuously less than the optimistic expectations .

It is marvellous that the overwhelming majority is from the analysts to the oil field in Wall Street, who they are actually the oil companies herself, continuous in the construction of their expectations on the ceiling of the old prices that OPEC was targeting it between the 22 governors 28 dollars despite the increasing witnesses for the decrease of the warner display in the horizon . But Saudi Arabia comments are in the last week, accompanied by the worry that Nigeria shows, and Iran, and Venezuela, all that indicates that the OPEC may recognize at the end the new truths : the exhaustion dynamisms - a technical term points simply to the recession of the production of the present wells regardless of the request or the increase of the capitalist spending for their improvement - this term has been prominent now to the introduction .
This calls for the inquiry around the disposition of the production increase planning for the verification and that the OPEC declared with some of the ados last month in Beirut . The OPEC officials to the world confirmed that the organization will increase the production million barrels daily so that it arrives to 25.3 million barrels daily in an attempt of calming the global prices of the oil . And despite that, there some of the inquiries, about the productive continuation of such jumps, with the acceptance that this is Cartel he did not pump after such quantities from the raw material since the second oil shock that the Iranian revolution produced from more than quarter century it went by .

After the end of the oil ( After the Oil Runs Out ), James Gordan and James article I see by hell in The Washington Post in 6 June this year, he addressed this point exactly :

If I was wondering at the gasoline prices trend in the long run, forget for a moment what she is the shares of OPEC and search in the national wilderness refuge in the North Pole and get in your consideration instead of that Hobir 's top subject . Hobir 's top is not an adverb of place, that he is development concept a century ago that went by one of the geologists and his name or Kng Hobir, who explains many what he is my neighbour today at the oil pump . Hobir 's logic says that it at a specific point the production of the oil reaches its summit, and its dimension will recede steadily regardless of the request . In 1956 he predicted that The United States oil will reach its top about year 1970 then its dimension recedes . The skeptics mocked it, but it was on a truth .

Appears now that the production of the international oil, about 80 million the barrel per day, will arrive to the top quickly . Actually, the production of the traditional oil has arrived just to the top and started in the decrease . To every ten barrels a produced in a traditional way, it is discovered four new barrels in the return . Without the oil the others is traditional from the tar sands, and the liquefied natural gas and the other residues, the world production has arrived to its top since for many years that went ...

Three greater cases get lost amid the discussion : the recession of the oil production affected the society, and its monuments reduction ways and when we handle . Unfortunately, the politicians and the politics makers neglected Hobir 's top and do not possess plans for the interaction with it : if it was behind the coming elections, forget O Amro ."

The reference of Hobir 's top - an attribution of the geologist that was first who presented the exhaustion dynamisms case in the oil area - the notice that the prediction was the object of a severe polemic is overlooked inside and outside by Zns the oil until 1980, when the idea proved that it is right . The main reason behind the bell curve in any diagram for the production against the time he that the exploration no it is a random operation and that the oil and the gas are exhausted accounts . When starts the exploration of a region, the biggest tanks are easier a discovery . The total production rises whenever she entered these tanks in the production, while the search for the smallest tanks continues . Actually the discovery of smaller tanks is not possible sufficiently until it starts in it lost the production from the exhausted bigger tanks . The prices and the technology affect the area below the diagram curve - the totally quantity productive of the extracted oil and gas in periods of time a specific - but they do not affect in the form of the curve . He thought about it as the operation of its double by the operation of senility and death in the living organisms, as Hobir guessed it about a right .

Actually, since year 1970, the biggest three oil discoveries from outside the OPEC have been in regions with freedom and it is expected that it reaches production top to million and quarter barrel daily - and she is the less many of the top of the greatest main discoveries production in the past in The United States, and Russia, and the Middle East, and Mexico, and Venezuela, and Nigeria . And whatever the noise of the declaration was about these new discoveries a high, then it is important the notice that these discoveries will be postponed few the production recession time in the present fields, and they will not increase the collective shown general to the international crude oil . The successes in the disappointing explorations in the last thirty years have happened, actually, despite the huge investment that the high prices caused dramatically in the seventies and in many of the eighties . The results of the last decades assume that it did not remain there giant oil fields wait for discovery them bigger so that they take a place exhaustion reserves to the oil and for the availability of an increase in the extracted oil that most of the shareholders consider in the markets today as its granted issue .

Unfortunately, the cut of The Washington Post on generalities approves about the top and the recession away from the strong data that appear on the surface throughout the last years, each of it points to the acceleration of a polish to the global exhaustion dynamisms and in a noticeable way in the Saudi Arab . There, Alghoar, the greatest fields in the world and in all fields Arab Saudi and big the other, have become an exhausted old field . In the last years, the Saudis resorted to two both from the injection by the water and what is named the extraction by means of washing the bottle so that they preserve the production level - technologies hurry into recession and the destruction of the tank .
For a country that possesses as they claim huge marginal surplus of oil production, and turns to like this technologies of extraction, then that probably proves doing a non wise work . The digging by the bottle washing way, he a column digs horizontally in a distant depth by a group of the similar openings by the brush . That follows that injected the waters with the payment under a pressure inside the tank, so that the oil rushes to top of towards the wells tops . By that the extracted from the wells increases . So it, with the collision of the water backgammon by the column of the horizontal digging and most probably that happens without introductions, a hypothetical it may waste the field totally and its production falls a hypothetical to no thing .

A many is examples what happened in the countries productive of the oil at the use of the digging by the bottle washing way . The production of Syria from the oil he now in the final death . And Yemen follows it, according to Ali Samsam with my choice, the vice-president of the national Iranian oil company, that as long as it suggested that the production of the Saudi oil may in spring 2003 arrive to its top . Williams Kinidi the analyst adds, for the records, the reserves of Alghoar field extraction in 1975 are estimated at 60 billion barrels - by Akson company, and Mobil, and Tksacw, and Shifron . The field produced 55 billion barrels till the end of 2003 and it was still resulting by the rate of 1.8 billion barrels in the year . This clarifies for you how much he is close that to the end . When Alghoar dies, then the world will be officially in a descent .

In the short extent, the speculation contributed in the future markets by a form for it its significance in the collapse of the oil prices throughout last month, despite that the oil merchants, until, spill these future situations in turn with other commodities, remained the prices in a stubborn way over 35 dollars to the barrel, on a big distance from the old reference syllogistic amount . And while like these speculator situations she may affect the oil prices level by several dollars to the barrel in the short run, in the average and longer extent, the display considerations / the request it will represent each other thing . The strong growth for the international request of the energy, and the loss of the ability in some Opec Countries, and the high exhaustion rates are all that it will continue in the contribution to narrower markets then a narrower . More than this, as she noticed The Financial Times, now that the need for the construction of a store ability increases before the summit of the seasonal request to the quarter the fourth . But the stores of the bigger raw material do not address the absorptive capacity problem to the refineries in The United States .

The reward of the political instability is exceptional, when the Saudis exposed themselves to more of the terrorist attacks on their oil facilities throughout their repeated promises with the revival of the oil production and the lead of the prices to the descent . Was Saudi Arabia she the sole OPEC member that got out of meeting Amsterdam that was held from three weeks it went by plans for the achievement of jumps in the production . This ousted situation that probably the irony of the terrorists and their granting gave more of the acquired interest in tearing the oil production, as it happens now just by increasing rates with Iraq throughout the last 12 months . Some security experts believe that the main Saudi facilities like Ras Tanura and Abqiq, the biggest complexes for the refinement of the oil and its treatment in the world, subject to the attacks . There are inquiries around an efficiency and the loyalty of elements inside the Saudi security forces, while it is said their lines are penetrating by the Islamic extremists . The last attacks on foreign personalities work in the oil field in the kingdom it appears that they revealed personal and tribal interrelationships between the security forces and the claimed Al-Qaeda individuals in the countries .

Then the worst scenario of the state follows - the complete collapse to Al Saud 's house . The collapse of the Saudi regime appeared that would incite to the cancellation of providing the world markets by Saudi Arabia oil, even if in a temporary way, and its effect remainder on the prices is bigger by many which implied the oil shocks of Opec Countries in the seventies . That will lead to the rise of the price for the American economy that the cheap oil moves, and the debts ride it, and it imports now what is about to that 60 % of its oil is the raw material from the abroad .

To where by the oil prices ؟ he is not simply an academic question . The future growth of the American economy depends largely on the supplies of an available energy, and it depends on it, and enables bearing its cost . The intimations of the imminent oil production top started actually in applying its effect in a serious way on the economic growth that faces a collapse for an unprecedented financial fragility . The restriction that no release from it for the supplies of the oil it becomes instability factor to the oil markets, that now extremist price changes in the response of their doing testify against the less likely disturbances . The prices of the higher oil continue in the increase of the pressure on the consumption, especially in The United States, while at the same time they reduce the available incomes . How much we are prepared well for the interaction with the prices of higher energy in a tangible way ؟ this a question that any maker did not face to the politics after frankly . The markets remain in condemnation state, but the prices of the high energy remains she the new economic truth .

If there is truth of the surprise of the oil October, probably the resulting shock will be that shock that will not realize its consumed size and no the western policy maker, where that this shock will include higher prices to a greater extent a sharpness from the prices that dominate now .The prices of the cheap oil ended ; the sole question he, what he is the high fate that will rise to it, and how much from the time will pass until it becomes also from now؟

* Iwerbak marshal is strategic and commercial and international to David Dblew Tais Wshrkah 's office, to the moneys administration . Iwerbak contributes also with Japan institute to the politics researches .The knowledge of its weekly works enables you in prudentbear.com site
This article appeared first in Tomdispatch.com site

Tom Dsbach ; 11 July 2004

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