Press review 28-06-2014 - “Iraq is finished”

The news meat-grinder is still ablaze with Iraq. Day in day out there are reports of Sunni forces lead by ISIL taking another town, another important infrastructure, another border post. ISIL alone seems in control of the whole section of the Euphrates valley between the Turkey-Syria border and the gates of Baghdad. The huge triangle between that valley, the Tigris valley and the Kurdish autonomous region seems also fully controlled by Sunni forces, ISIL or other.

The reporting by the western media is increasingly contradictory, one day ISIL is in complete control of the Baiji refinery, the following day it is still Baghdad in control. Monday the Sunni are reportedly fighting each other, Wednesday al-Nusra militants are pledging alliance to ISIL. But I reckon that reporting on this story must be anything but easy.

If up to now I considered the threats on Baghdad mostly rhetoric, reported gains by ISIL south of the capital call for reconsideration. It is not clear that ISIL has an army powerful enough to take a city of this size, but its breathtaking advance means it can not possibly be underestimated.

“Iraq is finished,” he said. “Maliki is nothing. Baghdad is finished. Now there will only be a Shiite-stan, Sunni-stan and Kurdistan.”

Peshmerga officer to Mitchell Prothero of McClatchyDC.

Press review 21-06-2014 - A bleak picture

ISIL still tops the energy news this week as it consolidates and expands its gains in Iraq. It now controls most of the territory between the Tigris and the Euphrates, including the petroleum reserves underground. The impact ISIL is having on Iraq's total petroleum extraction - and most importantly exports - is largely unknown, as the advances of ISIL once again mean the western media left cut off. Contradictory reports flew throughout the week about who controls important cities such as Baiji and Tal Afar.

The US confirmed its intentions to fend off the advance of Sunni factions, but naturally nothing was said of the support it has been lending to jihadists in the region. But if coming, these are still small steps, no relevant military actions are foreseen in the short term. One of the reasons floated by the US media for this hesitation is a lack of intelligence regarding the geographic lay out of the Sunni command hierarchy. Quite ironic, one year after Edward Snowden's revelations - it seems the US has wired the whole world, except for those that really matter wiring.

On the field there are now reports of shortages of refined products; the impacts of this war are definitly coming.

Extracted - the trailer

Extracted is the title of a book edited by Ugo Bardi, to which I contributed and that was recently published by Chelsea Green. I had previously left a few lines describing its contents, but now an account by Ugo himself has been made available in video.



Not so clear what the methane tap is doing there, but appart from that the video is quite good. This book is an essential piece of the economical and environmental puzzle we live these days; naturally highly recommended. Beyond Ugo's remarks on the cost of source rock fossil fuel resources I'd also note the vast artificial inflation of reserve estimates uncovered recently. Certainly something not in the fix toolbox.

Press review 14-06-2014 - ISIL launches its Fall Gelb

In Normandy most political world leaders were gathered to signal the 70th anniversary of Operation Overlord. In Iraq a large scale military operation lead by ISIL was under way, that in spite of the screaming irony of the date, more resembles Fall Gelb. A highly mobile force of unknown numbers stormed several cities almost simultaneously: Mosul, Baiji, Tikrit, Samarra, Ramadi, to which added bombings in Baghdad and other cities in the south. A front line of almost 400 km was open.

The usual western media branding of "terrorism" or "sectarian violence" no longer applies to the actions of ISIL in Iraq. A force capable of withstanding and win an urban battle in a city of over 1 million inhabitants is not a terrorist group, not even a guerilla, it is an army, fighting a conventional war. In a week it took two entire provinces of the country: Nineveh and Saladin, amounting to an area the size of Latvia and home to almost 2.5 million folk. Although accurate information is scant, ISIL should now be in control of at least 15% of Iraq's petroleum exports. At the time of this writing ISIL is still expanding its attacks into at least the provinces of Diyala and Sulaymaniyah.

Press review 07-06-2014 - A turning tide

The sentiment is definitely changing towards the petroleum market. Coincidently or not, a series of news this week seem to corroborate the observations I recently published on this matter. They all point in the same direction: at current prices and in the present geo-political setting, the equilibrium between demand and supply is set for a shake up.

Perhaps most relevant in this strain of news was a publication by the IEA concluding on the need for investments in the order of 50 T$ to maintain the energy system afloat the next 20 years (almost half of it in the petroleum sector). This would be the equivalent of investing the entire GDP of the UK every year up to 2035. In real life international companies are divesting in exploration, scrapping risky developments and selling assets; raging wars in Africa and the Middle East impair infrastructure in several key petroleum exporting countries. At this stage it is not easy to envision how these needs can be met.

Five reasons to expect volatile petroleum prices to return

The past three years where marked by exceptional stability in the petroleum market. The Brent benchmark went over 100 $/b by the midst of 2011 and would close above that value in every subsequent month except once. Volatility declined, which prices bound within the 110 $/b - 120 $/b interval most of the time.

In the same period extracted volumes remained too within a narrow band, between 74 Mb/d and 77 Mb/d. Long civil wars in Libya and Syria removed well over 1 Mb/d from the market, with economic sanctions on Iran also having a negative impact. But extraction from source rocks in the US and tar sands in Canada made up for these losses, with a shy output increase in Iraq also helping.

But for how long can this quiet market last? Apart from Iran, the internal politics of every other OPEC member seems deteriorating. Unconventional resources have so far plugged the gap, but can present prices sustain their expansion? In fact there are a few clues pointing to an end to this market sooner rather than later.