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The Business Insider reports that OPEC is expecting oil at US$75 a barrel by the end of the year - Even If Oil Hits $90, OPEC Won't Increase Production. Oil prices could reach $80-$90 a barrel by early next year, but OPEC will not increase its output until a huge amount of over-supply has been absorbed, the group's Secretary General said on Tuesday. OPEC officials have been nudging up their price aspirations since Saudi Arabia's oil minister said last week an oil price of around $75 could be achieved later this year and would not undermine a tentative global economic recovery. "The price will go to $80-$90 maybe at the beginning of 2010," OPEC's Abdullah al-Badri told the Reuters Global Energy Summit. "I don't think the price will go down... By the end of the year we'll see $75. $80-$85 is possible -- not with the demand we see at this time, but if demand picks up month after month, then maybe we'll see this price."

When OPEC meet on 17th December, how will they go about deciding the size of the inevitable production cuts? All OPEC states want the oil price to rise from current $44 / bbl (WTI). Some states will also be concerned that the price target is affordable by their OECD customers. But set against a backdrop of global economic turmoil and volatility in all markets, how do they judge the size of the production cut required to deliver the target price? Saudi Arabia is reported to favor a price of $75 / bbl, just short of the cost of new marginal supply in the OECD. Achieving this price in the medium term would keep OPEC in the driving seat. This short post is intended to be a discussion thread. Below the fold, I outline one radical idea for OPEC to achieve their goal in the short term.

The Economist has a look at some of the factors affecting oil production, warning "Oil prices have plunged. Another spike may be on its way" - Well prepared. WITH the price of crude mired at half the peak of $147 it reached in July, this may seem like an odd time to invest in oil wells. Despite trimming its output along with other members of the Organisation of the Petroleum Exporting Countries (OPEC) in an effort to prop up prices, that is just what the United Arab Emirates plans to do. Short-term price movements, its oil minister insists, should not distract from the world's enduring thirst for oil. Indeed the collapse of oil prices, one of the few reasons around for economic cheer, may be setting the stage for another spike. Just now oilmen are focused on the rapidly slowing demand for their product. Since early October, reckons the boss of BP, a big oil firm, America's consumption of crude has fallen by perhaps 2m barrels a day, or about a tenth. Sales of cars in America fell even more steeply last month-by 32%. There is also gloomy news from emerging markets, which have been the driving force in the oil markets of late. Demand for oil is growing much more slowly in China and India, for example, and car sales are down in both countries. There is even talk of global oil demand falling next year, for the first time since 1991.

Articles in the mainstream press about peak oil are pretty rare these days, but the SMH has one on the subject that never mentions the phrase (and flippantly dismisses Iraqi oil on the way) - Enjoy the cheap petrol, while it lasts. With demand on the rise, existing wells drying up and a dearth of big discoveries, the oil price is only headed in one direction. IN July 2008, the oil price hit a record high of $US147 a barrel. In its journey from the lows of 1998 to the highs of last year, many reasons were put forward for its ascent. Explanations included a so-called "war premium" , "a terrorist premium", hurricanes and evil speculators - the list of things and people to blame for the rise in oil prices was long. As the price rose, calls were made by political leaders and interest groups for oil producers to lift production and for a cut in taxes on oil and petroleum. Accusations of price gouging and profiteering by oil companies and producers soon emerged.

Oil Price Plunges from a Zenith In the first half of 2008 we saw oil climb to approach $150 a barrel amid the pundits' warning of oil rocketing to $200 a barrel and way beyond due to the phenomenon of Peak Oil. In the wake of those heady days we have now witnessed the slumping of oil prices to well under $100 a barrel into October. We have often heard that this is all within the context of declining oil supplies and escalating demand due to the rapid economic development taking hold in large regions and populations of earth, for example like in China and India, in addition to the maintenance of development in the more developed countries like the USA and Europe. The graph below illustrated this rise and fall of oil prices, and particularly the fall in prices from an all time zenith of a few months ago (Williams, 2008).

Record high gas prices have been making the news headlines for the past few months. Each week gas prices top the previous week, resulting in a new all-time high. Unless you are fortunate enough to live, work and play within walking distance from your home, you have been affected by these high gas prices like the rest of the nation. While the public continues to be outraged about gas prices, some politicians (McCain, Bush, and Gingrich) are taking advantage of the dire situation by organizing a push to drill for oil along our coastlines and lift a 27-year moratorium.

Back in September, the City of Houston agreed to buy all the solar power from a proposed NRG $40-million solar plant on a 25-year power purchase agreement, or PPA. The deal called for NRG to foot the bill for the plant, and the city to pay for the power at a rate of 8.2 cents per kilowatt-hour for the first year. What this meant, in real-world terms, was that NRG would supplant some of the solar output with power from other plants, giving the city an effective rate of 8.2 cents, though the agreement overall calls for Houston to pay 19.8 cents per kilowatt-hour. If built, the 10-megawatt solar plant would have been the biggest in the state, providing up to 1.5 percent of the city's electrical needs at a locked-in price on 90 percent of production - a fixed rate that would have served the city well if Reliant Energy raised its rates due to rising costs of oil, gas or coal. Reliant Energy's generation mix is 39.8 percent, followed by natural gas at 23 percent and coal at 22.5 percent - the former two prices likely to rise as the recession eases and tension over Middle East oil prices and production rises.

Back in September, the City of Houston agreed to buy all the solar power from a proposed NRG $40-million solar plant on a 25-year power purchase agreement, or PPA. The deal called for NRG to foot the bill for the plant, and the city to pay for the power at a rate of 8.2 cents per kilowatt-hour for the first year. What this meant, in real-world terms, was that NRG would supplant some of the solar output with power from other plants, giving the city an effective rate of 8.2 cents, though the agreement overall calls for Houston to pay 19.8 cents per kilowatt-hour. If built, the 10-megawatt solar plant would have been the biggest in the state, providing up to 1.5 percent of the city's electrical needs at a locked-in price on 90 percent of production - a fixed rate that would have served the city well if Reliant Energy raised its rates due to rising costs of oil, gas or coal. Reliant Energy's generation mix is 39.8 percent, followed by natural gas at 23 percent and coal at 22.5 percent - the former two prices likely to rise as the recession eases and tension over Middle East oil prices and production rises.

A century ago French philosopher and writer Paul Valery observed, "The central problem with our times is that the future is not what it used to be." He could have been commenting on current events. In August, Alternet invited me to write a series of articles on energy policy leading up to the election. At the time the invitation was extended, the price of oil was about $135 a barrel. Gasoline prices had eclipsed $4 a gallon. Natural gas prices hovered around $11 per million BTUs. SUVs sales were down, but car companies were having some trouble keeping up with the demand for smaller cars. Renewable energy was expanding rapidly. The most important energy issue was whether the renewable electricity credits, bottled up by Senate Republicans for the previous 12 months, would be extended before they expired at the end of 2008. The renewable fuel everyone loves to hate, ethanol, was blamed not only for the rapid rise in food prices but also for food riots around the world.

I've been getting a lot of calls and e-mails from people asking about the falling prices for oil in recent weeks. The immediate explanation is that world economic activity is decelerating. Demand is falling. OPEC announced cuts in output. But the markets still believe that economic decline will trump the ability of OPEC to prop up the price of oil. Enjoy it while it lasts. Just over the horizon, things are about to become dicey. This week, the International Energy Agency (IEA) will release a new report on the future of world energy. In its World Energy Outlook, the IEA will state categorically that "Current global trends in energy supply and consumption are patently unsustainable." There's not much wiggle room in that statement. According to the IEA, despite the recent fall in oil prices, the medium- and long-term outlooks for energy supply are grim. Conventional oil output is destined to decline. Demand will still grow, however, especially in the developing world. And the twain shall only meet by prices rising to clear the market. "It is," as our Arab friends like to say, "written."

Rising fears of a global economic downturn are sinking crude oil prices and driving down the share prices of major oil companies despite the industry's record profits of the last two years. Exxon Mobil Corp., the largest U.S. company and largest Western oil company by market capitalization, has lost 17% of its share price since January, its worst showing since 1981. Its smaller peers are doing worse. The stock prices of Chevron Corp., BP PLC, Royal Dutch ShellPLC, Total SA and ConocoPhillips, the largest western oil companies, all hit new 52-week lows during the day on Monday.

Relatively low taxes have kept pump prices far below most other developed nations, which some say is precisely why the current runup is so painful. Despite daily headlines bemoaning record gas prices, the U.S. is actually one of the cheaper places to fill up in the world. Out of 155 countries surveyed, U.S. gas prices were the 45th cheapest, according to a recent study from AIRINC, a research firm that tracks cost of living data. The difference is staggering. As of late March, U.S. gas prices averaged $3.45 a gallon. That compares to over $8 a gallon across much of Europe.

AP reports that falling natural gas prices in the US are making residential consumers happy for the time being, but notes that unconventional (shale) gas drilling has fallen off a cliff in recent months - Homes that use natural gas for heat could save big. The 60 million American homes that rely on natural gas for heat can expect substantially lower bills next winter thanks to a glut in supply and the weak economy. Just as distributors start to lock in contracts for the coming winter, natural gas prices have fallen almost 75 percent. Not all of that will show up as savings on the heating bill, but it should still mean noticeable savings. Utilities also generate about a fifth of the nation's electricity with gas, and many of their customers should notice price breaks as well.

Major oil exporter Nigeria is concerned about falling oil prices, petroleum minister Odein Ajumogobia told AFP Wednesday. "Of course we are concerned because we are budgeting based on a benchmark price and we have to obviously try and ensure that we meet our budget. If the price falls below the budget, there will be consequences. Of course it's a matter of concern to all oil producing countries".

New York - Besides gasoline, the Department of Energy calculates, there are 57 major uses of petroleum - everything from cosmetics to ballpoint pens, nylons, and even the waxes in chewing gum. That is why the effect of high oil prices is now spreading well beyond the pump, where gasoline hit another record price of $3.98 a gallon on Wednesday. Now, consumers will have to brace themselves for other higher costs, since businesses such as Kimberly-Clark, Procter & Gamble, and Colgate-Palmolive are raising prices on their products to recoup energy costs.

Here is a list of energy news items that the WattzOn team found most interesting in 2008: * CO2 is officially a pollutant (maybe) - In a ruling by the Environmental Appeals Board (a panel within the EPA), it was decided that the EPA has no valid reason to not limit CO2 emissions from coal plants. Confusingly, the EPA has recently overruled itself by stating that officials cannot consider greenhouse gas outputs in judging applications to build new coal-fired power plants. So, it's back up in the "air." * We need to be at 350 PPM of CO2 - James Hansen of Columbia University, and NASA's head of the Goddard Institute for Space Studies, published a landmark paper: "Target Atmospheric CO2: Where Should Humanity Aim?" in which he argues for an atmospheric CO2 concentration of 350 parts per million (PPM) for humanity to be safe on this planet. As some background, pre-industrial Earth had a CO2 concentration of around 275 PPM, and for years policy makers have set a target regulatory goal of 550 PM - twice that number. More recently, 450 PPM has been proposed as a better goal by the EU and a few others. Unfortunately, recent evidence has shown that the Arctic sea is melting at an alarming rate and a giant ice sheet in Greenland is starting to slide into the ocean. This is the reality with the world today at 383 PPM. Hansen points out that this means we set overly lax targets and proposes the 350 PPM goal with tons of paleo-climatic data to back him up. We need to bring the CO2 in our atmosphere back down to this concentration. * Energy scientists primed to enter government - US President-Elect Obama has nominated Steven Chu to be the Secretary of Energy, and named John Holdren as the Assistant to the President for Science and Technology / Director of the White House Office of Science and Technology Policy / Co-Chair of the President's Council of Advisors on Science and Technology. As the President-Elect puts it, "Today, more than

My top 10 oil industry stories of 2008: 1. Crude prices soar in 1H, WTI tops $147, Brent right behind 2. Prices collapse below $50 in 2H as demand retreats 3. Ethanol's struggles: VeraSun bankruptcy, others barely profitable, spreads collapse 4. Push begins to lift offshore drilling ban in US; Obama and McCain differ on approach 5. Capital crunch and low prices lead to deferred investment 6. Shale gas supply in US surges, a new factor in supply/demand balance 7. Credit crunch slows activity for once free-wheeling traders 8. Diesel surges, gasoline/naphtha plunge; traditional cracks skewed 9. Russian oil output to fall in 2008, first time in a decade 10. Brazil subsalt finds continue to lift nation's upstream prospects

Energy leaders at the World Economic Forum debated the true cost of fuel on Thursday as they grappled with the implications of world recession and how to navigate out of it. Record-high oil prices close to $150 a barrel in July last year added to the pain of economic slowdown, and now much cheaper prices of near $40 a barrel could help the global economy to rally. But for consumers, producers and the planet, oil at that level could be too cheap as it slows investment in new supplies of fossil fuel as well as in alternative energy. Saudi Arabia, the world's leading oil exporter, said late last year $75 was a fair price for crude -- at the top end of the $60-$80 a barrel many in the industry consider a desirable level. "That seems to be what you need to get investment," BP Chief Executive Tony Hayward on Thursday told the forum in Davos, with reference to the $60-$80 range.

Obama seems to understand part of the nature of the energy problem (unlike the morons in the "drill, baby, drill" crowd), with a recent interview with Time touching on some of the problems with industrial agriculture - Swampland. I was just reading an article in the New York Times by Michael Pollan about food and the fact that our entire agricultural system is built on cheap oil. As a consequence, our agriculture sector actually is contributing more greenhouse gases than our transportation sector. And in the mean time, it's creating monocultures that are vulnerable to national security threats, are now vulnerable to sky-high food prices or crashes in food prices, huge swings in commodity prices, and are partly responsible for the explosion in our healthcare costs because they're contributing to type 2 diabetes, stroke and heart disease, obesity, all the things that are driving our huge explosion in healthcare costs. That's just one sector of the economy. You think about the same thing is true on transportation. The same thing is true on how we construct our buildings. The same is true across the board.

Google has released an iGoogle gadget that tracks petrol prices - iGoogle: Petrol Price Tracker. I'm not sure if it works outside Australia, but it seems to work fine for Sydney. As they say in the video, you are better off cycling, walking or taking public transport - but if you have to drive, this will help make it less expensive.

OIL PRICES are plummeting, and the government ought to do something about it. You thought that the dramatic decline in the price of oil was one of the few good pieces of economic news lately? Well, in some ways of course it is. As the Post's Steven Mufson reported last week, the price of oil had dropped 38 percent since peaking two months ago.