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zceb90

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    Mountaineering, Skiing, Computers, Films, Energy, Transport.
  1. ...not to mention the fact that N Sea production declines are moving UK from energy exporter to importing around 80% of our energy needs in a 15 year timespan from 2005 to 2020. At current prices that's pointing to a trade deficit in energy alone of £5bn per month by 2020. BAU is going to be awfully expensive in terms of foreign currency.
  2. Saudi Aramco has made extensive use of MRC wells in order to maximise extraction rates in the mid-life of their oilfields. The problem of water encroachment with ageing reservoirs is much worse with these horizontal wells than in the more traditional vertical wells in that the water tends to hit the horizontal wells 'all at once'. Rapid production collapses have already been observed in other regions using MRC wells, Yemen for example. If (or rather when) output declines rapidly in Saudi's Ghawar oilfield the world is going to take notice!
  3. The book by William Catton Jr entitled 'Overshoot', even though written over 20 years ago explains in detail the consequences of exceeding the carrying capacity of the biosphere. It seems likely that oil depletion will be one of the first symptoms of such overshoot....but there will be others.
  4. What really matters to the oil consuming world is how Saudi's oil exports will hold up in when their production is flat or declining against a background of rising internal consumption, see Export Land Model. Recent policy statement by Saudi Royal Family suggests that Jeffrey Brown's paper re oil exports has considerable merit.
  5. How can the economy grow with shrinking availability of cheap energy supplies, particularly oil?
  6. They are locked into believing that 'the market will provide' and that 'money creates energy'. Those theories might appear to work on the upswing (which as far as crude oil supply is concerned has been from 1859 until approx 2005). We are now embarking upon the downswing (or the right hand side of Hubbert's curve of oil production). It may take some years but we are going to learn that actually 'energy creates money'. Less oil = less wealth.
  7. It's hardly surprising that Saudi is indicating a change of policy whereby exploration activity is curtailed so as to preserve some of their oil reserves for future generations. Over the past 50 years population has risen 6 fold and Saudi now consumes around 25% of their oil production; trend to use more themselves is likely to continue and current gas shortages are forcing Saudi to use oil for electricity generation. Moveover, some of us argue that the majority of Saudi oil production is coming from a few giant fields which are many decades old - the Saudi statement might be somewhat of a 'softening up process' so that oil importing nations can become used to the idea that future volumes available on world market for import will be smaller. For the UK the Saudi statement has major implications given the rapid decline of N Sea output - where will we find the import volumes and how will we pay for them?
  8. Apart from difficulty in obtaining finance i.e. bigger deposit required and earnings multiple being more restricted I suspect lack of job prospects is also causing many to stay put. For the past few years there have been plenty of job opportunities, especially in the public sector and changing jobs is one of the major reasons to move house. In good economic times it was also commonplace for employers to assist with relocation expenses. The combination of very limited hiring in both private and public sectors and threat of further widespread job losses will cause many to pospone plans to move house, especially if they are having to fund their own moving fees which are not trivial. Furthermore the lack of confidence is removing another incentive to move, namely the formerly common practice of trading upwards to maximise gain from HPI. My view is that the downturn in the economy will be long lasting given the sheer scale of the debt to be addressed. It will be interesting to see what prices are obtained by those 'forced to move'.
  9. The main cost for UK tourists is not the flight, it's the cost of accommodation etc when one arrives at the budget airline destinations. In this respect matters have improved in recent weeks due to sterling's rally vs euro which has continued today with more debt worries in the eurozone. Even so I suspect worries about job security and debt at home will cause many to rethink foreign travel plans even if the 'pound goes further'. What the airlines really should be worrying about is falling net energy and increased energy consumption in the BRIC nations and, not least, by the oil producers themselves. These factors are going to have an increased impact with every year that passes and will make debt repayment and economic recovery ever more difficult. It would not be surprosing to see more airlines lease rather than buy aircraft.
  10. There was a comprehensive study re risks of inaction which concluded that a major program of mitigation to avoid the worst consequences of oil production going into decline needed to commence 20 years in advance of the declines setting in...or economies would face major dislocation. It's a 2005 study with a US focus but, if anything even more relevant today: Hirsch Report (there's a link on this page to the full report). According to many analysts we've already missed the 20 year target and there are numerous recent suggestions that production declines within the next few years are much more likely due to recent BP disaster having the effect of slowing down deepwater oil production (and deepwater is one of the few options left to offset declining conventional oil). In the meantime local authorities, at least in my area, behave as if 'none of this is happening' - plans are well advanced for a major new highway scheme and an airport runway extension. Not least a large new business park has recently been developed 'in the middle of nowhere', albeit with cycle lanes...but it's nowhere near where people live and there are only a handful of bicycles even on fine days. There are many hundreds of cars parked there all day with, I'd expect, around 80% of them being used for commuting with just a single occupant. My reckoning is that UK is spending around £20bn pa on oil and gas imports, an amount that's set to double within 5 years due to further N Sea declines....and that's assuming energy prices don't rise. All this new infrastructure assuming cheap oil will be with us forever is a disaster in the making and yet very few seem to appreciate the situation.
  11. The problem we face with oil is not about 'running out'; it's about oil not flowing in sufficient quantities and / or at a price that our economies can fully afford. OECD economies are designed around cheap and abundant oil and all the known substitutes for conventional oil are more problematic / expensive than what we've become accustomed to over many decades. Falling net energy (or ERoEI) is the crux issue.
  12. BP have many assets and a strong cashflow; with oil price around $77/bbl and likely to rise further due to increased demand in China etc it would be possible for BP to raise very substantial sums via asset disposals. Furthermore the costs of the clean-up will not all be up-front i.e. some will be incurred in year 2, year 3 etc thus, for example, next year's dividend could be cancelled thus raising well over $10bn. Imo of more concern than the OP's quote from financial analysts is the impact this incident will have on future oil prices. Regulatory authorities in US and other oil producing countries are exercising much more caution re deepwater oil projects; several already have imposed moritoria on deepwater drilling. A number of energy analysts have estimated oil output by 2015 will fall by between 400k and 900k bbls/day as a result. Quite a small amount relative to global demand of 85m bbls/day but price is extremely sensitive to small changes in supply / demand balance.
  13. Those with BTL portfolios were only too happy to 'go for big profits' on the upswing and should have put funds aside for the downswing (which inevitably follows asset 'bubbles'). Why should taxpayers now subsidise them indirectly via HB rates to enable them to continue charging rates which no longer relate to what the current market will bear? Those BTL's now underwater should be allowed to default and the properties will then be onpassed to new owners at realistic prices and which can then deliver returns to their owners at reasonable rents which tennants can afford. There's really little choice in the matter - Gov't and taxpayers have run out of money to support such activity.
  14. One point she probably hasn't considered is just how long the (inflated) salaries for this type of entertainment will hold up. There's been recent talk that C5 is up for sale, likely at a very hefty loss due to lack of advertising revenue; ITV has also experienced big fall in revenue and I'd assume C4 (which shows Hollyoaks) has seen similar downturns. This week's budget will hit consumer spending hence further falls in advertising revenue would appear to be on the cards. The combination of BTL and income from the day job going south together will present a challenge.
  15. Projections re volumes and cost of future energy imports are subject to many variables including: 1) Demand which is affected by economic activity and, in case of gas, how cold the winter is. 2) Supply from N Sea (how fast the decline rates are). 3) Price of energy. 4) Sterling / US Dollar exchange rate. My take is that the author made a good estimate of these variables at the time when graph was prepared (18 months or so ago). Based on current numbers I'm looking at UK's energy import costs rising by around £4bn pa. Actual numbers over time are less important than the trend....which is for UK energy imports to increase inexorably. Alistair Darling was chancellor at the time...if another graph is prepared in due course I'd expect George Osbourne to feature. The point the author was trying to depict, both in this graph and in presentations (some of which I attended) was that the Gov't was more or less 'sitting back while UK energy security slipped away' and believed that 'the market would provide'. There's a fundamental clash here - energy planning has to be considered in terms of decades whereas the market only thinks short term. If future energy imports don't show up in sufficient quantities, or at prices the UK economy can afford, any economic recovery will derail far quicker than it would if, for example, yesterday's budget had 'cut too far too soon'.
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