$200 Oil Is Coming While We Waste a Perfectly Good Crisis (Part 3) 182 comments
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Most people do not understand that all prices are set at the margin. There are 75 million houses in America. Only 4 to 5 million homes are sold per year. Therefore, 5% to 6% of the homes in the U.S. set the price for the other 70 million homes. This same concept applies to the last barrel of oil. When worldwide demand exceeded worldwide supply in late 2007 and early 2008, those last barrels of oil set the price. This explains why those last barrels of oil set the price above $100 a barrel. It wasn’t greedy speculators and evil oil companies.
Source: International Energy Agency
It is clear that supply has stayed in the range of 86 million barrels per day while demand has dropped to the range of 84 to 85 million barrels per day. If oil demand rises by 3%, demand will outstrip supply again.
Source: International Energy Agency
$200 Oil Will Arrive
When I was ten years old my parents told me to never touch our stainless steel sink and the electric light switch above the sink at the same time. I couldn’t resist. I tried it and got knocked on my ass. I never did it again. Americans are a different lot. Last year we got knocked on our ass by $4.00 gasoline. Instead of learning, we have sauntered back to the kitchen sink and we’re reaching up for the electric light switch. I wonder what is going to happen this time.
Americans are used to making tough choices. They have made choices between the Hummer H3 (13 mpg) and the Hummer H2 (8 mpg). They’ve made choices between a BMW 650i (16 mpg) and a Mercedes S600 (13 mpg). The coming energy crisis will lead to choices between food or fuel for many people. The coming crisis is as clear as the housing bubble. Anyone with half a brain could see that home prices would need to fall 30% to 50% to get back to equilibrium. Therefore, no one in Congress, Wall Street, or CNBC saw it coming. Total world oil supply is in a permanent decline. Oil demand will continue to rise. Only a half wit would argue that prices will not rise dramatically in the coming years. Turn on CNBC to get the half-wit view of oil prices.
Now the bad news for Americans: We make up 4.3% of the world’s population and consume 26% of the world’s oil. Europe makes up 6.8% of the world’s population and consumes 11% of the world’s oil. After the oil shock of the 1970’s Europe decided to dramatically increase taxes on gasoline. The high cost of gasoline forced people to buy smaller fuel efficient cars. Today in Germany, their cars average 44 mpg, while in the U.S. our cars average 22 mpg. Whether Europe spent the taxes wisely is another question, but they did change behavior. No crude oil refineries have been built in the United States since 1976. During that time, hundreds of ethanol refineries have been built. It requires more energy to produce ethanol than ethanol produces. The United States has between 250 and 300 years of a coal supply. That is more than the amount of recoverable oil contained in the entire world. We will not utilize this resource because environmentalists say it is bad. Congressman Gary Miller describes the U.S. response to the 1970’s oil shock.
In 1973, America imported 30 percent of its crude oil needs. Today, that number has doubled to more than 70 percent. Gas prices are as high as they are now in part because we've had no comprehensive national energy policy for the past few decades.
The peak oil shock that is coming will affect the United States more dramatically than any other country. Are you prepared for $5.00 a gallon gasoline? We are 20 years too late to stop this from happening. The American way of kicking all tough issues down the road is about to kick us in the ass, and no one is preparing Americans for the result. Happy talk and confidence-building exercises will not solve the problem. We are not in control of our destiny. Our supply is drying up. More drilling will not work. Higher fuel efficiency standards will not work. Congressmen and TV pundits will posture, expound, skewer oil executives on TV, and get red in the face, but they have failed the American public again. The social upheaval that could occur from fuel shortages and outrageous prices will be ugly. Most Americans live in suburbs far from work. Our food supply requires trucks to deliver to our stores. The U.S. military consumes 400,000 barrels of oil per day and spends $13 billion of your tax dollars per year to keep their machines functioning. War for oil becomes more likely in that environment. Is that a farfetched scenario?
The population of the world will continue to rise. The United States has no control over that fact. Developing countries will grow more prosperous. People utilize more fossil fuels as they become more prosperous. $2,500 cars are now becoming available in China and India and the rest of Asia. In a Chinese car ownership survey, 96% of respondents said they paid cash for their cars. How un-Americanlike. Imagine if GMAC could gain a foothold in China. More than 20,000 new cars per day are being sold to Chinese citizens who have never owned an automobile before. This is massive new demand being created for gasoline. China now has a middle class estimated at nearly 300 million people. 37% of people driving in China today did not know how to drive 3 years ago.
Oil will continue to be discovered, just not enough to keep up with demand. The pie chart below paints a disturbing picture. Only 30% of total oil reserves are light sweet crude. The other 70% is difficult and costly to bring to market. Few U.S. refineries can convert heavy crude into gasoline. Oil sands require massive amounts of water and natural gas to convert it into usable oil. The oil remaining to be discovered will be in deepwater wells. It takes at least 10 years to bring a deepwater well online. We are losing the race with time.
Source: Wikipedia
The only two people sounding the alarm have been Matt Simmons and T. Boone Pickens. Mr. Simmons warns that the best energy geologists and engineers are now retiring, with no one to take their place. The global oil and gas system infrastructure is rusting away and falling apart. The cost to rebuild our global energy infrastructure would be close to $100 trillion and would require 10 to 20 million workers. This would not be wasted money. Mr. Pickens argues that by investing $1 trillion to build wind facilities in the corridor from Texas to North Dakota we could produce 20% of the nation’s electricity by 2020. This would free up our vast natural gas resources to be used as fuel for truck fleets and ultimately automobiles. The ideas of both men would create jobs in America and make us less dependent on Middle East oil.
None of these ideas will avert $5 gasoline in our near future. They may avert $10 gasoline and potentially a resource-instigated World War III. The choice is ours.
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This article has 182 comments:
No doubt, oil will be at $200 one day. But this will be due to inflation. Now the question for you is: WHEN will it be at $200? Let me guess: you don't know. Then why make such "predictions"?
Have you ever heard of demand destruction? Another question for you: at $200 who can afford it? Hint: demand destruction.
There is enough oil in the world to sustain us for hundreds of years (not sweet crude oil alone) and even $200 barrel is too expensive for today standards to explore non-sweet crude alternatives. You know all of this information anyway, so why do you waste our time with such unfounded "predictions"? Put your money where your mouth is: $200 barrel -- WHEN????
I have read the Hirsch report, Simmons's book, and Colin Campbell's numerous articles. I have come to the same conclusion as you, that we will be in a lot on trouble by the middle of next decade if no comprehensive energy plan is implemented.
If our instant gratification culture changes and we, as a society, adjust to the lower standard of living required for the many years necessary to develop alternative sources this may be a incorrect assessment. Then again, it is pretty visible that our monetary policy in itself could push up the price of oil dramatically.
If you are one who can do without the a/c, dishwasher, washing machine, etc. while taking away the kids video games. cell phones, etc., you are a true "greenie". If not, you are a hypocrite.
The good news is that there are many ways to skin this cat, especially as oil goes over $85/barrel, so i don't agree at all with anyone who thinks we need to raise taxes or constrain consumption outside allowing the market to do so. We have the technology to build more rigs and boost production dramatically while additional exploration proceeds.
I'm also worried when I hear about "national energy policy". The problem is that technology is changing very fast, and demand patterns can shift pretty quickly. Imagine if we would have committed tens of billions to solar panels back in the 70s (as Jimmy Carter proposed)- we'd have wasted tens of billions on 10% solar panels.
Better to let the market sort out the dollars and cents of various alternatives, wether it be biofuels, nuclear, coal, solar, wind, geothermal, tidal, or conservation- in an optimal mixture based on granular circumstances. Perhaps that tendency is why America- whose way is, as you say, "not to do anything until it is too late"- produces 25% of world GDP with 4% of world population.
1. comparisions should be real terms i.e adjusted for the debasement in the value of the currency . Since our currency is being debased rapidly, which means high inflation is likely ahead for some years, an enduring price of $200/bbl in ,say, 10 years, will be well below the real price of oil as it averaged out in 2008.
2. the price of oil is also relative to other economic/financial measures such as the price of gold(compare the price of a barrel of oil with the price of an ounce of gold), the share of discretionary income spent by consumers across the globe on oil, or spending on oil as a share of global output.By these measures, oil was no more expensive in 2008 than in 1980 and by the measure of oil spending as share of global output oil, even at $147/bbl(which was a very short lived price), was no more expensive than in 1980. Thus, if we agreee that , maybe 4 to 6 years from now, when there is again robust real growth in global output, consumer incomes and in physical demand which propels oil to $200/bbl by 2020, oil will still not be as shockingly expensive as the article implies
3. if oil is indeed very expensive for a year or so then substitution/supression effects will occur that will cause demand to compress; these include substituting oil with natural gas in power production and industrial uses and to an extent in transportation and with simply driving less. It will also induce the ramping up of the output of GTLs and fuel alcohols as well as lead to the building of massive CTL facilities in China and probably India and South Africa, which, on the margin, will make a substantial difference. As you rightly note, prices are set on the margin.
4. the physical resource base for oil is enormous and keeps growing the more we look and as technology advances; conventional crude and lease condensates are but a minor portion of the oil resource base; the majority is in bitumens and shales. At a sustained price of $100/bbl in 2009 Dollars , vast capital and ingenuity will be devoted to not only expanding production from bitumens and shales(not in the US, perhaps but certainly elsewhere) but also in finding conventional oil in deepwaters(consider the goobally important discoveries offshore Brazil within the past 12 months), especially in Africa(hardly explored) but also Latin America and Asia/Pacific(also hardly explored). If we Americans and the Europeans refuse to look and produce, the Chinese, Indians, Japanese, Russians and Brazilians will not hesitate; indeed, they will rejoice.
5. Much of the conventional oil resource in place termed "played out" at $50/bbl and prevailing technology becomes a frontier production play at a sustained $100/bbl and advanced tertiary recovery technolgies. Even a a 5% increase in the recovery rate(which worldwide is well under 40%) will result in a very large increase in supply.
Oil may well reach $200/bbl in nominal terms in 15 years but if it does it will contain in that elevated level the seeds of its own destruction. The faster it ascends to $200/bbl the quicker will descend to half that level. There are many things we should worry about as we look ahead but a sustained oil price of $200/bbl is not one of them.
Having witnessed acid rain on our east coast and smog generated in California's the Los Angeles basin each from our use of hydrocarbons, I believe we affect the earth by burning our fossil fuels. And I don't like the coal as an option to oil but for it's ability to help us transition to a cleaner option as we better our technologies.
Exactly where we are with the term “PEAK OIL”? Does anyone really know? I do believe that this raw material source is NOT inexhaustible.
And I like my natural environment.
Tell you this; I have been investing in OIH, an oil services industry index fund, since we will not see the world's thirst for oil reduced any time in the near future.
Leaving geo-political and monetary issues aside, the price of oil and oils service industry stocks are very low and will rise toward the natural mean and above with the passage of time.
theburningplatform.com...
No mention of geopolitical risks in the article. If this global downturn lasts much longer (or gets much deeper), things could get interesting.
www.foreignpolicy.com/...
www.simmonsco-intl.com...
I know it is easier to call people idiots. You are the type of people who frequent SA. I should have known.
On Apr 08 12:58 PM junkyarddog wrote:
> Your article is idiotic, with all due respect.
>
> No doubt, oil will be at $200 one day. But this will be due to inflation.
> Now the question for you is: WHEN will it be at $200? Let me guess:
> you don't know. Then why make such "predictions"?
>
> Have you ever heard of demand destruction? Another question for you:
> at $200 who can afford it? Hint: demand destruction.
>
> There is enough oil in the world to sustain us for hundreds of years
> (not sweet crude oil alone) and even $200 barrel is too expensive
> for today standards to explore non-sweet crude alternatives. You
> know all of this information anyway, so why do you waste our time
> with such unfounded "predictions"? Put your money where your mouth
> is: $200 barrel -- WHEN????
>
We've gotten anthracite, the cheapest and easier and most high quality coal out of our mines. We're not working down our bituminous coal stock, using more and more energy and capital outlays to get at the remaining amounts.
You can watch and listen to a discussion on resource extraction and energy costs associated with it, especially with respects to coal:
www.chrismartenson.com...
On Apr 08 12:53 PM Socialism cannot compete! wrote:
> Total crap article. Someone's heavily invested in "green" and the
> return to affordable oil has gutted his portfolio. One thing he should
> research and consider -- there are now good reasons to believe that
> crude is formed by abiotic processes, and is therefore not non-renewable.
> Don't let your politics interfere with your profits...especially
> when your politics are just plain wrong!
And I think peak oil won't be accepted until we retest the highs at least twice more. Each time demand will pick back up, absorb all excess capacity, the price will spike and demand will collapse again. Rinse and repeat.
And so long as politicians (Obama) can announce their $15B alternative energy initiatives and be met with cheers by "green" people who don't know the difference between a billion and a trillion, we will not solve this problem.
And the real kicker...this is both easy and economical problem to solve.
On Apr 08 12:53 PM Socialism cannot compete! wrote:
> Total crap article. Someone's heavily invested in "green" and the
> return to affordable oil has gutted his portfolio. One thing he
> should research and consider -- there are now good reasons to believe
> that crude is formed by abiotic processes, and is therefore not non-renewable.
> Don't let your politics interfere with your profits...especially
> when your politics are just plain wrong!
On Apr 08 02:32 PM Cetin Hakimoglu wrote:
> No need to be argumentative. You don't like the user feedback don't
> summit your articles to a blog.
Once the financial crisis ebbs and we get inflation again, I'm sure Obama will find the eloquence to address THAT problem as well.
Junkyard dog, Expect 200 dollar oil within the year that we and the chinese get out of this depression. Car sales will surge then in China and demand for oil will go through the roof but remember the cuts in production by opec, wells shut down at this price, less exploration and wells drying up. THAT will send oil through the roof.
Now I have told you when the price goes to $200.00 Now you tell me when we are going to get out of this depression.
The disaster scenario makes for a heart-thumping read, but is not very likely. Not that I disagree with you about "Peak Oil". What I disagree with is your conclusions, for the following reasons:
1. CLEARLY, current oil prices, in current dollars are, higher than in the past, but CLEARLY in constant dollars the price has not changed much. I can remember gas in the 1960's costing $0.33/gallon, and for a silver dollar, I could get three gallons of gas. Well, for an ounce of silver (one silver dollar), worth about $11-$13 in today's money, I can still get 3 gallons of gas. In three to 5 years, when the dollar halves in value, as the National Debt doubles, Silver will go for about $25 an ounce, and I will be able to get 3 gallons of gas for about $7 per gallon.
2. Your presentation IGNORES alternative sources of energy that may be HUGE. One possible source is the methane Chelates in the deep ocean, another is in geothermal available throughout the country.
3. We have successfully transitioned through several energy sources in the past. Wood to Charcoal to Coal to Oil and perhaps back to Coal or Nuclear in the future. People adapt, if we let the markets work.
So -let the markets work.
If we don't solve the energy problem, nothing much else matters. There is no one individual solution, but the whatever the solutions they must have the same characteristic: they must build capacity faster than oil production fades.
One factor that is not much discussed is the value of oil as a chemical. Every barrel we burn is another barrel of raw material for tars, asphalt, polymers, plastics, composites and petrochemicals that is gone forever. Yes, we can get carbon raw material from coal, but at a great deal larger cost and environmental impact.
You have written about the energy problem before and you should keep making the case for action. Too many people are arguing that we shouldn't put effort into developing alternative energy sources because current costs (for alternatives) are 2x, 3x, 4x (I have even heard arguments of 10x) current coal and oil costs. To me, these arguments have as much merit as saying the roof leak doesn't have to be repaired because it isn't raining. We're going to start when oil is $150 again? Or when it is $200 or $300 or even higher?
Environmental factors may be important, but, in my mind, they are trumped by the economic issues. If climate factors are mitigated and polution is diminished, that is a bonus to keeping a viable socio-economic model working.
In 1974, King Hubbert projected that global oil production would peak in 1995 at 40-GB/yr. He was very smart, very well-educated, very well-informed -- and wrong.
I mapped oil fields in 1962, worked for NASA's Energy Office (handling much of the US Energy Research & Development publicity) in the mid-1970s. In the early 1980s, I read a letter from the CEO of a California utility warning about ever-increasing prices of oil. I told a friend in the industry that I thought this was nonsense.
Last year, with oil prices nearing $150 a barrel (and predictions of $200), I told students that prices were being artificially raised and were not sustainable. I also pointed out that the price of gasoline, when I was a university student 45 years earlier was $2.00-$2.50 (adjusted for inflation) depending on where I bought it. In 1979, I paid around $3.25 a gallon (inflation adjusted) in New York, but I've bought gas for as little as 90 cents (in Missouri) in the past decade. Today the price is about where it was 45 years ago -- all the apparent increase is due to government-created inflation.
Now I do understand the logic of your argument. Earth is finite and its resources are finite. However, I also know that people have been warning the public about running out of oil since around 1870. So far, they have been wrong. Eventually they may be right. But the market is probably a much better predictor than any individual.
And, having studied alternative energy as a practical matter, I think it is like desalinated water. We have all the fresh water we need (contrary to scare stories); when we run out, we will take the salt out of ocean water.
Suggesting that government will solve this problem -- either with policies or with subsidies -- shows little experience with the realities of politics and government.
So, while you aren't an idiot in the usual sense of the word (a fool), you do seem to be an "idiotes" (the Greek word) -- a layman, someone unfamiliar with policies and matters of governance. In such circumstances you might want to follow the advice of Kung Chieu (Confucius): "those who are not responsible for determining policy should not discuss policy."
I am for free markets. If we had free markets would there have been no oil refineries built since 1976 and no nuclear reactors since 1979? The markets are not free.
On Apr 08 03:18 PM Jonathan Christopher wrote:
> Dear Mr Quinn:
>
> The disaster scenario makes for a heart-thumping read, but is not
> very likely. Not that I disagree with you about "Peak Oil". What
> I disagree with is your conclusions, for the following reasons:<br/>1.
> CLEARLY, current oil prices, in current dollars are, higher than
> in the past, but CLEARLY in constant dollars the price has not changed
> much. I can remember gas in the 1960's costing $0.33/gallon, and
> for a silver dollar, I could get three gallons of gas. Well, for
> an ounce of silver (one silver dollar), worth about $11-$13 in today's
> money, I can still get 3 gallons of gas. In three to 5 years, when
> the dollar halves in value, as the National Debt doubles, Silver
> will go for about $25 an ounce, and I will be able to get 3 gallons
> of gas for about $7 per gallon.
> 2. Your presentation IGNORES alternative sources of energy that may
> be HUGE. One possible source is the methane Chelates in the deep
> ocean, another is in geothermal available throughout the country.
>
> 3. We have successfully transitioned through several energy sources
> in the past. Wood to Charcoal to Coal to Oil and perhaps back to
> Coal or Nuclear in the future. People adapt, if we let the markets
> work.
>
> So -let the markets work.
A couple of hundred years of self sufficiency would be possible, but it's probably too late now.
Whether you're happy with the results projected by people like Quinn and Simmons or not, I see their assessment as being pretty much on target.
Wake up, and don't live with illusions. Illusions don't burn well, and can't be converted to liquid fuel.
Today we had a bearish report on Oil supplies, and My HOU-TC shot up for a nice $0.60 Plus move. If HOU-TC could shed it's 'anchors', we could be up where we should be... about double current price.
Take care.
On Apr 08 03:49 PM Fredric Williams wrote:
> I don't think you are an idiot, but I wonder if you have made previous
> predictions about the price of oil (or other commodities). If you
> have, what did you say and when did you say it?
>
> In 1974, King Hubbert projected that global oil production would
> peak in 1995 at 40-GB/yr. He was very smart, very well-educated,
> very well-informed -- and wrong.
>
> I mapped oil fields in 1962, worked for NASA's Energy Office (handling
> much of the US Energy Research & Development publicity) in the
> mid-1970s. In the early 1980s, I read a letter from the CEO of a
> California utility warning about ever-increasing prices of oil. I
> told a friend in the industry that I thought this was nonsense.<br/>
>
> Last year, with oil prices nearing $150 a barrel (and predictions
> of $200), I told students that prices were being artificially raised
> and were not sustainable. I also pointed out that the price of gasoline,
> when I was a university student 45 years earlier was $2.00-$2.50
> (adjusted for inflation) depending on where I bought it. In 1979,
> I paid around $3.25 a gallon (inflation adjusted) in New York, but
> I've bought gas for as little as 90 cents (in Missouri) in the past
> decade. Today the price is about where it was 45 years ago -- all
> the apparent increase is due to government-created inflation.
>
> Now I do understand the logic of your argument. Earth is finite and
> its resources are finite. However, I also know that people have been
> warning the public about running out of oil since around 1870. So
> far, they have been wrong. Eventually they may be right. But the
> market is probably a much better predictor than any individual.<br/>
>
> And, having studied alternative energy as a practical matter, I think
> it is like desalinated water. We have all the fresh water we need
> (contrary to scare stories); when we run out, we will take the salt
> out of ocean water.
>
> Suggesting that government will solve this problem -- either with
> policies or with subsidies -- shows little experience with the realities
> of politics and government.
>
> So, while you aren't an idiot in the usual sense of the word (a fool),
> you do seem to be an "idiotes" (the Greek word) -- a layman, someone
> unfamiliar with policies and matters of governance. In such circumstances
> you might want to follow the advice of Kung Chieu (Confucius): "those
> who are not responsible for determining policy should not discuss
> policy."
A lot of negative reader criticisms here...hardly seem warranted, whatever you think of them.
Is this a case of trying to kill the messenger who brings bad news?
You should have concentrated more on the External Growth rates particularly in the Middle East and Depletion rate worldwide of existing fields.
Alternative energy production has nothing to do with Oil which is no longer used throughout the US as a source of electricity, I believe 3% is the current figure. The alternatives will replace coal/Nuclear/Nat Gas only to a small degree even if they are expanded at a 10 fold rate and in any case, they will not reduce the demand for oil.
Whether the Recession is over by 2010 is really of little consequence. The Obama infrastructure package starts in earnest within 12 months. China, and the rest trying similar packages are starting this year.
More than half of the Globe is going to stimulate via energy intensive projects But Oil is going to continue to be weak. Sure it is.
Use a little common sense, the supply is constrained to XYZ. China is inking 20 year supply deals while prices are low. They will pay the going rate in the future, they are paying so that they are first in line.
As far as that 80 million brls.worth of Oil is concerned...it is less than 1 days worth of diminished demand worldwide. When oil breaks above $70 later this year, I expect some nation to try to buy all of it.
The next small uptick in prices will occur by mid-year to $60.
But hey, the USA is the center of the Universe. The rest of the world doesn't exist.
* stop building suburbs, renovate inner cities = no need for hybrids
* stop taxing rail lines or start taxing highways to get the trucks off the roads
* stop using "free" natgas to make dirty oil. Our cities need this distributable clean fuel.
* make more garbage power (get your masks on) from what recycling doesn't.
* accept lower living standards, courtesy corrupt banksters (but hang the crooks) = less oil demand
* rein in military industrial complex before they take over or destroy everything including civilization for their new world order.
* forget solar (except cheap solar) for a decade or so.
Jimho
Have we reached "Peak Oil" already? I think the jury's still out on that one. For an alternative (although slightly outdated) view:
reason.com/news/show/3...
For an in-depth analysis, try "Energy at the Crossroads" by Vaclav Smil.
www.amazon.com/s/ref=n...
Smil's book is even more outdated (2003), but, for what it's worth, his conclusion is that we're probably not close to running out of oil anytime soon. He also discusses coal, nat gas, and alternatives. It's quite a heavy read, but interesting and informative nonetheless. The best part of the book is Chapter 3, in which he points out just how difficult it is to estimate total global oil supply (and future prices)...and how spectacularly wrong MANY have been with their predictions. No doubt we'll continue to make bad predictions...until we stop discovering offshore oilfields, I guess.
Of course, estimates of future DEMAND are probably equally difficult...who knows how many of the burgeoning Chinese middle class will eventually be car owners in twenty years? And will they be driving electric or gas vehicles...or some kind of combination? Will they be commuting from suburban communities to their jobs in the cities (like so many Americans do on a daily basis)? Hard to say what China will look like in the future...or India, for that matter.
Unlike the author of this article, I'm optimistic that many Americans will eventually move away from their gas-guzzling SUVs and adopt less energy-intensive alternatives...especially after experiencing the scare of $4/gal gas this past year. Personally, I've only owned a Corolla and (currently) a Honda Civic (both >30 mpg avg...and great vehicles, by the way)...and I still see LOTS of these and other sedans on the roads here in the Northeast. I don't view "most Americans" as "half-wits" (as the author seems to suggest)...I think we just got a little carried away this past decade or so. As with the housing bubble, we'll learn from our mistakes, and adapt.
Energy is a necessity, like food. Food shortages lead to riots....we see it in the news all the time. An energy shortage on a worldwide scale can lead to anarchy and protectionism at the highest degree.
We should not be too laxed about this issue. The current financial crisis may have bought us some time and perhaps an opportunity to invest heavily in new energy ideas (thus creating jobs).
As for your prediction of $200 oil in 5 years? To me, the number and date are not as important to me as the implications behind the numbers and dates. We need to get our leaders to prioritize this while we may still have a chance (could be that we are already too late, but we can at least get started).
Anyways, thank you for this article. It's good to be reminded that there are things that we cannot take for granted and we all have responsibilities for the future.
Get a clue. You will never see gasoline over $5 in the United States. Not unless you expect a Martian invasion. Earthlings are BROKE.
That said, I don't see a government policy solution to the problem - to the contrary, present policies will make the problem far worse. The Hirsch report points out that 80% of our petroleum consumption is for transportation, with the remaining 20% going to winter heating, chemicals, road surfacing, etc. Very little petroleum is used for electricity generation, so "alternative energy" like windmills and solar cells are irrelevant to oil consumption. Perhaps we could bring back coal-burning locomotives, but there is no practical substitute for petroleum as fuel for our cars and planes. Even the Pickens Plan has fallen off compressed natural gas as a light vehicle fuel, since its energy density is only one fourth that of gasoline (i.e. we'd need 4x the tank volume for equal range with a CNG-powered car vs. gasoline).
Against this background, we have a new administration that has quickly denied access to new domestic petroleum sources, including oil shale and offshore, while promising $billions in subsidies to alternatives that have no bearing on transportation applications. As Hirsch pointed out, the lead time to develop new fuels and their distribution networks is measured in decades. Likewise the time required to replace the domestic fleet of 240 million vehicles (source: R.L. Polk) with more fuel-efficient models will be decades.
Our present crowd of politicians will respond to the environmentalists, industrial unions, and farmers first, so in the near term we'll see increased taxes on fuels, over-priced small cars that won't sell, and boondoggles like ethanol that consume more energy than they produce.
As usual, John Lounsbury makes a cogent comment: "You have written about the energy problem before and you should keep making the case for action." The solution lies in a time well beyond the term of our present politicos, and we need to keep them from interfering with and delaying the market response that will eventually provide the solution.
I agree with peak oil and the some of the other related predictions except the idea that alternative solutions/infrastructure is a long way off. Biomass Ethanol can easily be transported, stored, and integrated into the existing gasoline infrastructure and further easily be integrated into existing automobiles. There are already E85 vehicles on the road and converting a traditional gasoline car to E85 is something like a $200 cost.
This explains why the major oil players have bought serious stakes in the biomass technologies (e.g. BP and VRNM).
Still this is probably not enough to prevent $200 oil but there will certainly be alternatives for those who wish to find them and there will be great economic incentive to do so. But when the alternative is also controlled by the traditional energy players one wonders exactly who will enjoy the cost savings? Will it be passed onto consumers? Doubtful. It might just allow them to keep fuel priced relatively the same over time as we slowly transition from gasoline to other sources.
China is currently using about 3 barrels per person. 1.3 billion people heading up this curve is going to drive oil demand to the moon in the coming economic recovery period.
On Apr 08 02:22 PM James Quinn wrote:
> Total crap reply. Why even bother to post. Write an article on the
> abiotic process and I'll assess your theory for you. Where in the
> article did I mention politics?
The need of implementing a transitional plan into multiple energy sources (oil, coal gasification, natural gas, geothermal, solar, nuclear) at reasonable market rates to the masses should have been engaged in upon oil trumpetting a market price of $147/BBL . . . as though a global war had been declared. For it will be a break down on a global order for facilitating cheap transport of food stuff to many highly populated areas that will become evident to the shortsighted individuals who just so happen to occupy political positions (of national leadership and oversight).
The false political leaders will still be selling dreams of hope and change; touting more power should be given to government . . . all the while remaining silent about or preventing the powerful free market forces being unleashed in order to function in an efficient and effective manner.
And although, after a few trillion dollars being spent and a national deficit becoming recognizably unsustainable, the people are belatedly catching on. It is most unfortunate that the awareness will be of little consequence in preventing the pain and suffering that we will all be exposed to by not already having implemented plans for our not so distant, future energy needs.
This is one of the best articles I've read on seekingalpha, and well supported by facts. One thing people don't thing about...it probably costs $25/bl to to put water in a barrel, never mind oil! The issue as I see it is that we are in the early stages of transitioning from an oil to non oil based global economy. How long will it be before we have science and technology to solve our energy issues, either 1) new sources or 2) means to get a lot more out of fossil fuels we use. A disruptive technology could real put downward pressure on oil. deep
The Greaser.
Which of the many different economic systems sometimes labeled "socialism" are you referring to? And what does "socialism" have to do with peak oil?
In that case, alternative electricity sources will have a very significant effect on oil. And it only takes some proving out of costs and technology for that effect to be priced into oil much sooner than 30 years from now.
An otherwise informative article, but I need to bust the notion that we HAVE coal supplies for 200 years.
We've EXHAUSTED anthracite, the cheapest and easier and most high quality coal out of our mines. We're NOW working down our bituminous coal stock AND SUB-BITUMINOUS STOCK, using more and more energy and capital outlays to get at the remaining amounts. COAL HAS SERIOUSLY PEAKED
IN THE U.S.
You can watch and listen to a discussion on resource extraction and energy costs associated with it, especially with respects to coal:
www.chrismartenson.com...
I always lough at self proclaimed "free market enthusiasts" who believe in idiotic ideas that oil is "abiotic" (go learn middle school chemistry you idiots) or that demand destruction will drive the price down so we will have cheap oil again (no mention that demand rise then will increase the price again, morons), and plenty of prosperity ahead for the world ("innovation" will save us), and that they will make a lot of money in that prosperity and become millionaires because they are "business-savvy."
Dopeheads, you will be some of the first casualties of economic destruction that begins in about 5 years (right now we are still doing very well), because you will never accept that you are bound to NEVER become rich, and NEVER get ahead of people who know science, are much more educated than you are, and EXPECT trouble and accept that they will have tough times ahead. People with intellect are truly rare, and the public has a cummulative intelligence of a herd of sheep.
Mr. Quinn, I regard you as a valued friend and ally, but please stop referring to reservoirs as "oil lakes." Recovery of 25% of oil-in-place is considered exceptionally good, and it is usually mixed with gas, sulphur, CO2 and other contaminants that have to be separated.
Ultradeep exploration proceeds apace, very slowly and without any meaningful oil production to show for the tens of billions invested. Angola, Russia, Libya, China and Iraq have potential. None of them are friendly or reliable partners IMO.
Therefore the United States has little choice. Either we give up our military, our civilian airlines and motor transport, or deregulate the domestic oil industry. High prices might do the trick.
Sassoil already makes oil from coal at about $35 a barrel. But it produces a lot of CO2. So if the enviro-nazies can show global warming that is off the table.
But I have been waiting for a graph that trends global warming for 20 years. Hasn't happened yet.
On Apr 08 01:10 PM Cetin Hakimoglu wrote:
> What may keep a lid on oil prices is the abundance of coal
Reducing Gasoline use? great idea, go buy a $30,000 plus Volt got no money, drive less. Eliminate Gasoline use, Let Obama put a New Nat gas car in every garage. Can't find a refilling station? Drive less.
Does this give us Oil independance? Not by a very, very long shot.
Pot holes= oil
plastics = oil
cosmectics = oil
jet fuel = oil
Cell phones, laptops, just keep running down the line...oil, oil, oil.
The list goes on but we will be oil independent if only Nat Gas is used for cars, helps yes, indendendant? no.
Besides, what about Obama's pledges to the Farmers. What future does Ethanol have in an Oil free car?
IMO
On Apr 08 12:58 PM junkyarddog wrote:
>
>
> No doubt, oil will be at $200 one day. But this will be due to inflation.
> Now the question for you is: WHEN will it be at $200? Let me guess:
> you don't know. Then why make such "predictions"?
>
> Have you ever heard of demand destruction? Another question for you:
> at $200 who can afford it? Hint: demand destruction.
>
> There is enough oil in the world to sustain us for hundreds of years
> (not sweet crude oil alone) and even $200 barrel is too expensive
> for today standards to explore non-sweet crude alternatives. You
> know all of this information anyway, so why do you waste our time
> with such unfounded "predictions"? Put your money where your mouth
> is: $200 barrel -- WHEN????
>
The quickest & simplest partial fix with a substantial impact is to promote modern small diesel cars in the US. We could be selling affordable cars with 60 to 80 mpg today (without hybrid), but for excessive emissions standards.
We should federalize emissions standards and ratchet back the NOx restriction a little and the particulate restriction a lot. With the latest diesel tech we can get 60 or 80 mpg.
I can't believe that some new diesels actually put paper filters in the exhaust stream to deal with ridiculous particulate standards. That must trash the efficiency.
Volatility is up and the economy is experiencing massive shocks daily. It's absurd to think that we've somehow hit some predictable macro-economic equilibrium when there are so many enomously disturbing trends with yet unknowable feedback. It's absurd, but I wouldn't be the slightest but surprised if we see $200 oil sometime in the next 5 years. And I would be surprised if doesn't move substantiually out of $40 and $60 over the same period.
This could add some more sticker shock to a peak oil scenario, as we simultaneously have decreased dollar demand and increased demand for foreign currency.
To better understand our current position in the time line of history, reading 'The Fourth Turning' by William Strauss & Neil Howe might shed light as to what the future holds.
Keep up the good work.
On Apr 09 01:26 AM Jack B wrote:
> I agree with you. I can't imagine how oil can jump to $200 in the
> near future. It was driven to $147 by non-market factors. The world
> economy has eroded, and OPEC, for example, has adjusted supply to
> prop up the price. I can't imagine how James Quinn can use some statistics
> to bolster his statements when the reality of the world economy reigns
> supreme over any preceding irrational investor greediness. It's in
> the best interests of oil producers collectively to keep the price
> at a level that will enable the world to get back on track. In the
> absence of this, appreciable declines in supply relative to demand
> will result in reduced capital spending on production facilities,
> refining and improvements which will create higher unemployment in
> that sector and a further drag on economic output. The net result
> will be a further depletion of financia reserves and a bigger hole
> to dig out of. Oil producers might be greedy, but they're not diconnected
> from reality.
Not that anyone in DC is that forward thinking.
Matthew Simmons served as energy adviser to U.S. President George W. Bush.
Robert Hirsch was commissioned to write the report "Peaking of World Oil Production: Impacts, Mitigation, and Risk Management", for the United States Department of Energy in 2005.
The problem is Bush totally ignored what these two brilliant individuals advocated which is a comprehensive energy plan.
The hiring of Steven Chu as Energy Czar by Obama does not inspired any confidence in me. He is an academic with no actual industrial experience in conventional oil and gas technology nor alternative energy technology.
in today's financial markets when nobody is lending to qualified borrowers for any productive purpose, where is the 30/1 leverage money going to come from?
maybe the federal govt will just print it & give it to the banksters/
jet fuel/diesel from colorado shale and gasoline/chemical feedstocks from high-volatile bituminous coal are always possible but it takes 10 yrs to get an industry started. the industry start that we had in 1977-80 was aborted by r.reagan on orders from the houston oil millionaires who had paid for his election campaign.
> jack
why no mention of bio-diesel?
BP have partnered with an interesting UK small cap company D1 Oils. together they are doing a lot of R & D on jatropha.
jatropha is currently being used as fuel in some Indian states on government fleet etc.
www.d1plc.com/aboutFue...
disclosure: long DOO
When I read the first paragraph in this essay, I almost tuned out. because a contention which has Obama leading the US into socialism is either sick or stupid or both. But while I haven't read parts 2 and 3 yet, I want to say that while I don't believe that oil is going to $200 yet, Part 1 is a superb contribution, and I think that it should be circulated as widely as possible - i.e. not just in this forum.
Sometimes though I wonder if it wouldn't be a good thing if oil went to $200/b. Obama may not be a socialist, but he definitely doesn't get the energy message. $200 oil might make the decision makers understand what kind of tiger they are riding. The simple truth is that that price is unacceptable. The economies of the oil importing countries cannot function with that price - unless of course they decide to return to the good old days of the horse and buggy. An interesting thing about the above comments is that there are still persons who believe that speculation drove the price of oil to $147/b. My suggestion here is as follows: no one who can solve non-linear difference equations could possibly believe that, or for that matter anyone who can read the English language, because all except a handful of energy economists accept that it was demand outrunning supply that was the problem - and moreover, OPEC's strength and intelligence is now such that they can always make this happen.
Incidentally, oil doesn't come in lakes, and Alan von A, the recovery factor now is almost 35%, but I suspect that outside the Middle East it is much lower.
However very surprised by the lack of civility and manners in the author's reply to some posters who seem to question or disagree with the article?
On Apr 09 09:53 AM jvanwest wrote:
> What was your point in the beginning of part one to knock on the
> Obama administration with a number of small spending projects hand
> picked by you to make a poor argument that nothing is being done
> to curb dependence on oil? Your argument is weak because you failed
> to discuss the real numbers on spending for alternative energy projects
> proposed in the stimulus bill, which happens to be 10's of billions
> of dollars! With a start to your article like that I am not sure
> any educated person can continue to read further. I suggest you stick
> to facts and not publish your political views which are failed at
> best.
On march 1st (when the oil price was 40$ a barrel) I did he following (very simple) analysis which I'd like to submit to your attention as it seems pertinent to the subject and the recent price up to 50$ shouldn't affect it being modest increase:
(I apologize for my Enghish)
In a simplified approach, we could reasonably look at the economic evolution as a function of three main variables: time (t), US $, oil price.
Only time (t) is an independent (monotonically increasing) variable. The two others ones are functions of a large number of variables, including the time (t).
But, as crude oil is usually quoted in US $ per barrel, the reference mathematical model turns into the following basic function f:
Oil price ($) = f (t)
The current price is around 40 $ a barrel. This level was reached a number of times from 1980 to 2000, as maximum peaks due to oil crisis, as shown in the following chart (source: enersolutions.ch/index...,
which is worth reading despite its release date on October 31th, 2004):
(missing chart)
The 20 $/bl mean price was maintained for more than 10 years, from mid-eighties to mid-nineties.
The 30 $/bl mean price was maintained for a few years, from 2000 to all 2003.
The chart doesn’t show the trend from the end of 2004 on. But this is a recent and well-known story: the oil price has progressively increased to the maximum peak last summer 2008, with a subsequent sudden decreasing to the present value.
It’s worth remembering that this latest oil drop (from 147 $/bl in July 2008 to the current 40 $/bl), as well as the US$ recent evolution (recovery against other main currencies over the same period), occurred against the most “reliable” expectations...
If we consider the US$ depreciation over the years in terms of absolute purchasing power, we can reasonably say that the current oil price is rather low. Some further evaluations should be needed to estimate how many 1980’s $ (or any other year’s $) match the current 40 $ (purchasing power parity concept)...
As there were lots of analysts who justified 150 $ a barrel last summer, most of them ready to swear the price would have risen to 200 $ and more, now everybody knows very well the reasons why the price level is so low at present. Here are the main ones:
1) the unprecedented economic crisis and dark perspectives;
2) the crude oil production rate looks related to an out of date level of demand and consumption which shouldn’t come back for long time…;
3) the large crude oil storage and the market supply turn out to be much higher than the demand and consumption as a consequence of the two previous items: we read about 80 million barrels which are stored on the very large crude tankers sailing and waiting off shore… plus a further inshore storage by both producer and consumer countries…
At low price levels as the current one, business for profit or, if you like, profit-making can become difficult to manage. Even covering the production costs can become a problem. I am referring to the very deep oil fields or the offshore oil facilities… For instance, the Norwegian StatoilHydro Co. (*), due to its offshore oil fields along the Norwegian continental shield, could have a hard job to stand the global market competition (but the Company is taking advantage of the recent krone depreciation against the US$ and, perhaps, also of a large number of fully amortized offshore plants). For those countries where oil is still few metres below the sand (i.e. some Arab producers), the problem is not so important but, in these cases, there is the other side of the medal: the political instability and the persistent risk of conflicts and terrorist attacks in those areas.
The question is, as usual, obvious: will the barrel stand at this low level or will it move up to higher levels? The answer is not as easy as the question...
Surely, once the large quantities of crude stored on tankers will be sensibly reduced, the supply will be modulated on the lower demand of the market (also to the detriment of some producers), should the so dreadful hyperinflation break out from the USA and the $ with global diffusion, with tensions in those who are traditional areas of oil production and logistic networks, the answer should be only one…
Future oil prices notably higher than current prices, as the news say, could be a first warning…
Furthermore, if we wanted to take into account other weaker signals, some symptoms can be clearly perceived also here in Italy. Here are some of them:
> energy invoices, which were increased of 30% or more in a year, they said, due to the oil price run-up, which now are hardly lowered, they say, of a “poor” 3% next April;
> gasoline and diesel-oil prices at the stations, which are not reduced to the expected values subsequent the crude oil drop;
> foodstuffs prices which doubled in a year, they said, due to the rapidly increasing cost of energy, which now stand high, they say, due to some cartel among producers…
-----
(*) Energy company, vertically integrated (drilling, oil and natural gas extraction and processing, distribution and marketing), the biggest offshore oil and gas company in the world and the tenth by revenue. The company operates mainly in Northern Europe but has extended its activities in many countries over four continents. The Norwegian State is the major shareholder of the company (62,5% of shares). The corresponding annual dividends paid to the State are the main income for the Sovereign Government Fund which I mentioned in a previous post.
Your lousy political commentary aside I tend to agree with the bulk of the information regarding oil prices going thru the roof.It appears you decided to mix your obvious distain for the new administration and a robust arguement for oil future going thru the roof. I believe we have heard this same administration ring the warning bell and start a robust attack on our dependence on foreign oil. To couple your commentary with lines from a previous congressional budget does your readers a disservice. I to would have liked to see that budget slashed line by line however there are a few things going on in the economy.To cross lines between the countries dependence on foreign oil and the fight aganist this countries worst economic downturn since the depression is wrong. Its easy to see its a fun place for the republican pundits to play as its easy to hide political sour grapes with truth. One point in all your political rants you missed the part about unfortunatly some of these actions are driven by the need to address the collapse of our economy..The light has been turned on run away....Stick to the energy commentary its a good read and leave the sour grapes for another blogg.
On Apr 09 10:34 AM kjm wrote:
> Good article. I am a mom of 3 boys and I just need to ask you WHY
> oh why did you feel the need to touch the light switch and the stainless
> steel sink at the same time - against your mom's wishes?
On Apr 09 10:35 AM kharrin49 wrote:
> Jimmy Jimmy,
> Your lousy political commentary aside I tend to agree with the bulk
> of the information regarding oil prices going thru the roof.It appears
> you decided to mix your obvious distain for the new administration
> and a robust arguement for oil future going thru the roof. I believe
> we have heard this same administration ring the warning bell and
> start a robust attack on our dependence on foreign oil. To couple
> your commentary with lines from a previous congressional budget does
> your readers a disservice. I to would have liked to see that budget
> slashed line by line however there are a few things going on in the
> economy.To cross lines between the countries dependence on foreign
> oil and the fight aganist this countries worst economic downturn
> since the depression is wrong. Its easy to see its a fun place for
> the republican pundits to play as its easy to hide political sour
> grapes with truth. One point in all your political rants you missed
> the part about unfortunatly some of these actions are driven by the
> need to address the collapse of our economy..The light has been turned
> on run away....Stick to the energy commentary its a good read and
> leave the sour grapes for another blogg.
It's nice to see a publisher responding. I also follow the oil drum.
However I'm not a doomer. It's possible to make use of the oncoming oil spikes to ready investments in industries and technologies which will ameliorate the problem. Particularly nuclear, wind etc.
Think of the spikes like a hammer. The simple application of force. It can do damage, however if you can direct the force of the blow, it can do work instead. I'm using it as a lever, the spikes are going to be coming in on oil, and I'm then going to be directing the results of those into nuclear and "green" energy. Along with that go heavy energy users.
Having just read through the three sections of your commentary, I must agree with your basic tenets of the supply of oil and the coming market effects of higher demand and dropping supplies around the world.
May I add the following book to this discussion? It was written by a policy wonk, but within its pages (after the first 64 of thinktank boilerplate) it dicusses many of the points brought up in this OP.
The title of the book is "The Hydrogen Economy" by Jeremy Rifkin. Regardless of one's opinions on the subject, this is a good informative read.
OIL IS A RENEWABLE RESOURCE !! It is not now, nor ever has been a "Fossil Fuel" produced by dying dinosaurs, etc. Oil is being produced by living plants, mammals and organisms in millions of gallons a day quantities as part of their normal life cycles and is being deposited in relatively predictable areas based on its method of collection. scientists at major oil companies know this and it's time the general public also was informed of this fact. Thus, the oil in the mid-east was formed in the African rain forests, collected by the Nile river and its tributaries, released when it hit the salt waters surrounding the arab nations and deposited in underground formations. Yes, we will run out of oil - for the time being- because we are consuming much faster than the living species on earth are producing: -- but it is being replenished. To quantify this a little more, realize that the Mississippi river flows past Baton Rouge at the rate of 2 billion gallons per minute. Oil is soluble in water from 1-10 parts per million. Therefore, the Mississippi is delivering a minimum of 2,000 gallons/minute of dissolved oil into the Gulf of Mexico every minute of the day and night. The same is true of other areas of the world. This information should be utilized wisely by politicians, law makers and investors.
On Apr 09 10:19 AM Frank H wrote:
> I agree oil prices will get bumped back up to at least the 140's
> again and get set in place for a longer run at that range
Kudos to you about bringing up inconvenient facts such as Mexico's rapidly declining oil output.
Beyond the raw physical facts, there is also the entitlement factor. Once the oil producing nations saw that oil COULD hit $147/bbl, their expectations were raised. Mentally they started thinking of their oil as being "worth" that much. Over time their expectations will continue to rise, much like the people in this country who grossly overpaid for their houses and have now had a substantial haircut. The key difference is that the housing market has probably NOT peaked, but oil probably HAS peaked.
BTW, I think you are more right than wrong. I am long BP, SU and STO, partly as an oil hedge and partly also as a dollar hedge. (Not to mention whatever whacking Obama is thinking of giving Big Oil, I'm hoping the foreign companies will come off better in that case -- if that isn't a classic case of unintended consequences!) The fact that two out of the three now are paying decent dividends is also a factor. I'm staying away from USO right now as there is so much wastage in trying to mimic a commodity with paper contracts. Had better luck with UCO but obviously there are still some of the same issues.
In my opinion, this is your very best article yet.
Aside from the occasional forays into attacks on CNBC (which I personally don't relate to, but that's your prerogative), the article sticks to its central subject, gets its points across in a concise manner, is well-written, and well-reasoned.
Excellent work, Quinny! Thank you!
It is, of course, a little cynical for my taste, but you and I stand at antipodal neuro-sectors in the positive/negative outlook for the kosmos (and most everything else). And that’s fine; we need cynical people—to give us the downtrodden, doomsday, dodgy side of every proposition.
A couple of things for you to consider: I myself am invested in oil and energy (CEO, STO, PTR, HNG, YZC) not because of the peak oil theory (or fact, as you take it), but because of China. So, I agree somewhat with your conclusion, although not exactly with how we get there. And, of course, I wouldn’t dare predict the price of anything—stocks, commodities, or divorce.
As you pointed out, the growth potential in China is humongous. But my contact there would strongly disagree that there are 300 million Chinese in the middle class at this time; rather, he would say that there are about one-third that many upscaled to that point now with another 200 million on the way to that level. (just for you to take note of)
Also, the $100t figure to rebuild the energy infrastructure is quite an astronomical hyperbole, in my view. We could perhaps purchase a large portion of the planet for that figure. Don’t you think?
Last, I don’t know whether you got yourself an editor or you worked harder on this piece, but it certainly shows.
There are a couple of places that you jammed a little bit too much info into a paragraph, but for the most part the writing is good.
I’ve been editing for thirty years and I can tell you that when I write a serious piece, I use an editor. Only a fool or a megalomaniac would not, and Quinny you’re neither of those two. Right?
Even though I hope you’re wrong on much of this article, you’ve done well for your side of the energy view.
The best to you, Quinny.
The ArtfulDodger
I'd love to have an editor but I write these articles while sitting in bed watching American Idol.
On Apr 09 11:26 AM ArtfulDodger wrote:
> Dear Quinny:
>
> In my opinion, this is your very best article yet.
>
> Aside from the occasional forays into attacks on CNBC (which I personally
> don't relate to, but that's your prerogative), the article sticks
> to its central subject, gets its points across in a concise manner,
> is well-written, and well-reasoned.
>
> Excellent work, Quinny! Thank you!
>
> It is, of course, a little cynical for my taste, but you and I stand
> at antipodal neuro-sectors in the positive/negative outlook for the
> kosmos (and most everything else). And that’s fine; we need cynical
> people—to give us the downtrodden, doomsday, dodgy side of every
> proposition.
>
> A couple of things for you to consider: I myself am invested in oil
> and energy (CEO, STO, PTR, HNG, YZC) not because of the peak oil
> theory (or fact, as you take it), but because of China. So, I agree
> somewhat with your conclusion, although not exactly with how we get
> there. And, of course, I wouldn’t dare predict the price of anything—stocks,
> commodities, or divorce.
>
> As you pointed out, the growth potential in China is humongous. But
> my contact there would strongly disagree that there are 300 million
> Chinese in the middle class at this time; rather, he would say that
> there are about one-third that many upscaled to that point now with
> another 200 million on the way to that level. (just for you to take
> note of)
>
> Also, the $100t figure to rebuild the energy infrastructure is quite
> an astronomical hyperbole, in my view. We could perhaps purchase
> a large portion of the planet for that figure. Don’t you think?<br/>
>
> Last, I don’t know whether you got yourself an editor or you worked
> harder on this piece, but it certainly shows.
>
> There are a couple of places that you jammed a little bit too much
> info into a paragraph, but for the most part the writing is good.
>
>
> I’ve been editing for thirty years and I can tell you that when I
> write a serious piece, I use an editor. Only a fool or a megalomaniac
> would not, and Quinny you’re neither of those two. Right?
>
> Even though I hope you’re wrong on much of this article, you’ve done
> well for your side of the energy view.
>
> The best to you, Quinny.
>
> The ArtfulDodger
LOL! What are these "good reasons to believe"? You heard it on Michael Savage? Was it Sean Hannity? Or maybe O'Rielly?
More likely even it was some anti-science witch doctor in a mega-church entertainment conglomerate.
On Apr 08 12:53 PM Socialism cannot compete! wrote:
> One thing he should research and consider -- there are now good reasons
> to believe that crude is formed by abiotic processes, and is therefore
> not non-renewable.
Point one of your guns at your noggin and pull the trigger.
On Apr 08 02:19 PM doubleguns wrote:
> Politicians want crisis. That is when they can get thier political
> agendas down the american peoples throats.
F/T is not an efficient way to convert coal into C6/C9 high-octane hydrocarbons. you do get a lot of wax, some aliphatics in the diesel boiling range, some low-octane naphtha (suitable for reformer feed) and some gases (C4 and under). from a thermal efficiency standpoint, incinerating the coal all the way to CO + H2 and then building up some hydrocarbon molecules wastes a lot of energy.
a better route uses high-volatile illinois/west kentucky coal as feed to a 2-stage hydroliquefaction plant as was practiced @ wilsonville AL during 1981-85. yields of syncrude (no resid) were 3.1 bbl/ton & product-cost estimate for a commercial plant was 38.00/bbl. sure beats 147/bbl.
> jack
When will our politicians smarten up and go nuclear?
On Apr 09 08:54 AM Tim Miles wrote:
> Interesting article and analyses. Does anyone wonder why the Chinese
> are stockpiling oil and trying to build a navy that can protect access
> to it?
Missing (and perhaps I spoil a future article by saying so) is, what are your thoughts on how I can make money from the scenario you present...
Please be as exhaustive as you may...;-}
Thanks for a factual (well, for the most part, anyway!), well-organized and well-written article on a very important, yet often overlooked subject.
Sadly, a "potential" factor that could mitigate America's insatiable demand for oil may be America's on-going economic and financial crisis.
It is truly unfortunate that our elected leaders and our inept Congress are incapable of understanding the importance of taking "drastic steps" NOW to mitigate the inevitable disaster that awaits!
I used to bang away in the political way but no more . I learned something from our professor Ferddy E. Use your noggin he makes us think as so many other comments and articles have.
Now Freddy has got me thinking " what can I take to the Bank
from these rants !"
The heck with politics they got theirs guys we need to focus on how can we profit from the DC ideology oops I mean idiocy.
I just hope we never see $ 50.00 a six pak beer
Cheers,
DuffBeer
On Apr 08 01:42 PM Dirk McCoy wrote:
> Thanks for the article. While I can't agree with you that $200 oil
> is likely, I can agree that the convergence of trends indicates that
> we will need additional sources of energy over the next 10 years,
> and that one would be wise to consider timing risk when making plans.
> So I doubt SUV sales will recover to their former levels.
>
> The good news is that there are many ways to skin this cat, especially
> as oil goes over $85/barrel, so i don't agree at all with anyone
> who thinks we need to raise taxes or constrain consumption outside
> allowing the market to do so. We have the technology to build more
> rigs and boost production dramatically while additional exploration
> proceeds.
>
> I'm also worried when I hear about "national energy policy". The
> problem is that technology is changing very fast, and demand patterns
> can shift pretty quickly. Imagine if we would have committed tens
> of billions to solar panels back in the 70s (as Jimmy Carter proposed)-
> we'd have wasted tens of billions on 10% solar panels.
>
> Better to let the market sort out the dollars and cents of various
> alternatives, wether it be biofuels, nuclear, coal, solar, wind,
> geothermal, tidal, or conservation- in an optimal mixture based on
> granular circumstances. Perhaps that tendency is why America- whose
> way is, as you say, "not to do anything until it is too late"- produces
> 25% of world GDP with 4% of world population.
The per well decline is also a lie, as you rarely cap a well, so the average is always going to go down.
60 Minutes did a story on the two new oil fields that Saudi Arabia just built, each equal in capacity to the field that supplied oil from Saudi Arabia for the past 50 years. ~$14 a barrel cost, verses ~$3 for the old field.
Tar sands are economic at ~$60, which would give us another 200+ years supply of oil at current rates. We will NEVER see a $200 barrel of oil. (Inflation adjusted.)
Adjusting for inflation oil cost is basically the same as it was in 1940. If you then subtract out the oil taxes added since 1940 oil is actually CHEAPER today than in 1940.
In short, peak oil is a LIE.
God I read like 3 words of this 100000 word article and knew it was crap. Is Mr. Quinn intimately aware of the entire surface and subsurface of the globe, he seems to say he is.
Either way peak oil has been around for 75 years. Someday there will be peak oil sure and yes it is a shame that everyone gets serious about oil when the price rises and then forgets a week later, but really thats how the see-saw is going to keep going. Higher prices and demand goes down. Higher prices and the economy(US) will tank. Economy tanks and the demand and price goes down.
Down with Socialism(just to get a couple free thumbs up)
Also, all of these graphs come from someone with an agenda and its quite easy to find someone who agrees with your agenda.
Wait until we start shooting "pollution bombs" into space to block the Sun to save us from Global Warming...
Heres how the world witchunt is going to go down...
Government is always up top
Lawyers have been replace by bankers
Next in line are "journalists" and bloggers
Then will come scientists ruining the world with "opinions"
Last will come special interest groups that prove to be wrong, wrong, wrong
Then the cycle will start all over. And at the end of that time, guess what, there will be articles about Peak Oil.
The US Congress is such a pathetic and corrupt kakistocracy that only a new price record could make them consider a decent comprehensive energy policy.
On Apr 08 12:53 PM Socialism cannot compete! wrote:
> One thing he should research and consider -- there are now good reasons
> to believe that crude is formed by abiotic processes, and is therefore
> not non-renewable.
1. 60 Minutes did the piece (that's problem enough)...
2. ...from information given by the Saudi royal family.
On Apr 09 03:57 PM amdman wrote:...
> ....60 Minutes did a story on the two new oil fields that Saudi Arabia just built, each equal in capacity to the field that supplied oil from Saudi Arabia for the past 50 years. ~$14 a barrel cost, verses ~$3 for the old field. Tar sands are economic at ~$60, which would give us another 200+ years supply of oil at current rates. We will NEVER see a $200 barrel of oil. (Inflation adjusted.) Adjusting for inflation oil cost is basically the same as it was in 1940. If you then subtract out the oil taxes added since 1940 oil is actually CHEAPER today than in 1940. In short, peak oil is a LIE.
On the other side are those who believe we have oil for years and years and would like to go forward drilling, and along with more nulcear plants and coal fired units would ensure that oil would last even longer. Government is the obstacle for this approach.
As a result, little is beiing accomplished, it has become a political football, the score is basically tied and no one benefits. And the energy crisis grows daily. The debate heats up, the economy is injured, people and businesses suffer and a continuation of this stalemate will cause serious damage to our Nation.
Indeed. Why waste a good crisis? A company was going to build a complex to convert coal to liquid fuel but they had to abort because of a few environmental Nazis (NRDC AND SIERRA CLUB) were filing unsubstatiated lawsuits. Now the project could be on hold indefinately instead of the plant operating that could have employed thousands throughout the country (coal miners, plant operators, transporation, small business)(not including the thousands that would have been employed building the plant). Instead we will continue to import our oil.
"Limits to Growth" came out in 1972 saying the very same things (and much more) now being said about Oil in his article.... and was duly ignored and its authors maligned and lampooned by the assorted "much wiser" souls of those times. (there always are plenty)
"Limits to Growth the 30-year update" then came out in 2004 and was once again duly ignored. The book's predictions about economic collapse in the 21st century were true then, are true now and will be true right up to and including the times the collapse actually happens.
The human species is hopelessly ignorant, complacent and narcissistic. (by nature and by nurture) So perhaps a 90% drop in human population on earth will at least bring some welcome relief to the other forms of life trying to survive here.
On Apr 08 01:42 PM Dirk McCoy wrote:
> I'm also worried when I hear about "national energy policy". The
> problem is that technology is changing very fast, and demand patterns
> can shift pretty quickly. Imagine if we would have committed tens
> of billions to solar panels back in the 70s (as Jimmy Carter proposed)-
> we'd have wasted tens of billions on 10% solar panels.
>
Maybe. And maybe not. What if that $10 B had reduced our oil dependence by 1% per year? What if that investment had stimulated research so that the efficiency of all solar panels world wide were 1 full percentage point higher? (that is, if current panels at 15% were instead at 16%, etc.) Then we would see that the cumulative effect of the investment would have been huge.
> Better to let the market sort out the dollars and cents of various
> alternatives, wether it be biofuels, nuclear, coal, solar, wind,
> geothermal, tidal, or conservation- in an optimal mixture based on
> granular circumstances.
You forget to mention the enormous SUBSIDIES that are given to other "non-green" sources of energy. These are direct subsidies such as federal research and investments in nuclear, and indirect subsides as we pay for the degradation of the environment and its costs ($$ to clean up, cost of health problems, loss of intrinsic value).
> Perhaps that tendency is why America- whose
> way is, as you say, "not to do anything until it is too late"- produces
> 25% of world GDP with 4% of world population.
This is a good point - but the answers are many and complex, so not entirely relevant to the question at hand.
And as to the examples you gave of wasted spending - I am NOT going to say whether any one of these should or should not be funded, but PLEASE - the bill was for what $800 B and you pull out one item with $200,000? That is what? 1/4 of 1/1,000th of 1 percent? Give me a break.
My recommendation is Just stick to the issue at hand.
On Apr 09 09:29 PM whoguess wrote:
> What I think is going to change the game completely is the recent
> discovery of huge recoverable shale gas resevoirs in both the U.S.
> and Canada, sending NG prices tumbling to $3.90 per standard unit.
> This, coupled with President Obama's push for alternative energy,
> will quickly force U.S. auto manufacturers to build cars that use
> NG instead of gasoline, which requires only very simple modifications
> to gasoline-engines. When this happens, which I expect to occur quite
> quickly, can push back the price of crude and have a considerable
> dampening effect on crude from spiking or rising in prices quickly.
I for one said most politicians are not intellegent beyond their ability to get elected and saving the world was a common election promise from the USA to Moldova .
On Apr 09 09:49 AM Ferdinand E. Banks wrote:
> Did I mention that I am the leading academic energy economist in
> the world, and have published a dozen books and about 250 articles,
> most of them on energy.
>
> When I read the first paragraph in this essay, I almost tuned out.
> because a contention which has Obama leading the US into socialism
> is either sick or stupid or both. But while I haven't read parts
> 2 and 3 yet, I want to say that while I don't believe that oil is
> going to $200 yet, Part 1 is a superb contribution, and I think that
> it should be circulated as widely as possible - i.e. not just in
> this forum.
>
> Sometimes though I wonder if it wouldn't be a good thing if oil
> went to $200/b. Obama may not be a socialist, but he definitely doesn't
> get the energy message. $200 oil might make the decision makers
> understand what kind of tiger they are riding. The simple truth is
> that that price is unacceptable. The economies of the oil importing
> countries cannot function with that price - unless of course they
> decide to return to the good old days of the horse and buggy. An
> interesting thing about the above comments is that there are still
> persons who believe that speculation drove the price of oil to $147/b.
> My suggestion here is as follows: no one who can solve non-linear
> difference equations could possibly believe that, or for that matter
> anyone who can read the English language, because all except a handful
> of energy economists accept that it was demand outrunning supply
> that was the problem - and moreover, OPEC's strength and intelligence
> is now such that they can always make this happen.
>
> Incidentally, oil doesn't come in lakes, and Alan von A, the recovery
> factor now is almost 35%, but I suspect that outside the Middle East
> it is much lower.
Thx!
Electrolysers are devices that use electricity to split water into hydrogen and oxygen by electrolysis. The hydrogen acts as a store of energy, a “renewable” and environmentally neutral clean fuel that is compatible with today’s gas and power infrastructure and internal combustion engines.
Whilst governments are committed to renewable power generation, renewables such as wind, are virtually useless without storage to match electricity supply with demand.
A clean fuel, generated by electrolysers using renewables or off peak nuclear electricity, would ensure energy supply matches demand, addressing energy and fuel security, in the home, business and transport and reducing pollution in our towns and cities.
If we are to avoid peak oil price volatility stunting future economic recovery, or the lights going out, we need hydrogen and this is where the green stimulus should be focussed.
priced higher in the future. Green energy while nice and fuzzy to
some, is a long way from being any meaningful way to address
the problem. China mirrors the US economy 70 to 80 years ago.
China will grow into a more consumer driven economy in the next 100
years, and they will need more resourses to keep up with demand.
And since that oil needs to make it's way to china, demand will stay high.
I apologize ahead of time if you have posted comments on previous commenter's posts that reflect on my post, but it's too much of a chore to read through the wasteland of comments listed above.
I don't disagree with your conclusion, that there will be short term increases in the price of oil and that the U.S. needs a coherent energy policy. But I disagree with some of the information you have used to arrive at the conclusions.
First off, I am one of the old time geologists involved not only in oil but in other mineral commodities, and I've had a bit of experience in reserves analysis. Proven reserves are only one element of the reserves calculation, and are directly related to the cost of production. If the reserve estimate uses a cost per barrel of $50, then any oil costing more than $50 is not considered part of the proven reserve. Oil above $50 would be labeled as probable or estimated reserves, and are not allowed by international law/regulation/agreement into a company's formal evaluation of reserves. Since the price of oil (or any commodity) fluctuates based on market demand, the amount of proven reserves will fluctuate similarly, and become dependant on the estimates used for the price of the commodity at the time of the reserve estimation. Reserve estimates are somewhat conservative, so when the price of oil drops low or jumps high, reserve estimates do not automatically recalculate to the new number. That said, long term trends in price, such as the depressed price of oil in the 90s, do effect what price estimates are used in reserve evaluations such that proven reserve estimates done in the 1990s will be lower than proven reserve estimates for the same areas done in 2007. This does allow for updated estimates that do not seem to reflect production, and may (I stress MAY, as I've not spent time looking into it) account for some of what you've pointed out in your article. This description is really a bastardization of the process, but my point is that proven reserves are a measure of what is currently economic to produce, and may not reflect what is actually in the ground. The charts of peak oil and estimated future availability do not take this assumption into account (and as far as I've seen, no peak oil chart ever does look at this underlying assumption in reserves estimation). The conclusions on peak oil timing will be biased because of this.
Second, you use a number of U.S. production curves to illustrate the point that the U.S. has passed it's peak oil production years, and draw the conclusion that we will therefore always be dependant on foreign sources for our oil. I don't disagree with the reality of the current situation, but I do disagree with why this situation has come about. I would disagree that these curves reflect physical availability of oil, and would instead suggest that they reflect regulatory and market drivers that have moved oil production to areas outside the U.S. This is true for almost all mineral commodities produced in the U.S. Whether oil, copper, iron ore, tin, aluminum, lithium, etc., if it is cheaper to produce elsewhere and import to the U.S. (and environmental regulation is part of the price equation), then it will be. I think that a chart of manufacturing decline would probably parallel this similar decline in oil or commodities production. In any case, drawing conclusions on what we should do as a nation based on erroneous inference of our current situation isn't a good place to start from. Again, I don't disagree that we should put into place a coherent energy policy, but ignoring the reasons why we are where we are may gloss over policy changes that would help us.
Lastly, and this reflects my personal bias, T. Boone Pickens' only recommends things that benefit T. Boone Pickens. Where his personal interests coincide with the nation's interests, then he is a patriot. Where they don't, then his documented history is that the nation be damned. I have a heavy dose of scepticism about anything that man is involved with. But in fairness to the proposal that Congress appears to be considering, the use of windmill's and CNG will only make sense as they make economic sense to the general public. Without subsidy, wind power can not compete, and even with subsidy it is extremely expensive to the consumer (the subsidy only helps the generator, which is a hidden cost to the taxpaying consumer in addition to the higher per kwh cost). CNG has a future, as it can be a direct replacement for oil/gasoine, and I have hopes it will increase in usage.
Thank you for the article. They do make me think.
George
I'm from Louisville KY. So I'm a homer.
On Apr 09 09:49 AM Ferdinand E. Banks wrote:
> Did I mention that I am the leading academic energy economist in
> the world, and have published a dozen books and about 250 articles,
> most of them on energy.
>
> When I read the first paragraph in this essay, I almost tuned out.
> because a contention which has Obama leading the US into socialism
> is either sick or stupid or both. But while I haven't read parts
> 2 and 3 yet, I want to say that while I don't believe that oil is
> going to $200 yet, Part 1 is a superb contribution, and I think that
> it should be circulated as widely as possible - i.e. not just in
> this forum.
>
> Sometimes though I wonder if it wouldn't be a good thing if oil
> went to $200/b. Obama may not be a socialist, but he definitely doesn't
> get the energy message. $200 oil might make the decision makers
> understand what kind of tiger they are riding. The simple truth is
> that that price is unacceptable. The economies of the oil importing
> countries cannot function with that price - unless of course they
> decide to return to the good old days of the horse and buggy. An
> interesting thing about the above comments is that there are still
> persons who believe that speculation drove the price of oil to $147/b.
> My suggestion here is as follows: no one who can solve non-linear
> difference equations could possibly believe that, or for that matter
> anyone who can read the English language, because all except a handful
> of energy economists accept that it was demand outrunning supply
> that was the problem - and moreover, OPEC's strength and intelligence
> is now such that they can always make this happen.
>
> Incidentally, oil doesn't come in lakes, and Alan von A, the recovery
> factor now is almost 35%, but I suspect that outside the Middle East
> it is much lower.
Mr. Quinn states:
Most people do not understand that all prices are set at the margin. There are 75 million houses in America. Only 4 to 5 million homes are sold per year. Therefore, 5% to 6% of the homes in the U.S. set the price for the other 70 million homes. This same concept applies to the last barrel of oil. When worldwide demand exceeded worldwide supply in late 2007 and early 2008, those last barrels of oil set the price. This explains why those last barrels of oil set the price above $100 a barrel. It wasn’t greedy speculators and evil oil companies.
Unfortunately (for him), the conclusion does not derive from what he has said here. The fact that the price is set at the margin is neither here nor there for causing oil to be above $100 a barrel. It is simply a mechanism for establishing the market price. Additionally, comparing crude oil, a tradable commodity, to residential housing, an essentially illiquid asset, seems to be a poor analogy. Crude oil is bought to be sold while the majority of houses are bought to be lived in.
The real question is why did the price of crude climb so fast and far (peak of $147 a barrel)?
Mr. Quinn seems to suggest it was primarily a supply and demand issue, however, additional data which he did not include in his article would suggest other reasons.
www.rigzone.com/news/a...
www.rigzone.com/images...
The linked chart above shows crude oil pricing versus the value of the dollar. Since crude is priced in dollars any debasement of the dollar versus other world currencies should cause an increase in the price of crude. Did this happen? Yes it did. In fact the dollar throughout most of the current decade declined relative to other currencies. As a result, a significant portion of the rise in crude prices can be attributed to something other than supply and demand. Most economists would support this conclusion.
Secondly, ALL commodities are susceptible to speculative booms, oil being no exception. As I understand it, the recent runup in crude prices was probably fueled by investors bailing out of the mortgage market in 2007 and latching onto the commodity boom of 2008 (which included all types of commodities from food to precious metals). While this is probably not the only reason, there is no doubt that there was a commodity “bubble” across a wide range of commodities in late 2007 and early 2008. For support of this view you can follow the link which presents testimony presented to Congress last year by one public policy group.
www.bakerinstitute.org...
Finally, a look at the linked graph should lead most people who are familiar with trends to see the large price jump in crude oil in 2008 as the result of some kind of short term price shock instead of the result of a long term change in the supply-demand curve. Changes in long term demand and supply (or even expected changes in long term demand and supply) do not alter very much over time. Even when they do they are gradual, and pricing adjustments are gradual as well. To claim that the large runup in crude oil prices that were seen last year were primarily the result of supply and demand changes doesn't seem to make sense.
Will we see $200 a barrel crude in the next five years? Possibly, but it will not be because of a change in long term demand and supply. It will happen because of some kind of short-term price shock (speculative bubbles, runaway inflation, war, etc). A better question would be to ask what the average price of crude will be over the next five years. $75 a barrel, $100 a barrel, $150 a barrel? My own bet is that it will be closer to $75.
Obama has a great energy plan for this nation, simply fill your tires with more air. That should solve everything!
I would note for the writer's use ...
The huge infrastructure you seem to think would be necessary for the use of natural gas in transportation is already in place for a large percentage of the public. It is a home compressor system that is already on the market (called PHILL). If you have nat gas in your home then you would be able to fuel up in your garage.
Thanks for a great article. I have been preaching the same tune for years....
Most people would feel better if we had a better energy plan in the US. Perhaps even just an energy plan. I support Pickens Plan and other alternatives as well.
On the otherhand we survived $147 Oil and we will survive even if Oil goes to $200. Oil will go to those who value it the highest.
Finally I add that everyone was convinced that Peak Oil would cause the problems you foresee 30 years ago in 1979-80. So while I agree with you, I watched many people lose fortunes based on their conviction that the price of Oil would skyrocket.
Nonsense! In Ukraine, Russia and elsewhere in 'emerging Europe,' cars powered by natgas are quite common now. True, there arent so many natgas stations - and driving further just to find one feels awkward - but I rode in a hybrid car over there: there certainly are cheaper alternatives to our "gas."
Look for greater accessibility to these alternate energies in the USA in coming years, and invest in those producers!
www.afdc.energy.gov/af...
On Apr 08 01:12 PM longoil wrote:
> Excellent article, well researched James !!!
>
> I have read the Hirsch report, Simmons's book, and Colin Campbell's
> numerous articles. I have come to the same conclusion as you, that
> we will be in a lot on trouble by the middle of next decade if no
> comprehensive energy plan is implemented.
The Chery + Tata motors automobiles are $2000 and $2500 respectively . Good Luck GM trying to sell Volts for $30,000 , NOT !
They wonder why they 're bankrupt !
Re "oceans of oil in Texas" there's a hiring freeze. Most independents are bankrupt or on the edge, hoping to sell their production. Forget about P2 possible reserves. Mark that to zero.
So much, well researched information in one article that for me tells the whole story.I've been following this story for a long time with many articles in my saved folders,they can all be replaced by this one.
many thanks
well done.
Is it ever so.
What does this example have to do with the spot price of a fungible commodity like oil? This statement is illogical. It postulates that 100% of homes are for sale in America and of the 5%-6% of homes that are listed for sale, in escrow, or recently closed escrow, set the price (?) for those not for sale. No! They only set the asking price of a house for sale at that place and time, not for the whole country. Furthermore, the asking and selling price usually differ. The cost, price and value of a home are three different values that are not always relative. Some homes are priceless, at least for a few generations, others are so valueless that they become commodities such as security-backed foreclosures. As posted above, this just more:
"...misleading blather [to be] believed by supposedly intelligent people."
I was in Europe in the 1960's while in the service. Gas was relatively cheap, but still scarce, because the allies bombed Europe's refineries two decades before. The cars, however, were still small. Car sizes in Europe were not dictated by the price of gasoline, but by the width of roads that had served horse carts for a thousand years as well as small homes and small lots without any garage. Furthermore, land is, and was, always at a premium in Europe, whereas land has been surplus in America. America has room for larger automobiles by virtue of being vast, relatively flat and politically contiguous. The superhighway was the result of geography as well as the need to sell the excess gasoline capacity of the refineries in the 1950's that had supplied this nations world war effort. Big cars, big highways and abundant cheap gas were the result of a large, victorious, industrial nation.
I am amazed at analysis. Some very smart Thoroughbred horse breeders with veterinarian degrees have postulated upon the small size of the wild American Mustang horse in comparison with other, taller breeds. Pages they have been written containing prolific science and include data based theories regarding food on the prairies to reason for the Mustang's modest size to European breeds. Could it be that the Native American was just short and breed his mounts to fit his stature?
Now, what really "drives" the price of oil?
I agree with you entirely that without being self sufficient in energy we are screwing ourselves and the future of this country. However, if Iraq comes on line it can replace a lot of what is otherwise drying up and can do it for years to come. This certainly moves the time of $200/barrel oil further out than what might otherwise be expected.
If we were smart, and yes, that is a big if, we wouldn't wait to get ourselves independent. Being a market based economy however, we are likely to stick to our philosophy and walk the tight rope into our own demise. My R friends will blame Obama. My D friends will blame big oil and they'll both be right/wrong.
We don't appear to accept the notion in this country of long range planning. Long range appears to be anything beyond the next mid term or Presidential election. Engage in such planning and the clowns blame government interference in the markets as the basis for why it should not proceed.
It is stunning for its stupidity - it doesn't matter what you call it. The more dependent we allow ourselves to be on others - the more we deserve the pain we create for ourselves.
Forest Gump knew better: "Stupid is as stupid does".
Both parties in Congress have been equally wasteful. The GOP during the Bush years, set new records for pork- Dems will find a way to beat them. I voted in the GOP primary but am at least open-mined enough to give the Obama Administration a decent chance, with backbiting and name calling. Let's talk about solutions not partisanship.
Since we went through $150 oil last year and saw significant demand elasticity I don't find $200 oil that scary. There is still tremendous waste in the current US energy economy that hasn't even come close to being squeezed out.
The scary part will be if we see demand inelasticity - this is where the danger lies. Then we will look back at $200 oil as the good old days.
Gee, mine always got 20-22 on the highway, and 16-18 in the city.
I guess his really needs a tune-up.
I don't know enough about what he's discussing to make any relevant comments, but when I see a "fact" this far off from my experience/knowledge, it taints the entire presentation.
Your argument that supply demand has little changed is not credible. I see no reason oil prices will go beyond the 2008 high which occurred after a 20 year asset bubble, which will take 3 to 5 years to pop.
Yes "one day" oil will be $200, but "one day" i will be dead, its a rather predictable prediction!
Another problem with oil shale production is that it will consume enormous amounts of water and energy. Some say the energy may come from on- site or nearby natural gas. But where will the water come from, in an already arid West? Funny that no one talks about, or even knows about, the 1922 Colorado River Compact and how the water in the already over-appropriated river system gets divvied up. Maybe southern California and the Front Range of Colorado will get dried up some so folks back East can still drive their pickups getting 12 miles per gallon??
Second point mentioned by no one: at the time of very high oil & nat gas prices in June , 2008, energy companies were sitting on over 67 million acres of undeveloped leases on shore, mostly in the West, and off-shore. "Drill, baby, drill" was a fun mantra during the election, but was directed in the wrong place. What is the point of continuing to award leases to energy companies just to see the leases sit and enhance the corporate bottom line? Sort of gives the "market" and "reliance" on market forces to accomplish everything a bad name.
All in all, Mr. Quinn presented a thoughtful article. Not sure I agree with each & every comment. But he still gives a lot to think about. Seems to me that we will need all possible energy options to be in play. Final thought to several: give the "eco-nazis" rhetoric a rest; use of that sort of ugly rhetoric doesn't solve anything.
Alaska�s Gull Island Oil Fields Could Power U.S. for 200 Years
By Mark Anderson
�Crude oil is the real �currency� of the world,� said Lindsey Williams at a gathering of the Midwest Concerned Citizens group in Kansas City on July 22. But Americans will never hear about huge oil and gas reserves in the United States, which, if ever tapped, would bring today�s fuel prices at least as low as $1.50 per gallon and make America more energy independent.
As a Baptist missionary in the 1970s, Williams said he rubbed elbows with members of the world�s power elite�who boasted of detailed 30-year and 50-year plans to control the flow of oil and information.
A huge quantity of crude oil and natural gas exists under Gull Island, located in the waters of Prudhoe Bay in Alaska, says Williams. He cited key British Petroleum memoranda and related the statements of upper echelon oil officials who told him that Gull Island would be kept under wraps, limiting domestic supplies so Americans would someday see prices hit up to $10 a gallon at the pump.
�Every issue in the world today relates to crude oil,� said Williams. The U.S. occupation of Iraq and the saber rattling about attacking Iran fit into the crude oil matrix.
Iran is being targeted because it�s one of several countries that want to use their own currencies for oil sales, rather than using the U.S. dollar. Williams told AFP that any country that doesn�t want to �play ball� with the U.S. government and the financial and oil interests is, in essence, put on a hit list.
The United States, he said, learned that Iran intended to form its own bourse and not use the dollar for oil sales. Therefore, the notion that Iran is a menacing �almost-nuclear� country was trumped up, presented as fact via the corporate media and Iran is now in the crosshairs.
Other nations wanting more independence from U.S. meddling include Norway, Venezuela, Nigeria, Bolivia, Sweden and Russia.
The 30-year plan, which was first proposed three decades ago and is nearing fruition, included smug assurances from oil officials that the United States will triple its crude-oil usage and alternative fuels will not be allowed to gain enough ground to make a difference. They also noted that all foreign oil production will be scaled back to the United States and that Americans soon will pay $4 to $5 a gallon at the pump and could pay as much as $7 to $10 down the road.
In the early 1960s crude oil was selected as a tool of world control, Williams said, adding, �What we pay at the gas pump is a form of taxation.� The American consumer�s dependence on crude oil thus far has enabled people from foreign oil-producing nations to buy T-bills (U.S. treasury notes) in order to support the U.S. national debt and continued deficit spending. The need to support that debt puts the U.S. government in a bind, forcing Americans to remain dependent on foreign oil.
Williams, as a chaplain in 1970 when the trans-Alaskan oil pipeline was finished, ministered among the pipeline workers. However, as time passed he made a favorable impression with the top brass and was asked to improve worker-company relations. Next thing he knew, he said he was sitting at meetings of the World Bank, the International Monetary Fund and various meetings of oil executives over a three-year period.
He told AFP that the IMF-World Bank acts as a middleman between oil producing nations and refineries. In so doing, they set oil prices, he said.
The big event in that three-year period was in 1977 when an Atlantic Richfield oil executive told him, �We have just drilled into the largest pool of oil in North America�[and] in the world!�
That pool was Gull Island. It was said that there was enough natural gas to supply America for 200 years. But to this day, �not one drop� of that oil has been released to American refineries, Williams said.
Williams said the executive had warned him that the Gull Island find was highly classified. Do not repeat any of this, he was told. Obviously, that warning did not stop him.
On Apr 08 12:58 PM junkyarddog wrote:
>
>
> No doubt, oil will be at $200 one day. But this will be due to inflation.
> Now the question for you is: WHEN will it be at $200? Let me guess:
> you don't know. Then why make such "predictions"?
>
> Have you ever heard of demand destruction? Another question for you:
> at $200 who can afford it? Hint: demand destruction.
>
> There is enough oil in the world to sustain us for hundreds of years
> (not sweet crude oil alone) and even $200 barrel is too expensive
> for today standards to explore non-sweet crude alternatives. You
> know all of this information anyway, so why do you waste our time
> with such unfounded "predictions"? Put your money where your mouth
> is: $200 barrel -- WHEN????
>
Good luck just sharing some knowledge leaned the hard way.
Currently looking for oil to retreat to $40-45 and have DUG as a short term trade and then will look to play it long back up.
On Apr 08 02:19 PM drbob66 wrote:
> I sure hope the author is right. I bought some USL @ 25 about a month
> ago (and I'll buy more if it pulls back in the next few months).
> I'll patiently hold my shares and wait for the next "super spike."
>
>
> No mention of geopolitical risks in the article. If this global downturn
> lasts much longer (or gets much deeper), things could get interesting.
>
>
> www.foreignpolicy.com/...
Good article, I believe it too, we aint gonna get out of this by doing nothing.
On Apr 08 01:38 PM t_avatarici wrote:
> Some decent charts-- too bad IE browser AND Firefox could not display
> they... hello? anyone driving?
It is not too late (unless the nimbyer's stop mass production on that too) !
On Apr 10 03:56 PM User 392818 wrote:
...
A better question would be
> to ask what the average price of crude will be over the next five
> years. $75 a barrel, $100 a barrel, $150 a barrel? My own bet is
> that it will be closer to $75.
Dude, your'e right! Oil will still be that cheap if renewables account for some 50% with a hundred million electric cars influx (YA RIGHT), or we become so impoverished because we did not employ ourselves for peak oil (and global warming) preparation. Simply mass producing mirrors, steam generators and heat reservoirs would turn things around!
Looking for the 2009 Mercedes-Benz S600 MPG, EPA ratings, or other specs?
Please select the trim and performance options for the 2009 Mercedes-Benz S600 because the engine size, transmission and other specifications can influence a car's ratings as well as how many miles per gallon the car will drive. Then, Green Car will calculate and return the desired data, including city MPG, highway MPG and combined fuel economy scores, along with a vehicle's Air Pollution Score, Greenhouse Gas Score, and other EPA ratings.
Cylinders/Displacement: 5.5 L / 12 cyl
Drivetrain: 2WD
Transmission: Auto-L5
Fuel Type
Vehicle Class
City MPG
Highway MPG
Combined MPG
Air Pollution Score
Greenhouse Gas Score
SmartWay Qualified
Certification Sales Region
Fuel Type Gasoline
Vehicle Class Large Car Large Car
City MPG 11 11
Highway MPG 17 17
Combined MPG 13 13
On Apr 11 07:55 PM Yurasis_Dragon wrote:
> The author states "a Mercedes S600 gets 13 mpg............"
>
> Gee, mine always got 20-22 on the highway, and 16-18 in the city.
>
>
> I guess his really needs a tune-up.
>
> I don't know enough about what he's discussing to make any relevant
> comments, but when I see a "fact" this far off from my experience/knowledge,
> it taints the entire presentation.
I also believe that we should drill, but not so much that my kids don't have any left in 10 years (if and) when they can drive. I definitely believe in what James is saying, about population and the rising demand for oil but I do not believe most of you who say "green won't work". Granted, green as you think it won't.
However, "green" (even though I hate to call it that) as I see it will! What's so hard about a bunch of mirrors (with steam generators built tough enough for nuclear)?
All you oil people out there need to realize this one thing: The creation of massive (baseload) RE capacity requires huge amounts of oil and ($$$) That's why I don't call myself green, and is the only reason why we should drill. "Wasting" oil on any other thing (such as fashion and sex) should be considered not as important as "using" it for the creation of the next (and higher level) energy platform.
You object to Obama spending $15 billion on green energy? Why?
I object to giving the highly profitable oil companies $39 billion every year, after 90 years of subsidies. And giving the coal companies $8 billion a year, plus what was just added.
If we ended the fossil fuel subsidies and applied the same money to renewable energy, wind and solar would be built 2- 3 times faster than nuclear or coal plants. Far more jobs would be created. They never need any fuel, ever. No fuel for anyone to control. Solar prices are falling at a rate that will make them cheaper than "clean coal" and any new nuclear power. They are more proven technology than carbon capture for coal. Decades ahead.
California has the solar resources to generate 10-12 times it's current electricity generation, just with solar thermal plants in the desert. That's the low estimate, limiting development to land with 1% slope, while anything up to 3% slope will do.
And that excludes sensitive environmental areas.
641 GW at 1% slope compared with todays 58 GW total generating capacity from all sources in California.
But the myth that solar can't power much of the country is repeated endlessly.
Photovoltaics and wind can also contribute huge amount of power. Wind is already cheap and PV will be in a few to several years, depending on location.
Solar thermal is already half the cost of PV and going much lower. It will be 4-8 cents/kWh by the time the first coal plant with CCS or the first new generation nuclear plant comes online, with the prices for both at least 12-17 cents kWh. It will be under 10 cents in about 4 years. An NREL study found that CSP solar development would benefit the economy much more than building gas plants. CSP can produce dispatchable power which is valuable power. Better than baseload. Day and night. The NREL estimates that CSP with heat storage will have a capacity factor up to 70%.
www.altenergystocks.co...
www.desertec.org/
climateprogress.org/20.../
Ethanol was never a good idea, especially from corn. It's proponents were mainly large corporate interests.
Some of our coal plants can be converted to biomass. It's a renewable.
Oil is not a renewable, as one comment said. When you burn oil or coal, you are releasing carbon (in CO2) into the atmosphere, and thus onto the short term carbon cycle. In the case of coal, it took 65 million years of carbon coming out of the short term carbon cycle, and accumulating as coal deposits. We are now putting that 65 million years of accumulated carbon back into the short term cycle in a few hundred years. In a blink of an eye. What's wrong with this picture?
This is unprecedented in the last tens if not hundreds of millions of years, maybe in the history of the earth.
Oh yeah, it's a natural cycle, right?
The real illusion is the belief that renewables can't replace fossil fuels in the grid. They are by far the fastest way to solve both the energy and environmental problems. Along with serious efficiency improvements in power plants, buildings, transmission, vehicles etc.
However, if America can loosen it's obsession with oil, it can stop reduce the impact that the $200 barrel will have when it comes.
One last comment though - why the comments about budget allocation for tattoo removal when you don't mention that Thain spent $1.22m renovating his friggin' office? Which of the two do you consider more frivolous?
On Apr 13 07:00 AM nobby73 wrote:
> It is almost impossible to know where oil will be in a few years
> because it is not clear the consequences of the federal bailouts
> and the huge quantity of money that has been printed. However, the
> idea it will be below todays level is pretty remote. When you talk
> about supply and demand factors, it is necessary to flip the equation
> both ways and think about the supply and demand of dollars relative
> to oil and it's a damn-sight easier to make a $100 bill than a barrel
> of oil, as Bernanke is proving. Oil is a finite quantity and although
> the concept of peak cheap oil is more valid than peak oil per se,
> I would remind Americans that the dream of every Indian and Chinese
> is to own a car and the idea that America will still be using 25%
> of global production in 10 years is nonsense. China is stealing a
> march on America here, looking to secure supplies from places like
> Russia, Kazakhstan and Venezuela, while America sticks to Canada,
> Mexico and Saudi (and I too believe the Saudi's have been lying about
> its reserves since the magic jump when Saddam invaded Kuwait and
> also damaging reserves by pumping water in too fast). This was the
> reason for the invasion of Iraq, the attempts to create a coup in
> Venezuela (and the idiots screwed up both projects). The idea that
> American consumption is the only reason behind the growth in China
> is also nonsense, so the economic problems in the US won't harm China
> in the long run.
>
> However, if America can loosen it's obsession with oil, it can stop
> reduce the impact that the $200 barrel will have when it comes.<br/>
>
> One last comment though - why the comments about budget allocation
> for tattoo removal when you don't mention that Thain spent $1.22m
> renovating his friggin' office? Which of the two do you consider
> more frivolous?
On Apr 08 12:53 PM Socialism cannot compete! wrote:
> One thing he should research and consider -- there are now good reasons
> to believe that crude is formed by abiotic processes, and is therefore
> not non-renewable.
On Apr 08 01:38 PM t_avatarici wrote:
> Some decent charts-- too bad IE browser AND Firefox could not display
> they... hello? anyone driving?
On Apr 08 01:42 PM Dirk McCoy wrote:
> Thanks for the article. While I can't agree with you that $200 oil
> is likely, I can agree that the convergence of trends indicates that
> we will need additional sources of energy over the next 10 years,
> and that one would be wise to consider timing risk when making plans.
> So I doubt SUV sales will recover to their former levels.
>
> The good news is that there are many ways to skin this cat, especially
> as oil goes over $85/barrel, so i don't agree at all with anyone
> who thinks we need to raise taxes or constrain consumption outside
> allowing the market to do so. We have the technology to build more
> rigs and boost production dramatically while additional exploration
> proceeds.
>
> I'm also worried when I hear about "national energy policy". The
> problem is that technology is changing very fast, and demand patterns
> can shift pretty quickly. Imagine if we would have committed tens
> of billions to solar panels back in the 70s (as Jimmy Carter proposed)-
> we'd have wasted tens of billions on 10% solar panels.
>
> Better to let the market sort out the dollars and cents of various
> alternatives, wether it be biofuels, nuclear, coal, solar, wind,
> geothermal, tidal, or conservation- in an optimal mixture based on
> granular circumstances. Perhaps that tendency is why America- whose
> way is, as you say, "not to do anything until it is too late"- produces
> 25% of world GDP with 4% of world population.
A) $200 oil - No. Aside from other alternatives, crops become convertible to oil at some point - my guess is $125. Any spikes above that will fall retatively quickly.
B) IMHO US independence from foreign oil equates to $10 gasoline, via taxation as the most likely alternative. Why?? To terminate urban sprawl and to finance affordable alternative lifestyles, as well as all the other options such as no oil wars. Also, to reduce US contribution to Climate Change.
Disclosure: long DGO, KDKN, WNWG
The problem though is convincing the enviro retrocats and the nimby's to promote that. Even tougher is how to urge them to make laws enacting such rather cheap solar BUT AGAINST BULLDOZING (for the vast mirror fields).
If solar can't compete, why are the Saudi's investigating it?
"Al-Naimi advised:
“One of the research efforts that we are going to undertake is to see how we make Saudi Arabia a center for solar energy research, and hopefully over the next 30-50 years, we will be a major megawatt exporter.”
(from this pdf)
www.ogj.com/pdf_temp/3...
I'm sure they have visions based upon the proven (but bulldozed) deserts sites in California and the robotic industrializations of tomorrow.
i'm also for more nuclear power, but the fact that no nuclear reactors have been built since 1976 is not evidence that there are no "free markets" with respect to energy:
a) what is the reason that no new reactors have been built since the '70's? if you can remember 3 Mile Island, then you know that anybody that was advocating them in the last 30 years would be doing so with 0 political backing. unless you are prepared to build them at the point of the gun and with the national guard providing security, good luck getting that through. last i checked, we were still a democracy.
b) do you advocate building nuclear reactors in the US without any oversight or safety standards? trick question - if you think that they should be regulated in ANY way at all, then you are anti-free markets, at least as its defined by the Chicago school and libertarians.
c) please demonstrate how, with the history of energy prices in the last 30 years, that someone building a nuclear power plant, would have had a higher ROI than someone that instead invested in conventional fuel refining (i.e. stock in Exxon Mobil, for instance). again, the free market argument fails you because it would clearly lead to the conclusion that investors were correct to buy stock in major oil refiners instead of nuclear reactors.
at the end of the day, the only countries that have been able to build nuclear plants or other large-scale alternative energy generating facilities have been socialist or at least quasi-socialist countries, so be careful what you call people.
www.dailykos.com/story...
Therefore, if anybody wants to go nuclear, (instead of solar thermal) LFTR just might be lightyears ahead of conventional!
From teachmefinance.com/Sta.../
The 2006 Mercedes-Benz S600 ... is estimated to get 12 miles per gallon (5.1 kilometers per liter) in the city and 19 miles per gallon (8.1 kilometers per liter) on the highway.
On Apr 11 07:55 PM Yurasis_Dragon wrote:
> The author states "a Mercedes S600 gets 13 mpg............"
> Gee, mine always got 20-22 on the highway, and 16-18 in the city.
I guess his really needs a tune-up.
> I don't know enough about what he's discussing to make any relevant
> comments, but when I see a "fact" this far off from my experience/knowledge,
> it taints the entire presentation.
From teachmefinance.com/Sta.../
The 2006 Mercedes-Benz S600 ... is estimated to get 12 miles per gallon (5.1 kilometers per liter) in the city and 19 miles per gallon (8.1 kilometers per liter) on the highway.
On Apr 11 07:55 PM Yurasis_Dragon wrote:
> The author states "a Mercedes S600 gets 13 mpg............"
> Gee, mine always got 20-22 on the highway, and 16-18 in the city.
I guess his really needs a tune-up.
> I don't know enough about what he's discussing to make any relevant
> comments, but when I see a "fact" this far off from my experience/knowledge,
> it taints the entire presentation.
"Anythings worth getting CSP with storage developed on a massive scale" as that is THE ONLY renewable that could even come close to powering the world!
Problem though, I've "stumbled" upon a much simpler (and unlimited) yet to be (re)developed source of power. A spin off from nuclear tech, the Liquid Fluoride Thorium Reactor is about a thousand times safer and produces less than one percent of wastes, which has a halflife of about a thousandth of what the dummies want to put in Yucca Valley! (So in 300 years, if the casings crumble, the contents would be less radioactive than natural uranium itself!) Better yet, this thing can even "burn" the high level wastes! Infact, it requires such to "kick start" the process of thorium fission (as I think I understand it)!
The reason why it is not used is because the infrastructure and design went towards the weapons making form of nuclear, that is of "burning" uranium, which I oppose.
Just search it and see if this is not truly the answer since the tech has been around half a century ago... Imagine, no need to spend billions on extra lines, no need to fight off global dust storms caused by desert bulldozing (the easiest way to do CSP), and being able to desalinate water and to grow food in the deserts, with all that unlimited power, to not have to worry about the few times when CSP doesn't provide baseload power, not having to impose STUPID wealth restricting carbon caps (as developing nation would starve to death) and most importantly, a way for the rest of the world to produce power for less than that of coal!
Global warming, PROBLEM SOLVED!
As someone who really wanted CSP, I must admit, that something better is available, something that EVERYONE should look into! I am asking more questions about the LFTR concept as it seems almost to good to be true, but it is for real and the science has been around to prove it!