Major Alaskan oil field shutting down

In a sudden blow to the nation's oil supply, half the production on Alaska's North Slope was being shut down Sunday after BP Exploration Alaska discovered severe corrosion in a Prudhoe Bay oil transit line. BP officials said they didn't know how long the Prudhoe Bay field would be off line.

Steve Marshall, president of BP Exploration Alaska said that tests indicated that there were 16 anomalies in 12 areas in an oil transit line on the eastern side of Prudhoe Bay. Tests found losses in wall thickness of between 70 and 81 percent. Repair or replacement is required if there is more than an 80 percent loss. "The results were absolutely unexpected," Marshall said.

Once the field is shut down, in a process expected to take days, BP said oil production will be reduced by 400,000 barrels a day. That's close to 8% of U.S. oil production as of May 2006 or about 2.6% of U.S. supply including imports. The shutdown comes at an already worrisome time for the oil industry, with supply concerns stemming both from the hurricane season and instability in the Middle East.

(2006-08-07 11:33:52 SGT) [Energy] Permalink

Venezuela may take zeros off currency

chron.com :

Venezuela could take a few zeros off its currency, the bolivar, if lawmakers have their way in trying to simplify the country's monetary unit. At the moment, the smallest bill in Venezuela is 1,000 bolivars (47 U.S. cents). One of the ideas raised by some lawmakers is to simply strike three zeros, turning 1,000 bolivars into one "new bolivar."

Rodrigo Cabezas, chairman of the Finance Commission in the National Assembly told reporters that the proposed reform will be sent on to the Central Bank, which will decide on the matter. Cabezas said in a statement that the proposed reform envisions the new monetary unit going into circulation in late 2007 or 2008.

(2006-08-07 08:01:15 SGT) [Biz] Permalink

Food price inflation - a personal report

It's one of those cliches - "be careful what you wish for". I blogged just a day earlier, regarding price inflation, that "we only have to await the rest of the drinks" besides coffee, to increase in price - coffee, of course, having already increased in price by 10 cents per cup some time back at many coffeeshops nationwide. Well, apparently, "the rest of the drinks" have caught up. A cup of tea now also costs 10 cents more at the Koufu coffeeshop at Rivervale Plaza, Sengkang.

A breakfast for two with two cups of tea and two plates of roti prata used to cost a total of $4.20 last week. The same meal now costs us $5.10 - an increase of some 21%. Inflation in action. Has your salary increased 21% lately? Uh huh.

It starts and ends with oil. Of course. Having covered a part of the trajectory of events for the past few years, I should know. The timing is sort of uncanny though.

This is why I aim for 100% - or better - in my ongoing quest for portfolio returns. Because anything less could be consumed by the inflation monster. I laugh at "financial planners" trying to sell me 4% returns - what do they know. The cautionary tale out of Zimbabwe haunts me still - of inflation running at 1000%, of a collapsing economy. Here's my blog entry dated 6 Jan 2004 :

... the banks have fallen victim to hyperinflation and flagrantly corrupt lending policies. Zimbabwe's real inflation rate exceeds 1,000 per cent yet the government has set interest rates at only 800 per cent, forcing most banks to lend at a loss. Zimbabwe's economy is among the fastest-shrinking in the world. Its collapse has assumed such proportions that unemployment has risen to more than 70 per cent and half the population survives on international food aid.

- Of course, I hope that we can avoid such a fate. I hope.

Gulf states struggle to boost spare oil output

peakoil.com -> gulfnews.com :

Gulf oil producers are struggling to expand their spare crude output capacity to meet surging global demand and their plans are blocked by manpower shortages, security factors and their ageing oil reservoirs, according to the World Bank. Such factors have led to a sharp decline in the region's spare capacity and allied with international demand to keep oil prices at historically high levels, the bank said in a study on the Middle East and North Africa (Mena) region.

By August 2005, the idle output capacity of the six main Gulf oil producers Saudi Arabia, Kuwait, UAE, Qatar, Iraq and Iran has plummeted to only 1.7 million barrels per day, one of the lowest levels ever. As a result, oil prices have sharply increased and are expected to remain high. While some regional producers have resorted to water and gas injection to maximise the flow of their wells, such techniques could be damaging.

- Peak Oil approaches.