Friday, September 02, 2005

Serious Quotes On The Serious Subject Of Oil

EN ESPAÑOL ABAJO
In January the price of brent crude was $29. Along the year supply bottlenecks and security fears kept up the pressure on oil prices, pushing the cost of brent crude to hit historical redords. This days, crude oil prices have hit fresh highs as fears grow over the extent of damage done by Hurricane Katrina to oil output in the Gulf of Mexico. Eight refineries were shut down due to Katrina - around 95 percent of the Gulf of Mexico's oil output was out of service. No refinery has been built in the United States since the 1970s. The aging plants are already pumping at full throttle, and there is extra pressure on facilities still standing to meet demand now. Oil prices surged back above $70 in European markets on Wednesday 31, August; but slipped quickly to $69.56 after disclosure of the Bush Administration decision involving the release of supplies from the Strategic Petroleum Reserve. With this landscape as background, Power Encounter welcome a new comment of professor Ferdinand E. Banks.

IN MY OPINION:
SERIOUS QUOTES ON THE SERIOUS SUBJECT OF OIL
By Ferdinand E. Banks (*)

Not too long ago I had the great pleasure of giving a long lecture on oil at the Royal Institute of Technology in Stockholm, where I once studied mathematics in a building that is still known as ‘Sing-Sing' (after the US prison of the same name.) And once again I discovered, to my great surprise, that the realities of the present world oil market have not been absorbed in an optimal manner, despite their reflection in the high price of oil.

The picture is quite clear: we are moving toward a world in which we are going to be deprived of the oil to which we have always believed that we are entitled. Eleven years ago The Energy Journal presented a special issue called ‘The Changing World Petroleum Market’ in which the future world oil and gas scene was completely misrepresented by a number of experts who should have known better. This is not unusual, however their mistakes have unfortunately been perpetuated in the sense that the gravity of the present situation has not been acknowledged by them or their disciples, despite a fairly large probability of a future oil price that could devastate the international macroeconomy if it reaches the level that many observers are now predicting.

The basic difficulty is the inability of many observers to comprehend that technology cannot discover and/or produce oil that does not exist; and where it does exist, it may not be what many students of this subject think that it is. A perfect example here is the tar sands of Northern Canada, whose resources have now been officially added to proved Canadian reserves of oil, thereby turning that country into a rival to Saudi Arabia in the oil reserves league.

Professor Douglas Reynolds (clik here to see some of his books and papers) has examined the realities of Canadian tar sands in perhaps the best paper ever written on the subject (2005). As he makes clear, “Physics, economics and engineering management all point to one thing – oil sand is not the same as crude oil. By defining oil sand bitumen as proven reserved of crude oil, we are setting up the oil and energy markets for a large price spike – a shock.” A version of this comment could probably be applied to the heavy oil of Venezuela, however the composition of the present government of that country is such that it will hardly inspire a heavy commitment of investment dollars to what is, after all, a play for the gallery, rather than a sensible option for avoiding a likely oil shortage.

The key term in the previous paragraph is “investment dollars”, something that I attempted to clarify in my energy economics textbook (2000), but which did not go over too well with several influential readers. However now it has been used by Maureen S. Crandall of the United States National Defense University in a discussion of the huge resources that ostensibly will be made available by extensive exploitation of the Caspian region (2005). She puts it as follows: “But this producing region as a whole, while accounting for billions of dollars in investments, is unlikely to be a large and sustained future producer and contributor to the world’s energy supplies, and cannot be considered of strategic energy importance to the US.”

Similar observations could be made about other ‘oil producing regions of great promise’, but it is best at this time to sum up the situation with a quote from Craig Bond Hatfield (1997). “The coming era of permanent decline in oil-production rate and the economic and social implications of this phenomenon demand serious planning by the world’s governments.”

REFERENCES
Banks, F. E. (2000). Energy Economics: A Modern Introduction”. Dordrecht and Boston: Kluwer.
---- (2005) Economic Theory and Some Oil Market Realities
Crandall, Maureen (2005). ‘Realism on Caspian Energy’. IAEE Newsletter (Spring).
Hatfield, Craig Bond (1997). ‘Oil back on the global agenda’. Nature (May).
Reynolds, Douglas (2005). ‘The economics of oil definitions: The case os Canada's oil sands’. OPEC Review (March).

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En Enero el precio de brent era de 29 dólares. A lo largo del año los temores que suscita tanto la producción como la seguridad internacional ha empujado los precios del petróleo hasta récords históricos. Estos dias, los precios han vuelto a repuntar ante el temor de los daños ocasionados por el huracan Katrina en las instalaciones del Golfo de Méjico. Ocho refinerías han parado la producción y alrededor del 95% de la producción está fuera de servicio. En Estados Unidos no se ha construído ninguna refinería desde los años 70, y las instalaciones existentes funcionan a plena capacidad para atender la demanda. Los precios alcanzaron los 70 dólares en los mercados europeos el pasado 31 de Agosto, aunque disminuyeron un poco cuando la administración Bush hizo saber que haría uso de la reserva estratégica de petróleo. Con este telón de fondo, Power Encounter publica un nuevo comentario del profesor Ferdinand. E Banks.

EN MI OPINION:
UNAS CITAS SERIAS SOBRE EL SERIO ASUNTO DEL PETRÓLEO

Ferdinand E. Banks (*)

No hace mucho tuve el gran placer de pronunciar una larga conferencia sobre el petróleo en el Instituto Real de Tecnología en Estocolmo, donde un día yo estudiara matemáticas en un edificio que todavía se conoce como ‘Sing-Sing'- (como la prisión del mismo nombre de los EE. UU.) Y una vez más descubrí, para mi mayor sorpresa, que las realidades del actual mercado mundial del petróleo no se han asimilado de manera óptima, a pesar de su reflejo en el elevado precio del mismo.

El cuadro está bastante claro: nos movemos hacia un mundo en el que estaremos necesitados del petróleo al que siempre hemos creído tener derecho. Hace once años The Energy Journal publicó un número especial titulado ‘El Cambiante Mercado Mundial del Petróleo' en el que el futuro escenario del petróleo y del gas estaban completamente tergiversados por varios expertos que debían haberselo sabido mejor. Esto no es insólito, pero lamentablemente sus errores se han perpetuado en el sentido de que la gravedad de la situación actual no ha sido reconocida por ellos ni por sus discípulos, a pesar de la probabilidad claramente grande de que un futuro precio del crudo podría devastar la macroeconomia internacional si este alcanzara el nivel que muchos observadores ahora predicen.

La dificultad básica es la incapacidad de muchos observadores para comprender que la tecnología no puede descubrir y producir el petróleo que no existe; y que donde existe, puede que no sea el que muchos estudiosos del asunto piensan que es. Un ejemplo perfecto aquí es el de las arenas de alquitrán de Alberta en el Canadá Septentrional, cuyos recursos se han añadido ahora oficialmente a las reservas probadas de petróleo canadiense, convirtiendo con ello a este país en un rival de Arabia Saudita en la liga de reservas de petróleo.

El profesor Douglas Reynolds (pinchar aquí para ver algunos de sus libros y artículos) ha examinado la realidad de las arenas canadienses de alquitrán en quizás el mejor artículo escrito hasta ahora sobre el asunto (2005). Como él aclara, “la Física, la administración de la economía y la ingeniería indican todas una cosa – la arena de petróleo no es lo mismo que el petróleo crudo. Al definir la arena bituminosa de petróleo como reservas probadas de petróleo crudo, establecemos los mercados del petróleo y de energía para repuntes grandes de precio – para un choque.” Una versión de este comentario podría ser aplicada probablemente al petróleo pesado de Venezuela, sin embargo la composición del actual gobierno de ese país es tal que apenas inspirará un compromiso serio en dólares de inversión a lo que es, a fin de cuentas, un juego para la galería, antes que una opción sensata para evitar una escasez probable de petróleo.

El término clave del párrafo anterior es “dólares de inversión”, algo que procuré clarificar en mi libro de texto (2000) de economía de la energía, pero que no tuvo mucha aquiescencia de los lectores influyentes. Sin embargo ahora ha sido utilizado por la profesora Maureen S. Crandall de la Universidad Nacional de la Defensa de los Estados Unidos en una discusión sobre los inmensos recursos que en apariencia hará disponibles la explotación intensiva de la región del Caspio (2005). Ella lo pone de la siguiente manera: “Pero esta región productora en su conjunto, aunque representa miles de millones de dólares de inversión, es improbable que sea un futuro productor y contribuidor regular a los suministros mundiales de energía, y no puede considerarse de importancia para la energía estratégica de los EEUU.”

Se podrían hacer observaciones semejantes sobre el otro ‘petróleo que producen las regiones más prometedoras', pero lo mejor en este momento es resumir la situación con una cita de (1997) de Craig Bond Hatfield. “La época que se avecina de disminución permanente de la tasa de producción petrolífera y las implicaciones económicas y sociales de este fenómeno exigen la planificación seria de los gobiernos del mundo."

REFERENCES
Banks, F. E. (2000). Energy Economics: A Modern Introduction”. Dordrecht and Boston: Kluwer.
---- (2005) Economic Theory and Some Oil Market Realities
Crandall, Maureen (2005). ‘Realism on Caspian Energy’. IAEE Newsletter (Spring).
Hatfield, Craig Bond (1997). ‘Oil back on the global agenda’. Nature (May).
Reynolds, Douglas (2005). ‘The economics of oil definitions: The case os Canada's oil sands’. OPEC Review (March).

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(*) Ferdinand E. Banks Bio (e-mail: ferdinand.banks@telia.com)

1960-61: Assistant lecturer, Institute of Economics, University of Stockholm (Sweden).
1961-64: Lecturer in economics, the International Graduate School, University of Stockholm;Lecturer, Institute of Economics, University of Stockholm, SwedenConsultant, United Nations Development Program (Egypt, Ethiopia, Senegal).
1964-66: Senior lecturer in mathematics, statistics, and economics – The United NationsInstitute for Economic and Development Planning (IDEP), Dakar, Senegal.
1966-68: Senior Lecturer (economics), Stockholm University, Sweden; Consultant, United Nations Industrial Development Organization (UNIDO), Vienna, Austria.
1968-71: Econometrician and Commodity Economist, UNCTAD, Geneva ,Switzerland.
1971-78: Research Fellow, The Institute of Economics (Nationalekonomiska Institutionen), Uppsala University; Lecturer in econometrics and natural resources, Stockholm University; OECD lecturer in input-output analysis and macroeconomics, Technical University of Lisbon (Portugal); consultant on natural resources, the Hudson Institute, Paris, France.
1978-79: Professorial Fellow, The Reserve Bank of Australia; Visiting Professor, the department of econometrics, University of New South Wales, Sydney, Australia.
1978-79: Research Fellow, Nationalekonomiska Institution, Uppsala University, Sweden.
1980: Visiting Professor,The Centre of Policy Studies,Monash University, Melbourne, Australia.
1982: Social Sciences Faculty Research Fellow, Uppsala University., Uppsala, Sweden.
1983: Visiting Research Fellow, Melbourne University; Visiting Lecturer, The Australian School of the Environment, Griffith University, Brisbane, Australia.
1984: Visiting Professor, The International Graduate School, Stockholm University.
1985: Visiting Research Fellow, Centre for Resources and the Environment (CRES), The Australian National University, Canberra, Australia.
1987: Fellow of the NATO Advanced Study Institute, Povoa do Vardim, Portugal.
1989: Visiting Professor, University of New England, Armidale, Australia.
1990: Visiting Professor of Energy Economics, Université de Grenoble, Grenoble France;Visiting Professor of International Economics, Ecole Superieure de Commerce de de Grenoble (Graduate School of Business), Grenoble, France.
1991-92: Visiting Professor of Finance and Economics, Nanyang Technical University, Singapore.
1993: Visiting Professor of International Finance, The Center for Economic Research and Graduate Education, Charles University, Prague, Czechoslovakia.
1994: Visiting Professor, University of New England, Armidale, Australia.
1995- Technical consultant, AP Energy Business Group, Singapore.
2000: Lecturer in Industrial Organization, Nationalekonomiska Inst., Uppsala University
2001: Visiting Professor and University Fellow, Hong Kong Energy Studies Centre. Hong Kong Baptist University. Hong Kong Visiting Professor (on natural gas), ENI Corporate University, Milan Italy.

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