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Petrobras Windfall Is A Problem

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Petrobras Windfall Is A Problem


Brazil's oil company Petrobras (PBR) reported a monster find in deep water off the coast of Brazil. The total recoverable reserves are expected to be between 5 billion and 8 billion barrels. That is about 50% of Brazil's existing reserves.

The problem comes from Brazil's action after the find was announced. Brazil canceled auctions on 41 adjoining blocks in the Santos Basin field. They canceled the auctions to "preserve the country's sovereign assets." This is just another step towards the conditions I have been warning about for the last three years. Countries are becoming increasingly negative about sharing their oil. We have seen several countries voluntarily reduce exploration that would lead to exportation and even exportation itself.

This is going to be a major problem in the years ahead. Once we have clear signs peak oil has arrived many more countries are going to halt exports with a plan to keep their own oil for future use. This is going to cause a dramatic shift in world exports and it could come very quickly once peak oil arrives. This means the world could suddenly go from producing 88 mbpd to 75-80 mbpd in less than a year once the dominoes begin to fall into place. It will only get worse from there. Countries are going to decide that having oil for their own future use is more valuable than the $125-$150 they would receive on the open market once the peak begins.

I first wrote about this over three years ago and was soundly criticized about my views. Nobody believed countries would quit exporting and change to hoarding oil. Now that it is beginning to occur I believe the potential for peak oil is even closer than thought just six months ago. Sometimes perception is more of a risk than reality. If enough countries perceive there is going to be a shortage their hoarding in advance of that shortage will create the actual shortage they are worried about. 

Readers need to take my warnings to heart because once this crisis begins it is going to create the kind of stampede you would get by yelling fire in a crowded theater. Do you want to be at the front of the exit line or bringing up the rear?


Jim Brown


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