Keep the Dream Alive – Oasis (2005)

The following commentary is from Friday’s business section of The New York Times. It comes down to how far can industry players really push oil’s price up against the tide of today’s economic forces?

OPEC’s Pipe Dreams

OPEC is doing all it can to talk the price of oil back up to what it calls a "reasonable" $75 a barrel. Some analysts even expect oil prices to hit that level by the end of the year. But the idea that this would be a return to normality makes little sense.

Oil traded below $35 pretty consistently for decades up to 2004. Tony Hayward, chief executive of the oil company BP, said at a recent conference that he remembered when $40 felt like a "fantastic" price.

Why Mr. Hayward’s superlative? Because not long ago $40 was comfortably above the long-term equilibrium price at which supply theoretically cleared demand. In the late 1990s, oil companies traded on valuations that assumed a long-term oil price around $15 a barrel. And in the first two years of the new millennium, analysts estimated a long-term oil price around $20 a barrel. That had risen to $25 in 2004.

There are good reasons to suppose that the comparable figure is now higher — perhaps about $40, about $6 above its closing price on Thursday. First, the oil price should rise at the rate of global inflation, all other things being equal. Assume it was $15 in 1995. Then today it should be $21.

But production costs have risen too. Producers increasingly have to drill in tricky locations like deep water or tar sands. In the latter, the cost is about $38 a barrel, according to estimates by Royal Dutch Shell. Transportation and refining costs have also increased.

So for oil producers, $40 is no longer a fantastic price. OPEC members have real problems balancing their budgets at that level. The likes of Shell, meanwhile, have big capital expenditure plans predicated on higher prices.

But wishful thinking cannot underpin the oil price. On the fundamentals, there is little to justify the notion that its long-run equilibrium has risen by $50 in only five years.

HUGO DIXON and FIONA MAHARG-BRAVO

Tweety Pie - Mel Blanc (1958)

In case you can't get enough of this blog, or would like to stay abreast of what goes on daily here at The Oxford Princeton Programme, why not follow my two tweets which just went live last week? Something is chirping every 24 hours during the work week.

www.twitter.com/jabueva will update folks on the latest training opportunities offered by The Oxford Princeton Programme.

www.twitter.com/energyeducator is an industry voice for energy education and training regardless of the resource and whether it be physical, techincal or commercial; upstream or downstream. Colleagues, clients and competitors are all welcome.

On the Road Again (II) – Willie Nelson (1980)

This week, we show up at the Royal Garden Hotel in the Kensington District of London for the 11th International Petrochemicals Technology Conference & Exhibition, IPTC (16 & 17 February) and 10th International Downstream Technology & Catalyst Conference & Exhibition IDTC (18 & 19 February).

We are represented by the dynamic duo of Miss Joanna Schofield and Mr. Oliver Wells, both out of our Oxford Office. If you are in the vicinity, do stop by at our booth and meet two of the most delightful individuals you'll ever come across in the industry; and do try your luck at our Energy Education Wheel of Fortune.

Who says energy and commodities training can't be fun?

Oliver Wells Principal Sales Executive owells@oxfordprinceton.com

Joanna Schofield Principal Sales Executive jschofield@oxfordprinceton.com

From Russia With Love - John Barry Orchestra (1964)

Or maybe not, on this St. Valentine's Day.

I am, however, energized over our latest web-based course, European Gas: Security of Supply (Understanding the Russia-Ukraine Gas Conflict), which becomes available on March 1st.

It was just last month that curtailed supplies flowed into Europe, leaving millions without heat in the dead of winter. Whilst the two countries managed to come to an agreement to get gas flowing once more, their dispute is a long-running one that has been brewing ever since the breakup of the Soviet Union. We are unlikely to see the last of it.

This left us wondering whether Europe and the rest of the world are truly prepared for when this dispute makes headlines in the future. It turned into an opportunity to provide education and training to professionals in and out of the gas industry. And we are bringing it to market in record time no less.

The course will discuss:

• How and why Europe has come to rely on imported gas, and on Russian gas in particular
• How Russian gas gets to Europe, and how this may change with new pipeline and LNG infrastructure projects
• How gas is priced, and how the prices that Russia and Ukraine have been disputing compare to other international prices
• How the dispute between Russia and Ukraine arose, and how it might eventually be resolved

I do hope many of you will take advantage of this cost-effective ($175) opportunity to stay on top of this geopolitical energy situation.

Are there any other timely topics out there that you would like to see more in-depth discussion and analysis on?

Blowin' in the Wind - Peter, Paul & Mary (1963)

This, from The Huffington Post, is to be read in its entirety before you comment. But for now, let's just say, whoa!

Heidi Fleiss: Renewable Energy Business Better Than Sex

Heidi Fleiss, best known as the Hollywood Madam, had always had plans of opening up an above-board brothel in the Las Vegas area. But the economy has changed, and so have her plans:
"I think I'm going to put all my property up for sale in Crystal," Fleiss said recently by phone from her house in Pahrump. "I don't want to work so hard ... and deal with all the nonsense in the sex business."
Instead, she is focusing her attention on an alternative energy project she said is "perfect for Nevada."
"That's where the money is," she said. "That's the wave of the future."
And maybe that's true -- green consumers want more, more, more and there are a few other positive signs:
*Wind now employs more people than coal*New York State thinks it can revive the economy and the environment at the same time*Green jobs are looking safer than other jobs
But can renewables really beat the sex industry? Maybe it's best if they just work together.

On the Road Again – Willie Nelson (1980)

Andrew Infante is ready to discuss energy education with the forthcoming crowds.
The first of this year’s events and exhibitions takes us to E-World Energy & Water 2009 starting today, February 10th through the Thursday, the 12th in Messe Essen, Germany. If you’ve never been, it is one of Europe’s largest trade fairs and is dedicated to the energy and water economies. It is simply ginormous. This year, over 15,000 visitors are expected and we are one of 450 exhibitors.

The Oxford Princeton Programme has exhibited at this show for many years running now as we do get to touch base with several of our current clients as well a meet new ones who would not learn of our services otherwise.

If you plan to attend, do stop by: we are at Hall 1.0 Stand 417 and say hello to our representatives there: Oxford Deputy Sales Manager, Mr. Jim Crosskey, and Global Marketing Coordinator, Mr. Andrew Infante. Take a copy of our updated 2009 Global Course Offerings Catalogue and try your luck at our Energy Wheel of Fortune.

Divine Intervention – Taking Back Sunday (2006)

I know about the separation of Church and State, but Church and Energy? Hey, we’re all entitled to our opinions, right?

Read on and find out what the Bishop of St. Paul in Alberta said in a pastoral letter last week to oil executives in Calgary and Houston regarding the Athabasca Oil Sands. Is this what is meant by taking the "moral high ground?"

Pace and scale of Alberta oil sands development a "moral problem"

Alberta's oil sands industry has taken considerable heat for its environmental sins, but now an ecclesiastical voice is added to the secular critics.

"I am forced to conclude that the integrity of creation in the Athabasca Oil Sands is clearly being sacrificed for economic gain," Luc Bouchard, the Roman Catholic Bishop of St. Paul in Alberta, wrote in a pastoral letter last week. "The proposed future development of oil sands constitutes a serious moral problem."

The problem "does not lie in government and industry's lack of a sincere desire to find a solution; the moral problem lies in their racing ahead and aggressively expanding the oil sands industry despite the fact that serious environmental problems remain unresolved after more than forty-years of ongoing research," the Bishop wrote.

He cited the destruction of the boreal forest eco system; the release of greenhouse gases, potential damage to the Athabasca (River) watershed; heavy consumption of natural gas (using a relatively clean burning source of energy "to produce much more environmentally damaging oil"); and the creation of toxic tailings ponds. ("The question as to whether it is ethical to create such enormous amounts of essentially poisonous materials with no known way to detoxify them needs to be addressed").

Any one of these destructive effects provokes moral concern, the letter said, "But it is when the damaging effects are all added together, the moral legitimacy of oil sands production is challenged." And when the scale or proposed future expansions is taken into account, "The full environmental threat of the oil sands and the resulting gravity of the moral issue involved is most deeply felt."

Bishop Bouchard directed his letter to "oil company executives in Calgary and Houston, to government leaders in Edmonton and Ottawa, and to the general public whose excessive consumerist lifestyles drives the demand for oil."

Bouchard told Platts in a telephone interview: "What I am saying in the letter is not something that is new. But I wanted to add a dimension that needed to be added, which is a spiritual and moral dimension."

As consumers, "We all have to make an examination of conscience," regarding energy use, he said, but suggested that the overriding issue is "a reduction in the pollution we create."

The response to the letter "has been overwhelmingly favorable," Bouchard said. "If at least I've heightened the greater awareness of what is going on, all the better."

The Canadian Association of Petroleum Producers said in a statement: "We invited the input of all Canadians to identify and address their concerns regarding oil sands development and we accept the Bishop's input as part of that process."

Oil sands development "is sustainable, regulated and the cornerstone of Canada's resource supply," the statement said. "We look forward to talking with the Bishop and others about environmental impacts, progress that has already been made, as well industry's future vision for balancing energy supply, environment and economy in the region."

(Platts)