This month Federal Reserve chairman Al Greenspan said that he was not fazed by $50 oil because “we will begin the transition to the next major sources of energy perhaps before mid-century”.
Although that left a few people wondering what we are going to do for the intervening period, Greenspan also talked on how he was also content with gigantic American credit card debt because credit cards are being “used for new purposes”.
However, this week has seen two events that may raise a few extra questions for Greenspan.
The American Petroleum Institute (API) is the leading oil industry body in the US. It undertakes a number of roles, mainly to give the US oil and petroleum industry a unified voice. Its members are the petroleum companies that operate within the US, small, medium and large.
One of the factors influencing oil
Since 6 October, it has added extra breakdowns of its weekly figures. But the API has been producing a very detailed resume of all US commercial inventories since the 1920s. These figures come out around the same time as the US government’s own inventories.
Traditionally the release of the US government data from the Department of Energy (DoE) – how many imports there have been, how much oil is stockpiled at refineries and so on – is crucial to setting the forthcoming price.
Often the API figures have not been the same as those issued by the DoE, as one would expect from such a huge task. But recently it has been notable that the major figure the market rests upon, crude oil stocks, is significantly different.
Open to doubt
The API figures showed a loss of 972,000 barrels whilst the governments figures showed a more reassuring increase of 1.2 million barrels.
The API also showed that crude oil imports actually continued to fall – in their estimate, by 1.189 million barrels against the government’s figures saying a slight increase in imports.
The unstable situation in Nigeria
If the API figures are correct, it certainly casts doubt on the promises of increases in output from OPEC countries such as Saudi Arabia.
Now long promised, those increases seem to have failed to make it to the market place. Certainly beyond the normal 45 day expectations. Even the DoE figures showed only a slight build of 43,000 barrels.
Ron Planting of the API is confident of the veracity of their figures. “We’ve been doing this since the 1920s and we take in about 90% of the industry volumes,” he said.
Neither the DoE nor the API have the impossible task of having every last drop of US oil in their resume. But the API is particular in its quest to be as accurate as possible.
There are fears that global oil
Planting said: “We spend a lot of time looking for big changes or funny things happening, ” “If we see something like that we try and get a correction, although of course sometimes it’s not clear what is going on.”
But when the final (inventory) data is issued, a month or so later we compare those figures to see who is closest and the API figures are closest most of the time.
But that is the nature of information. If I was a trader I guess I would be looking at both sets of statistics and making my judgments from there.”
As well as question marks over government data “peak oil” is a theory, put forward by some in the oil industry, about the possibility that current global oil production is at its height.
If global production plateaus or falls, then oil costs will continue to rise. Possibly sharply. It has been a controversial topic, hotly debated and with many detractors.
“Do you realise that
Some, such as Michael Klare at the University of Massachusetts, have been muted about oil supply being the largest single reason for the invasion of Iraq, though not the only one.
Others feel more openly that the desire to create energy supply security for the US is driven by an underlying fear that stocks are dwindling.
This week peak oil seems to have found another, perhaps reluctant, advocate. George W Bush. Some of his remarks, in a piece in the New York Times Magazine, show that the US president is aware of the possibility of peak oil at the very least. They also show the combative way he views global oil supply security.
As regards peak oil, NYT journalist Ron Suskind says that President Bush was speaking with a group of high-level Republican party supporters, “and someone asked what he’s going to do about energy policy with worldwide oil reserves predicted to peak”.
According to Suskind, “Bush said: ‘I’m going to push nuclear energy, drilling in Alaska and clean coal. Some nuclear-fusion technologies are interesting.’ He mentions energy from ‘processing corn’.
President Bush says he will push
‘I’m going to bring all this up in the debate, and I’m going to push it,’ he said, and then tried out a line. ‘Do you realise that the Arctic National Wildlife Refuge is the size of South Carolina, and where we want to drill is the size of the Columbia airport?'”
He then went on to mention that the Saudis have “a weapon” because “they have the oil”.
Many oil insiders, but not President Bush it seems, are now disputing Saudi reserve figures, as unreliable at best and fiction at worst.
So, along with questionable government statistics, household debt and record governmental deficits, it remains to be seen what effect the Saudis “weapon” will have on the ever calm Alan Greenspan’s economy.