What the Saudis Aren't Telling Us

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What the Saudis Aren't Telling Us By Keith Kohl | Wednesday, July 13th, 2011 There seems to be a debate about Peak Oil around every corner. It isn't the dispute itself that irks us. Rather, that people look at the developing situation and still refuse to accept the facts. Some of the reasons not to worry are downright laughable, including one I just got wind of that involved oil fields magically replenishing themselves once depleted... The real offenders are the ones who have no idea how tight the world's oil supply will become over the next few years. They firmly believe a global peak in oil production is decades away. I hate to be the one to tell these folks the peak may already be behind us. Advertisement Undiscovered Country It's the size of Australia, and it contains what the USGS estimates as over 72 billion barrels of crude in easy-to-access shallow earth deposits... And yet fewer than 500 oil wells have been built to date. That's less than 3% of what's in operation in surrounding territories. Find out the name of the company about to open the world's newest — and perhaps last — untapped oil region.  Tighter World Supply For how long will the Saudis be able to bail out global production? Depending on who you're talking to, the Saudis have between two and four million barrels per day in spare capacity. In other words, the country can officially increase its oil production to more than 11 million barrels per day, if necessary. Whether they will actually tap into that spare capacity or not is another matter. And there are other problems with this oil they're saving for a rainy day. No matter how optimistic the Saudis are about their spare capacity, the fact is this isn't the same light, sweet crude that makes our refineries drool. The only oil available is the sour crude that's more difficult to refine. How can we be so sure of that? We've already seen this movie. With nearly two million barrels per day of Libyan crude shut-in, the Saudis have been saying for months they would be willing to help ease that burden by producing more. They've already reported the majority of their spare capacity comes from oil with higher sulfur content. But many of the European and Asian refineries can't handle this grade of sour crude. Keep in mind the Saudis are one of the few oil producers with membership to a rare club. Less than fifteen of the world's oil-producing countries have not peaked — yet. Pandora's Oil Box By now, we've all heard about the IEA's decision to release 60 million barrels of oil from various strategic petroleum reserves around the world, coming mostly from China and the United States. Despite drawing anger from the OPEC, the IEA is setting itself up for another predicament further down the line. The IEA already stated this SPR release is only intended to “help bridge the gap until sufficient oil” is found. And that begs the question of whether or not we'll ever be able to sufficiently produce enough oil... According to the IEA's latest oil report, global oil demand is expected to rise to 89.5 million barrels per day (about 1.2 million barrels per day compared to 2010) within the next six months. By 2012, world oil consumption is expected to climb another 1.5 million bbls/d to 91 million barrels per day. Meanwhile, production won't come anywhere close to that number. Global production is only expected to reach ~89 million barrels per day. Just so we're clear with things, this SPR release was a one-time deal intended to bridge the gap until more oil is available... Yet, supply will still be short? Is this just an exercise in futility? At this point, a better question to ask yourself might be if you're prepared for Peak Oil. Advertisement Rich Investors Don't Trade Stocks Anymore What they are trading outperforms stocks several times over — whether the market is going up or down. Thing is, anyone with a trading account can do the same thing... This informational tutorial explains how to get started. Flirting with Disaster Let's look a little closer to home. We've all seen the nightmare-inducing chart showing the peak in our domestic oil production. If you really want to know when we began flirting with disaster, it was actually two decades before our peak. U.S. oil production hasn't been self-sustaining since the 1950s, and the gap has been widening ever since. Not to spoil the hopes and dreams of every alternative to oil, natural gas, and coal... But are we really surprised by what we've actually accomplished in meeting that demand? And just like the sour grade of the Saudis' spare capacity, tomorrow's oil won't be the same as today's variety. That's one of the reasons light oil plays are so valuable to today's investors. This unconventional oil play has delivered 38% gains to investors within the last two weeks — and it still has plenty of room to run... The secret to this company's success: These guys are actively drilling in one of the few remaining places in the United States where oil production is wildly profitable.  Until next time, Keith Kohl Editor, Energy and Capital From the Archives... Majors Buy SPR Crude as Supply Continues to Slide 2011-07-12 - Nick Hodge U.S. Deficit Up 15% Before the Start of Summer 2011-07-12 - Brianna Panzica Clean Energy and Sundrop Fuels Get Investments 2011-07-12 - Brianna Panzica Bloom Energy Deal with AT&T 2011-07-12 - Brianna Panzica Joint Bid with ArcelorMittal Holds Promise 2011-07-11 - Brianna Panzica Economic Releases for the week of Monday, July 11th, 2011: Jul 12 - Trade Balance Jul 13 - MBA Mortgage Index Jul 13 - Treasury Budget Jul 14 - Core PPI Jul 14 - Business Inventories Jul 15 - Michigan Sentiment Jul 13 - Export and Import Prices Jul 14 - Retail Sales Jul 15 - CPI Brought to you by Wealth Daily

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