Abandoned Oil Pump

According to Energy And Capital:

Oil prices in the high $30s to low $40s are nothing short of a ticking time bomb under the world economy, but you wouldn’t know it from watching the commodity markets.

Once the global downturn slashed $100 off the price of a barrel, the issue of oil supply seemed to simply fall off the radar of market observers.

Falling oil demand is all that anyone seems to care about, but we may pay dearly for taking our eye off the ball of supply.

Read the full article at Energy And Capital:

- The above article describe exactly what I had been talking about but with more detail information on the facts & figures.

Let me summarize the article in point forms.

1. Oil prices in the high $30s to low $40s are nothing short of a ticking time bomb
2. While the price of oil has crashed from its highs last summer, the costs of production—including labor, steel, rig leasing, and so on—have not declined nearly as much
3. Oil revenues are off sharply across the industry, and most companies are taking write-downs on revenue, and cutting costs
4. Production from Mexico, our number-three source of imports, is in serious trouble. Its oil output fell 9.2% in January to its lowest level since 1995, but its exports are falling much faster, at a 20% decline, according to Pemex
5. The decline of Cantarell, one of the four “supergiant” oil fields in the world, has accelerated to 38% per year. At the current rate, Mexico’s oil exports will cease altogether in seven years or less.
6. Things are no better in the Middle East. OPEC reports delays of more than 35 of 150 planned upstream projects, with some postponed until after 2013. Additional project delays are expected.
7. Saudi oil minister Ali al-Naimi has warned that the world needs $75 oil to ensure future supply, and that current prices “are wreaking havoc on the industry and threatening current and planned investments.”
8. Deutsche Bank calculates the global loss of oil production due to poor economics at 700,000 barrels per day with oil at $30 a barrel, of which more than half would be lost production from tar sands.
9. At $20 a barrel, fully 3.5 million barrels per day (mbpd) would be uneconomical to produce.
10. Shell chief financial officer Peter Voser says the company’s current cost is around $38 per barrel. But the cost of new tar sands projects is much higher: According to an analysis by Merrill Lynch, it doesn’t pay to invest in new tar sands projects until oil sells for about $80 a barrel.
11. Continued reports of oil project cancellations and postponements have prompted the IEA to intensify its drumbeat of alarms about future supply. Last week the agency warned that if oil demand recovers in 2010, global spare capacity would fall to zero by 2013.

- This is almost as alarming as an extinction level event that may come by 2013 when all spare capacity may be totally run out.

This statement gave me the chills down my very spine, that may means oil may be either the harbinger of death, chaos & destruction.

Peak Oil real effects is about to reveal it’s ugly head by 2013 when people inevitably die in the thousands or millions due to starvation, violence, epidemic, thirst, war and those who survive may be enslaved by the ever ballooning cost of living.

We must start to understand how to survive this and monetary bail out may not be the key solution to the economic crisis.

The Great Depression have the following 9 conditions

1. Debt liquidation and distress selling
2. Contraction of the money supply as bank loans are paid off
3. A fall in the level of asset prices
4. A still greater fall in the net worths of business, precipitating bankruptcies
5. A fall in profits
6. A reduction in output, in trade and in employment.
7. Pessimism and loss of confidence
8. Hoarding of money
9. A fall in nominal interest rates and a rise in deflation adjusted interest rates.

These conditions had already been met by certain level by current economic crisis and we must not ignore the lessons of the past mistakes made the last time.

We must not repeat the same mistakes again & again…

Be prepared for sustainability, or be sorry.