Home Objectives Research Structure of Oil Market Conclusions Progress Log Team Members Mission 2007 - Course Site	Research Focused Question: What is the past and current structure of the oil market? (Sep. 30, 2003) "IEA: World Energy demand to grow briskly to 2030" (Oil and Gas Journal, Oct. 14, 2002) The World Energy Outlook publication produced by the International energy Agency predicts energy demand will grow by 1.7% per year through 2030, with the majority of the increased demand resulting from transportation needs.  Natural gas, which is predicted to incur the largest increase in consumption worldwide, will need to be imported into North America by 2030 in order to keep pace with demand. Energy Information Administration/ Petroleum Supply Monthly, September 2003 Table s1:         1988 2000 U.S imports =7,402 thousand barrels per day imports =11,459 thousand barrels per day exports =815 tb/d  exports =1,040 tb/d net imports =6,587 tb/d net imports =10,419 tb/d Table 1:            total stocks 2003 (crude oil, petroleum reserve, gasoline and other fuel oils) =1,566,868 tb/d   Petroleum Economist 1) “Regional variations mean feast or famine” (July 2000) As consumption has increased in the wake of economic prosperity and OPEC has cut crude oil production, gasoline inventories are at their lowest level in a decade.  The low energy prices have also cut back the funds available for exploration and development.  Unfortunately, U.S. refineries are already operating at 96 percent capacity, so production can not be increased much further.  Although the western terminals have been operating smoothly because consumer consumption continues to grow, eastern terminals have suffered from low utilization rates.  Ultimately, though, companies with the greatest geographical diversity will succeed the most. 2) “A respectable position” (Aug 2000)             In 2000, the possibility of exploiting natural gas from Alaska’s North Slope was seized upon by numerous companies.  At the start, BP Amoco was the front runner for extracting the 130 trillion cubic feet (cf) believed to be on the North Slope (only 30 trillion cf has been actually discovered).  Their most likely plan for extracting the oil was to run a pipeline down to the lower 48 states.  At first, BP was unsure of whether the demand in the lower 48 states was high enough to justify their multi-billion dollar investment.  After developing plans for a plant that would reduce standard costs by 20 percent using gas- to-liquids technology, though, they foresee commercialization of the gas within 2005-2010.             However, Alaskan Representative Gail Phillips has spoken out against any plan to invade the environmental purity of the Arctic National Wildlife Refuge. 3) “Supply Crisis Looms” (July 2003) Natural gas storage levels in the U.S. are at the lowest they have ever been.  The current situation is due to the fact that just 5 percent of the world’s supply of natural gas is in the U.S., but 31 percent of the world output also comes from the U.S.  Unfortunately, demand for natural gas is only on the rise, predicted to increase from 24 trillion cf in 2002 to 32 trillion cf in 2020.  Although some are arguing that Alaska’s North Slope should be exploited to increase production, it is unlikely to be able to increase the supply in the near future.  There are also political questions surrounding development on the North Slope, as the companies planning on investing in the area and building the 20 billion dollar required pipeline want the government to affix a price floor of $3.25/m Btu. 4) “Markets- tight stocks, slow Iraqi revival drive markets” (Aug 2003)             Although oil prices have remained fairly constant over the long run, prices have been relatively high for the past four years.  They currently remain high because of high demand in the U.S. and because of supply disruption fears in Iraq, Nigeria, and Venezuela.  Inventories are low this year, down 11 percent from last year.   Bucceri, Tom. Division of Oil and Gas Homepage. http://www.dog.dnr.state.ak.us/oil/. 26 Sep. 2003. 12.5% royalty from land-leasing goes to Alaska (schools receive portion of money) June, July 2003, Alaska received: $104,706,887 and $95,406,791 from oil and gas Third parties may benefit from restricted disclosure of private government seismic testing if doing so furthers Alaska's interests Amount of the Exploratory Incentive credits shall be based upon eligible sots with 50% or $5,000,000 maximum for approved activities on state land Numerous oil seeps along southern half of Alaskan peninsula, opposite side of the state from ANWR Northern half of peninsula is a good setting for structural and strategic traps Oil and gas are evident in many wells on peninsula, but not commercial flow of oil has been proven Primary tests show that further tests may expose oil and gas potential - seismic testing somewhat uncontrollable Appears to be a reputable governmental source, although inclined to support profitable industrial ventures Arctic National Wildlife Refuge. http://www.anwr.org/backgrnd/theissue.htm. Artic Power. 2003. Prudhoe Bay, 100 miles West of ANWR, similar geology Combined with Kuparuk, Lisburne and Endicott, form 25% of US domestic oil production Millions of dollars in research and development on North Slope demonstrate that petroleum and natural wildlife can peacefully coexist Minimal tundra used for oil facilities, migratory species' migration patterns taken into consideration ANWR largest unexplored oil field in North America After leasing land, fifteen years until ANWR oil reaches market Domestic crude oil production declining, from 9 billion barrels per day in 1985 to 6.6 million in 1995, to a projected less than 5 million in 2010 Deficit in US supplies - 10 million barrels per day Oil industries can promise natives fish and wildlife resources ANWR's establishment has meant that little actual oil and gas exploration has occured, but ANWR is located between two large, known oil fields, representing 25% of US domestic crude oil production Recoverable oil estimates range from 600 million barrels to 9.2 million barrels 26 "super giant" fields hypothesized to contain 500 million barrels - less area required for oil exploration Site heavily biased towards oil drilling "Challenging Times." Meed Middle East Economic Digest 47. 13 Jun 2003. Strikes in Venezuela and violence in Nigeria led Saudi oil to raise prices to $30 per barrel- First fiscal quarter 2003: Saudi oil revenues average $7,500 - $8,000 million per month- Iraq conflict, occupation, benefits Saudi Arabia  Unemployment in Saudi Arabia creates tension on government - heavy oil production necessary to quell economic unease Iraq War and new government appointments make centralizing difficult Debt reduction capable and high GDP capable of getting Saudi Arabia into European Union Oil 34% of GDP in Saudi Arabia First published in The United Kingdom - recognizable perspective  "Venezuela's energy industry: Counting on oil to re-float the economy -- again." Institutional Investor International 28. Jun 2002. Venezuelan economy dependent on oil, underdeveloped in other areas, depend on US industry for electricity  United State's economic influence continuously appears in article
Last updated: Oct. 25, 2003 Email Team 8: m2007-8@mit.edu