Peak Oil: WhistleBlower at IEA Claims Oil Production Statistics Are Manipulated

Here's one for the peak oil crowd, and those who suspect that the US and others have been manipulating certain market information for their own purposes, to promote a hidden agenda, to manage public perception.

Skeptical as always for now, but let's see what happens with this story.

Guardian UK
Key oil figures were distorted by US pressure, says whistleblower
Terry Macalister
9 November 2009 21.30 GMT

Exclusive: Watchdog's estimates of reserves inflated says top official

The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying.

The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves.

The allegations raise serious questions about the accuracy of the organisation's latest World Energy Outlook on oil demand and supply to be published tomorrow – which is used by the British and many other governments to help guide their wider energy and climate change policies.

In particular they question the prediction in the last World Economic Outlook, believed to be repeated again this year, that oil production can be raised from its current level of 83m barrels a day to 105m barrels. External critics have frequently argued that this cannot be substantiated by firm evidence and say the world has already passed its peak in oil production.

Now the "peak oil" theory is gaining support at the heart of the global energy establishment. "The IEA in 2005 was predicting oil supplies could rise as high as 120m barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year," said the IEA source, who was unwilling to be identified for fear of reprisals inside the industry. "The 120m figure always was nonsense but even today's number is much higher than can be justified and the IEA knows this.

"Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further. And the Americans fear the end of oil supremacy because it would threaten their power over access to oil resources," he added.

A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organisation was that it was "imperative not to anger the Americans" but the fact was that there was not as much oil in the world as had been admitted. "We have [already] entered the 'peak oil' zone. I think that the situation is really bad," he added.

The IEA acknowledges the importance of its own figures, boasting on its website: "The IEA governments and industry from all across the globe have come to rely on the World Energy Outlook to provide a consistent basis on which they can formulate policies and design business plans."

The British government, among others, always uses the IEA statistics rather than any of its own to argue that there is little threat to long-term oil supplies...

SP Futures Daily Chart and the Triumph of the Swill

It looks like the bulls want to take this squeeze up to the 1105 trendline, with six bull days under their belt since the tag on the lower trend line last week.

This rally is being accomplished on thin volumes, thick liquidity, and weak regulations dominated by trading programs, with obviously fabricated and highly overstated fundamental underpinnings.

As Lloyd Blankfein would characterize it, the Wall Street banks are just "doing God's work," or at least the work of some power and principality with a favorable inclination to greed, pride, and deception, if these masters of the universe were to acknowledge any power greater than themselves.

No doubt there are some good intentions in the government behind a desire to manage the markets higher. After all, a rising stock market is a sign of wealth and prosperity to the superficial elite based on their own personal portfolios. Especially if one ignores all the jobless, homeless, and suffering people being victimized in their highly exclusive empire of the ego.

But who can stop a people determined to be rich without productive labor, with a self-obsession capable of subordinating even heaven to their personal greed and vanity? This will end in an ocean of tears.

The banks must be restrained, and the financial system reformed, and balance restored to the economy, before there can be any sustained recovery.

Outlook for US Natural Gas Supplies and Demand

For now natural gas supplies in the US are above average, and the Energy Information Administration is forecasting a slightly warmer winter than last year in the US Midwest, and slightly colder in the West. The Midwest is the primary consuming region for natural gas and propane, with heating oil in the northeast.

There is some speculation this week that Hurricane Ida may enter the Gulf of Mexico, the first to do so for this remarkably light storm season, and speculators have been given some cheer in the oil and nat gas markets because of this.

Oil may be justified, but barring a selectively devastating storm, natural gas looks to be well supplied. This is the time of year in which we will typically look to place bull positions in the natural gas markets. So far that does not seem to be justified, but perhaps later, just on seasonal variance.

The energy bulls should hope for an abnormally cold winter in the US midwest. Their government does not think that they will get it.

"EIA projects average household expenditures for space-heating fuels to be $960 this winter (October 1 to March 31), a decrease of $84, or 8 percent, from last winter. This forecast principally reflects lower fuel prices, although expected slightly milder weather than last winter will also contribute to lower fuel use in many areas. The largest expenditure decreases are in households using natural gas and propane, projected at 12 and 14 percent, respectively. Projected electricity and heating oil expenditures decline by 2 percent (see EIA Short Term and Winter Fuels Outlook slideshow).

According to the National Oceanic and Atmospheric Administration’s (NOAA) most recent projection of heating degree-days, the Lower-48 States are forecast to be 1 percent warmer this winter compared with last winter and 1 percent milder than the 30-year average (1971-2000). However, heating degree-day projections vary widely between regions. For example, the Midwest, a major market for propane and natural gas, is projected to be about 4 percent warmer than last winter, while the West is projected to be about 4 percent colder.

EIA expects the price of West Texas Intermediate (WTI) crude oil to average about $70 per barrel this winter (October-March), a $19 increase over last winter. The forecast for average WTI prices rises gradually to about $75 per barrel by December 2010 as U.S. and world economic conditions improve. EIA’s forecast assumes U.S. GDP grows by 1.8 percent in 2010 and world oil-consumption-weighted GDP grows by 2.6 percent.

Energy prices remain volatile, reflecting uncertainty, or risk, in the market. To measure this uncertainty, EIA is tracking futures prices and the market’s assessment of the range in which those futures prices might trade (see STEO Supplement: Energy Price Volatility and Forecast Uncertainty). The Outlook will now report confidence intervals around the New York Mercantile Exchange (NYMEX) crude oil and natural gas futures prices using a measure of risk derived from the NYMEX options markets known as “implied volatility.”

Natural gas inventories are expected to set a new record high at the end of this year’s injection season (October 31), reaching more than 3.8 trillion cubic feet (Tcf). The projected Henry Hub annual average spot price increases from $3.85 per thousand cubic feet (Mcf) in 2009 to $5.02 in 2010."

Source: US Energy Information Administration

This chart shows the divergence between the Natural Gas ETF and the Crude Oil ETF in the US. The reason for this is founded in the fundamentals.



This is merely a linear version of the first chart shown above, the annual build and depletion of natural gas inventories over time. This tends to illustrate the big swings that are possible, and over a longer timeframe.

Krugman Declares "Mission Accomplished," Maginot Line Completed

The triumph of financial engineering based on an analysis of the past.

Conscience of a Liberal
The story so far, in one picture
By Paul Krugman
November 3, 2009

World industrial production in the Great Depression and now:

Jesse here. This chart is a bit deceptive because it compares two periods of time based on the start of the crisis. It would be interesting to compare the two crises from the start of the Fed's expansion of the monetary base. As I recall, the early 20th century Fed did not react this way until 1931 and did so in two stages. Ok, Ben was quick out of the starting gate with a massive quantitative easing. Score one for the Fed. They are quick on the draw when it comes to monetization.

And there is little hazard that Ben will tighten prematurely out of fear of inflationary forces, having learned at least that lesson from what might prove to be a simplistic historical comparison.

It would be unjust not to note that the 1930's Fed struggled a bit with the difficulties of an entirely different type of commercial banking structure and regulatory structure, and the restraints of a gold standard.

But at the heart of it, the comparison may be irrelevant. The genuine challenge in this era of fiat currency will be to avoid the 'zombification' of the economy, the appearance of vitality with none of the self-sustaining growth.

It may be discovered that the key to coming out of a crisis permanently is not how quickly and dramatically one inflates the money supply, or even how long one maintains it, and how many stimulus programs one can create, but rather how quickly and capably a country can reform, can change the underlying structures that caused the problem in the first place.

Japan has been doing it slowly because of its embedded kereitsu structure and government bureaucracy supported by a de facto one party system under the LDP. In the 1930's the impetus for reform was overturned by a strict constructionist Supreme Court and an obstructionist Republican Congress. The story of our time might be the perils of regulatory and political capture.
Before this Administration declares "Mission Accomplished" and high fives its victorious recovery, they may wish to consider that they have done the obvious quickly in one dimension, but have done very little to change the dynamics which created the crisis in the first place, choosing instead to support the status quo to a fault, partly out of ignorance and to some extent because of a pervasive and endemic corruption of the political process.

There are three traits that make a nominal bounce in production fueled by a record expansion in the monetary base a success: sustainable growth without subsidy, sustainable growth without subsidy, and sustainable growth without subsidy. And this can only be achieved by changing the game, reforming what was wrong with the system in the first place, if this is what caused the crisis.

Our forecast is that Ben and Team Obama are failing badly because they are fighting the last war, in the almost classic style of incompetent generals who lost the early stages of the Second World War because they were using the game plan from the First. And plans for a Vichy-style government establishing l'état financière seem to be well underway, in a general surrender of the goverance of the nation to the econorati.

For all its flaws, at least the Clinton Administration used to conduct polls to see which way the public was leaning, and took its cues from that. The Obama Administration blatantly ignores public outrage, and takes its calls from Wall Street, literally, and forms its policy and laws around what they want, or at most, will grudgingly accept.