In a surprising move, the United States and the International Energy Agency agreed to release some of their emergency reserves of oil in an attempt to cut the high market price of oil.
The plan calls for the release of some 60 million barrels of oil from reserves – half of that from the United States. Since global daily demand for oil is 88.0 million barrels, the release will only have a limited impact on the price of oil.
Department of Energy Strategic Petroleum ReserveThe official reason for the release was the loss of 1.5 million barrels of Libyan production, but that’s been going on since February. It seems rather slow timing for them to take five months to respond. There have only been two other times when such collective action has been taken: during the Gulf War in 1991, and in 2005, after Hurricane Katrina damaged offshore oil rigs, pipelines, and refineries in the Gulf of Mexico.
The real reason for the move is more likely growing concern over Saudi Arabia’s ability to ramp up production to its new, 10-million-barrel-per-day target. The oil giant has not produced that much oil since the early 1970s. Oddly enough, the only country capable of producing oil at that rate is Russia.
The vain attempt by leaders to keep oil prices down demonstrates a failure to recognize that oil prices are only going one way, and that is up. Increasing demand and dwindling supplies paint an ugly picture for the future.
Renewable energy is a very sexy term today, but wind and solar power will never amount to anything. Their kilowatt-hour cost is more than triple that of oil. At best, renewable energy will only be able to satisfy 5 percent of our needs.
The recent disaster in Japan has placed a dark cloud over nuclear energy. Germany has announced plans to shut down its seventeen nuclear power plants. Switzerland also has approved a plan to forgo building new plants. Even if nuclear energy came back into favor, it would take at least a decade to build any new nuclear plants.
The oil supply and demand fundamentals show an accident waiting to happen. The IEA projects that total world oil consumption will grow by 1.7 million barrels per day (bbl/d) in 2011, primarily because of higher electricity generation in China, Japan, and the Middle East.
Projected world consumption will rise by 1.6 million bbl/d in 2012. Projected supply from non-OPEC countries increases by an average of about 0.6 million bbl/d in 2011 and 0.5 million bbl/d in 2012. (http://www.eia.gov/steo/)
A key factor to the increased demand for oil is China. Its economy has been growing at a relentless pace. Since it has very little domestic production, it has to import nearly all of the oil it consumes. China is very close to overtaking Japan as the world’s largest importer of Middle East crude oil.
Another way China is helping to tighten the supply of oil is by using its financial clout to buy up reserves. It has made numerous investments in oil production. Every time another investment is finalized, all future production will head straight to Chinese refineries.
China has even been eyeing Canada’s oil sand reserves. Sinopec, a Chinese state-controlled oil company, has bankrolled a $5.5 billion plan to build the Northern Gateway Pipeline from Alberta to the Pacific Coast province of British Columbia .
The only positive news on the energy front is natural gas. Engineers have developed a new method of extracting gas from shale deposits. There isn’t enough new natural gas for us to run our cars on this energy source. It just means that homes that use gas for heating will have a few more decades of use.
Sometime in the next few years, we are going to reach a point that production falls behind demand. The resulting spike in the price of crude will put the Middle East into focus. The recent rise in oil has put OPEC on track to have its first year with $1 trillion in revenue.
It is easy to see petroleum as the catalyst behind much of end-time Bible prophecy. The late John F. Walvoord wrote the book, Armageddon, Oil and the Middle East Crisis. Despite the book being published in 1974, it has not lost its relevance to current events. You can’t get away from the basic truth that when the supply of black gold begins to decline, the nations of the world will begin to fight over who gets access to that oil.
Relief may soon be coming to oil-consuming nations in the form of conservation. When the Rapture takes place, millions of Christians will leave behind their gas-guzzling vehicles. The Antichrist can requisition my Ford Edge for his traveling needs. I’ll leave the keys on the kitchen table.
By Todd Strandberg