Crude Reality: Big Oil's Purposely Restricting Supply 117 comments
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This crap about offshore drilling is a political wedge.
Both the oil companies and OPEC purposely keep oil supplies low to drive up prices. Economics 101. They want to constrict the supply tight enough that the price keeps rising. Their only interest is that of their stockholders. It's how capitalism works. They have no motive to bring down prices, and few real competitors to force them to do so. They're not going to save the American economy if we give them more land to drill on. It will stay in the ground like the millions of acres that they already have which are being left undrilled.
America only has an estimated 2% of the world's remaining oil reserves. Unfortunately, the rate of global demand increases by more than this each year. The best offshore drilling could accomplish is to affect prices by a few percent. America needs to turn to alternative sources now! The longer we wait, the more our dollars will go overseas, and the more the balance of power becomes skewed towards the ultra-rich. Countries like New Zealand already produce half of their energy from non-fossil fuel, non-nuclear sources. Why can't America do the same?
The Republicans are still in the White House. Why don't they act?! It's because their are two oil men in the White House, and their interests are tied with Big Oil, and Big Oil is happy to become richer as the rest of the country goes broke.
It's so easy to skim over the issues and to just show the back and forth of the bickering candidates, but this is the one issue that could determine the fate of America as a superpower in the 21st century. Politicians will bribe you with tax cuts, even if it drives the country into debt. They'll lie about quick solutions, they'll ignore the debt, and they'll promise you anything to get ahead in the polls. But shifting to alternative power is something we must do. Something that both candidates have promised. Alternative energy sources needs to be the core of the debate.
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This article has 117 comments:
You may want to wait for your final exam results in "economics 101" before teaching the rest of us...and if I hear the "Bush, Cheney and Big Oil" nonsense one more time I may have to send Halliburton to your house to refresh your memory on the no-bid contract they won when BILL CLINTON was in office.
These nanny-poo environmental alarmists seem to breed every generation....200 years ago we burned wood and coal for cooking, transportation and home heating while horses pissed and pooped in the street. THAT was pollution...as the technology became more efficient and affordable, we transitioned from those fuels and we will do the same again.
The transition from oil should be a slow transition dictated by the markets and entrepreneurs developing and demanding them...not the politicians and environmental nincompoops whose good intentions have already created the ethanol debacle resulting in massive food inflation, my excessive grocery bill and the starving of a few hundred thousand in 3rd world countries.
Please...go volunteer at a food kitchen, ride a bike to work, turn off your AC and leave the markets to develop alternative energy.
In the meantime, I like my F150 and dont mind paying a bit more for the oil.
"Phil O'Reilly, the chief executive of Business New Zealand, said poor decisions by successive governments had led to New Zealanders living with the threat of electricity shortages. "You just can't run an economy like this," he said.
"If we get through to the end of winter without blackouts; it was all done by the skin of our teeth. I don't think that's a sensible proposition."
Low rainfall is seriously cutting into New Zealand's hydro capacity. The same thing happened in 1992, 2001, 2003, and 2006. Utilities must turn to diesel, nat. gas, etc to avoid shutting down the grid.
M. Trupp, your 'solution' for America's energy problem is similar to proposed solution for medical care using the Canadian model: just stop providing it, and ask for ever-increasing cash to carry the reduced services. A typical bureaucratic mindset. Begone.
The underlying reason is simple: When prices of oil get too high, consumers will start looking at alternatives more seriously.
1) For the longest time (1985-2002) OPEC deliberately kept prices between a $22 to 28 / barrel to keep energy alternatives unattractive.
2) The last thing oil companies want to do get oil and gas from the oil sands, oil shale, bakken gas, US coastal areas and deep sea drilling. The cost of such projects is in the tens of billions and this affects their bottom line severely.
Intelligent people do their own research and find out the how this oil market works. Once again, emotion dominates the article and he supports his arguement with absolutely no facts.
Stop with the call for "corn gas" and wind mill cars. (Talking about something that would take forever, explain how the poor and middle class aregoing to be able to afford these new cars and what will happen to the trade in values of their cars? Once again, you have not thought out the results.) Corn gas has caused massive inflation, thanks for that gem of an idea! Take one of the main products in your food supply and try to turn it into a fuel source, absolutley insane! (Result Inflation) It's the thought that counts not the results! (That is the Liberal thought process in a nutshell.)
Typical liberal, all emotion and no facts!!!
governments." Big Oil " has little impact on U.S. fuel prices. When
the media screams about the billions U.S. oil companies make they
never mention the hundreds of billions invested. " Big oil " only has
an ROI of around 7 %.
Based on the comments here, maybe MatthewGoldseth should be writing columns.
Our government is making a fortune from the taxes collected on the energy we use. They do not want us using alternative energy. Because, alternatives will be tax free for "x" number of years. The more oil and natural gas we use, the more taxes they get to spend on ear marks. Both sides do not want us having solar panels on our houses, or wind turbines in our yards. Then they will not collect any taxes from it. In fact they will have to give us a tax credit for doing it. Congress is already considering raising the gas tax because we US citizens are already using less gas.
Face it everyone, this is about Taxes, plain and simple.
www.vialls.com/wecontr...
www.freeenergynews.com.../
www.rense.com/general5...
What is wrong with drilling our offshores anyway? It is not better than nothing and will also provide more supply for us and everyone else? If we worry about killing some birds, then do not eat chicken!
Anyone got change for a dollar? Anyone?
I agree completely with the overwhelming consensus of readers here. This piece is nothing but a piece of "crap", to use the AUTHOR'S word! Takes some to know some, Tony! This is nothing more than an over-the-top personal tirade put to paper. It is worse than worthless, because it occupies space on the servers. Please, Seeking Alpha, raise your standards just a little bit! This guy doesn't even have a bio, much less a credible one!
Pathetic! Utterly and absolutely pathetic! And that's being NICE!
How could they have even let him post an article here? This is supposed to be a business website, not a place for a political shill to rant!
This severely damages the credibility of Seeking Alpha. All the other writers and posters who write good material should be complaining today about this garbage, because when SA publishes this tripe, it damages the reputation they have tried to establish for themselves and their businesses.
They really need to remove this article entirely! Seeking Alpha, you've been HAD!
Please, if you're going to comment, can you at least answer me these questions:
According to this study by BP, the U.S. only controls 2% of the remaining oil:
gcaptain.com/maritime/...
If we pumped all of that tomorrow how much would it really increase global supply? Could we keep up with increasing demand? Would it really drive down prices if that is all we have left to offer? How much of that would go to the U.S. market, verses being shipped overseas, since the U.S. seems to be anti-protectionist?
educate me.
If you really want an education: oilismastery.blogspot..../
www.electricityforum.c...
lamenting the dire problems this year with hydro. And there are hundreds more on same theme.
I think nuclear shows greatest promise for a large-scale fix, but all the other sources (after oil and hydro and coal) have a part - mostly a tiny part - to play. Including drilling.
en.wikipedia.org/wiki/...
www.pickensplan.com/
Yes. Oil in the ground is finite and it's going to get more and more expensive to extricate as we drill deeper.
Economics 101 taught me that when the price of something is in an "inelastic" demand curve, by raising the price, the seller makes more money even though demand drops off.
As Lewis Black would say "What the hell's wrong with you people?"
"
* If production is elastic, we assume that if the price of a product goes up, or if a shortage of the product develops, then competitors are able to add new capacity to increase the availability of that product. Higher prices and/or shortages encourage suppliers to invest in additional plant, equipment, materials, and labor in order to increase sales and profits. Economists generally believe that when this new capacity comes on-line, a surplus of product will eventually develop, and the resulting competition for business will force suppliers to reduce their prices in order to sell more products.
* If production is inelastic, then higher prices and/or shortages do NOT bring forth new capacity because suppliers are unwilling, or unable, to increase production.
* If demand is elastic, it simply means that consumers will buy more of a product when the price comes down. They will buy less when the price goes up. Yes. There are other reasons why consumers increase or decrease consumption, but price is a fundamental driver of demand.
* If demand is inelastic, changes in price initially do very little to change consumer buying habits. Lower prices do not encourage much more consumption. On the other hand, consumers are willing to pay higher prices (up to a point) to keep on buying what they need. As prices continue to increase, however, consumers will begin to purchase cheaper substitute products, and/or will seek to change their lifestyle, because they can no longer afford the product. Although low income consumers are usually the most vulnerable to these realities, middle income consumers are seldom far behind."
The problem with oil is both the supply and demand are inelastic.
Suppliers are nearly out of conventional oil (i.e. sweet light) and are resorting to more desperate extraction for non-conventional oil such as oil sands and deep sea drilling. Despite this increased effort, global production has been saturated (or plateaued) at 85 mbl/day since 2003.
On the demand side, consumpion has dropped somewhat from the US and Europe. But BRIC and ME countries have not only filled in the gap of OECD countries and their demand is steadily increasing well beyond it
Recently, someone made an excellent analog between oil and insulin. If you have a supply of only 98 units of insulin/day and 100 diabetics, does the price of insulin only increase by 2% ? In fact, it will increase to the point where the two poorest people will have maxed out their bids. In other words, a 2% decline in supply can cause increase price of several hundred percent.
In fact this has actually happened several times in past history of oil prices:
1973-74: Arab Embargo takes 5% of supply off the global market, price of oil goes up 5 fold ($2 >> $10)
1979-1981: Iran Iraq war takes 10% of supply off the global market, price of oil goes up 4 fold ($10 >> $40)
2003-present: Supply is plateaued, but demand is steadily increasing. Price of oil goes 7 fold ($20 >> $140)
Someone tell me how a wind turbine spinning in the fields will make my Land Cruiser go? Or, how thousands of solar panels in the desert will provide the energy for me to fly home from Australia in a month?? It won't.
People are confusing the argument. YOU CANNOT REPLACE OIL WITH ALTERNATIVE/RENEWABLE ENERGY (at least not today).
Electric energy is not the same as energy used for transportation. They may both be big issues, but they are unrelated. Please keep this in mind.
> jack
First please note that the author did not include his picture. Surely a good photographer would know how to take his own picture.
This alone should have prepared us for schlock.
Seems to me that we must be the only country on earth that isn't drilling everywhere. This must mean that we are smarter than the rest of the world.
Besides, so what if it won't mean much in the grand scheme of the Universe. It will mean thousands of new jobs eventually in a high pay level industry.
Apparently the author doesn't care much about the people going unemployed as long as his pets aren't harmed.
Were I a Big Oil Exec and had scrimped and saved through 6 years of College, put in years tramping the wilderness, living in tents, more office years of 12hr days. Had to be away for months on end, flying around the world trying to talk sense to a pack of unwashed Bedouins.
Were I all that and I was just awakened last night at 2AM, by my new neighbor, who having partied all night was bringing the nights Trophy's home is his Streach Purple Pimpmobile.
And I realized the American Public were rolling over for more millions to be entertained by this "Artiste" than I was making.
And knowing his "Major" sacrifice was cutting the 5th grade to shoot hoops, thereby missing English, and having to talk like an illiterate Hip-Hopper to the public two or three times a week.
Were I in this position--I don't think I'd find any sympathy if you had to go to the game on a bicycle,- until the picture changed.
1. We actually don't know for sure how much oil is offshore or in ANWR. The Dems have blocked even exploration on these deposits.
2. The oil discovery in North Dakota, southern Canada, and neighboring states holds over 500 BILLION barrels of oil. Granted, it will be difficult to obtain it, but given good old American ingenuity, we will get it, and get it far cheaper than you libs would ever imagine.
3. The two oilmen in the White House are advocating that we drill, and drill now. It was King Bill Clinton of priapism who vetoed drilling in ANWR. It is N. Pelosi of San Francisco who refuses to allow a vote in congress, when over 70% of Americans want one.
No more oil shortages
No tax hikes
Nobama
Alright, so the author's an idiot. We pretty much all concur with that. But some of the comments are interesting and worthwhile.
You indicated that transportation and electricity fuels are mutually exclusive, and one cannot be used to replace the other. That's only partially correct.
Indeed, that's the whole idea behind the Pickens plan. Wind energy (and perhaps some solar) would be used to make electricity, freeing up a like amount of NG from the electric grid. CNG and LNG are both excellent transport fuels for cars and trucks respectively.
The genius of this is that we're starting TODAY, and these so-called alternative fuels can be making elecricity and operating a significant portion of our EXISTING vehicle fleet within THREE YEARS.
Understand this chart; it's the use we should be examining AND that being the 80% waste of all the energy in all the crude; only 20% useful energy. And we can do that with electricity and biofuels. We already produce and distribute more useful electricity than transportaion requires( 12 Quads electricity v/s 5 Quads useful in transportation).
Stupid, selfish and greedy we are.
static.seekingalpha.co...
Solutions:
1) start making ASAP/AMAP electricity from wind/solar/nuc/hydro/t... etc.;
2) STOP BURNING hydrocarbons (coal, ng, oil, gasoline, diesel, lng, ng, tar and shale etc., and any liquifaction and gasification products) for both POWER GENERATION and TRANSPORTATION.
3) electrify transportation.
Do this not for greenie/global CO2 and clean air purposes, nor even save the nation economic reasons, but to reduce hydrocarbon consumption and waste of energy for many good reasons from resource lifetime, availability, better alternatives, etc., including the shear stupidity of burning what's more difficult to acquire by the year vis-a-vis free, available, wind and solar, etc.
Do this as good LEADERSHIP for the people as France, Brazil, Spain, Switzerland, Europe, etc., are going to show us (instead of the US plan of drill, drill, drill.......DUH!!!!!).
Understand the differences between independent and dependent variables, eg., intendend consequences (reduce hydrocarbon dependency; consumption) and unintended consequenses (CO2 reductions, clean air, energy prices(?), $'s exported(?), etc).
T. BOONE HAS IT 1/2 RIGHT: MAKE ELECTRICTIY FROM WIND AND SOLAR AND NOT BURN NATURAL GAS. HE'S WRONG BY THEN WANTING TO BURN THE NATURAL GAS FOR TRANSPORTATION. THAT'S WHAT WE SHOULD ELECTRIFY AND NOT BURN THE NATURAL GAS NOR THE CRUDE. THAT'S GENIUS!!!!!
THAT'S REAL POLICY.
WELL, IT IS FOR AT LEAST A LOT OF FOREIGN NATIONS!!!!!
And if we still need a little oil we can turn back on an oil pumper now and then as needed.
Goodness, it's going to take a long time for the rest of the world to demand all that crude we could free up since we consume about what 4x-5x the largest comers, China and India (and they're choking in smog, opting for alternatives where possible); heh, heh, even smarter than us.
I guess alll the democrats walked off this board like they did in congress yesterday. Democrats do not like to talk about energy issues, do they ?
They who proclaim their innocence the loudest are the most guilty!
> jack
Apparently when he was in Congress extoling about his vision for the future. He was also lobbying for Congressional Funding.
His Farm will be connected to absolutely nothing. He wants public funding for the power lines that will allow him to sell power to the public.
T. Boone pretty smart.
> jack
As for storage potential, we have not begun much lest exhausted hydro storage, numerous underground vehicles (gas, air), thermal w/ and w/o change of state in salts, chemicals, etc.,), conversion storage (making/catalyzing recombination of h2/h2o), flywheels, giant capacitors, methane storage/splitting/fuel... all without even touching batteries.
NJB,
You have some good ideas about utilizing electricity for transportation. They're not new, you know. This effort began in the U.S. soon after Edison, et al commercialized the stuff.
The problem is even if you could surmount all the federal regulatory hurdles to do this today, which you can't, there isn't enough electricity in our nation's electric grid to do it anyway. Witness present brownouts and blackouts all over the place.
THAT'S why Pickens is building wind farms, not because he loves them so much. He has to free up enough NG now being used for electricity to be able to covert it for use as a transportation fuel.
Capice? NOT ENOUGH ELECTRICITY or OIL or NG, either one! NObama!
The 1928 Ford Model "Ä" was capable of 30 mpg and 65 mph.
Things have not improved too much in the last 80 years.
Independent is for innovative genius wisely implemented (and we used to be able to say the US and Republican; now it's the wise foreign nations leaving us in the dust).
Dependent used to be the parasitic liberal head-in-the-sand give-me-more- handouts DUH Democrats and now its the drill, drill, drill Republicans.
The spending is being done by our Oil Companies who have to do so to keep their refineries running. The big WE applies to refined products from that Oil. That is what we pay.
So lets Tax the oil companies from Heaven to hell and back. Let them have less money to purchase Foreign Oil and we will reduce our dependence.
If these money mongers stop buying oil from Foreigners tommorow, our dependance will vanish overnight. Who needs them anyway?
Hurrah! We will be independent! The Tree Huggers will win because we will leap back 150 years in time and give the USA back to nature. Hurrah!
His view: US was king of oil until 1971. US used it's excess crude capacity to maintain stable price and that ended when world demand absorbed our excess capacity in 1971. At that time, US ability to influence global price ended.
Pricing power shifted to Middle East/OPEC shortly thereafter and is now subject to market powers outside of anyone's control.
US is now and forever will be a minor player in global oil production. World demand will eventually outstrip world ability to supply oil.
Reducing demand/consumption on gas on US roadways is biggest opportunity to reduce our demand.
And Republicans and "Big Oil" (whatever's left of it in the US as domestic and international companies) still want to drill, drill, drill and use our own.
IT'S WAY PAST TIME FOR ALTERNATIVES - OF EVERY SORT - ASAP - AMAP (that's as soon as possible, and as much as possible) - IEW (and that folks is "IN EVERY WAY": other than drill, drill, drill, and dig, dig, dig - meaning leave all OUR oil, gas, and coal (eg., NATURAL hydrocarbons) in the ground as long as possible (ALAP).
GO "ALTS"!!
Breadnight - I personal think time will show that the answer to energy storage in our personal transportation will be battery storage (lithium batteries being the most efficient, as proved by tesla motors) charged off the grid. Your land cruiser and my jeep cherokee will eventually be replaced in time by more efficient electric models.
mekats - since oil has a low elasticity, constricting the supply won't necessarily result in lowering the demand.
DonaldRay - your criticism is well taken. I apologize for presenting the oil corporations as the root of the problem. My main point here was simply that offshore drilling won't significantly affect prices and it's time to start investing heavily in alternative technologies.
paulk8756 - Call me an idiot if that makes you feel better, but I'm a computer programmer who graduated at the top of his class (3.98 GPA). Part of the reason for the partisan tone of the original post was to provoke a heated response. Looking at the number of comments here compared to the rest of seeking alpha’s postings, it seems like that goal was reached. ...and thanks for your support of picken's plan!
nakedjaybird - couldn't agree with you more. you kick ass!
jhm47 - point taken. In regard to solar, the grid is most strained when the sun shines, so that works pretty nicely as long as it's not the majority of electricity production. Hydro can do a good job at balancing outing when wind/solar production is low, since the dam gates can be opened at night or when more output is needed. And I fully support nuclear.
paultaut - wind is pretty profitable here in the northwest, and it's estimated to quadruple in the next few years. Why wouldn't this also be true elsewhere? In regard to your "WE do not spend anything on Foreign Oil", I'm not arguing here, just curious: Is all the oil imported to the U.S. refined once it gets here, and none of it refined internationally?
BlueTea - Interesting. …and once again, I apologize to the oil drillers for insinuating that they were the root of the problem. America’s success is largely attributable to their contributions.
surgcare - we don't have to shift 100% straight-away. Oil is going to be part of the energy mix for a long time.
Kick'n ass - that's a Patton statement. That's what made the Manhattan Project work. Takes a Harry Truman type guy to say "The Buck Stops Here"; and "Pull The Trigger".
That's the LEADERSHIP required for ASAP, AMAP and IEWP regarding ALTERNATIVES mentioned above.
GO ALTS!!
www.foxnews.com/story/...
I am all for alternative energy.
The reason it is not taking off as fast people want is NOT because of a conspiracy by OPEC, Big Oil or Republicans, but because of real technical issues that need to be resolved with alot of R&D dollars which no one (oil companies, tax payers, government, etc.) wants to pay for.
1) The many problems that exist with alternative energy is not the generation, but the storage. Solar and wind are intermittent sources that require temporary storage before being put on a power grid. These storage systems are not cheap; batteries, pumped hydro-electric storage, hydrogen generation, etc. The other issue is peak wind generation (e.g. in Texas and California) does not always concide with peak demand (i.e. A/C in summer months).
2) The waiting list for hybrids (such as Prius) is due to the shortage of lithium. Unfortunately, lithium is rare compare to older (and less efficient) battery technology materials such as nickel and lead.
3) Hydrogen not only has a negative EROI but has many infrastructure and storage issues. Not only does its small atomic size cause it to leak very easily, it is very reactive with most metals. It low density makes it very uneconomical to tranport by truck. A tractor trailer that can carry 22 tons of gasoline, can only carry 1000 lbs of hydrogen in liquid state. Conventional pipelines cannot be used due to leakage and corrison by hydrogen gas.
3) Ethanol (made with corn) also has a negative EROI. Again, conventional pipelines cannot be used due to the high reactive behaviour of ethanol (same problem with non-FLEX ready cars). Ethanol needs fertilizer made with NG, pecticides made with oil and planting and harvesting need diesel powered vehicles.
Do get me wrong, I am NOT negative on alternative energy.
More R&D is needed to resolves outstanding issues, but no one wants to pay higher taxes to do so.
None of what you say is stopping T. Boone from moving ahead with targeting wind power to replace 22% of the NG power generation, nor all the other countries opting for alternatives, as we speak.
And (as for investing) don't forget all the remote/undeveloped locales in many nations that can utilize solar and a small lead-acid or the like battery without infrastructure nor major storage (not unlike our railroad crossings and other remote power uses that already exist).
And, as I've said elsewhere/other times: having a real need for what we should maybe call BULK ELECTRICAL STORAGE will help bring it to fruition.
And as for vehicles, most favorable are hybrids. Those will really take off with efficient solid state waste heat conversion directly to electricity (which is developed for standard technology and getting close with nano-tech) by injecting biofuels into a burner (container) encapsulated by electical conversion devices and a small on-board battery or storage device - maybe even a flywheel (already demonstrated in busses, years ago).
T.Boone Pickens is an exceptional individual who can fund such large projects with his own money and that of his friends with very little outside help. I am hoping his wind farm project will be the catalyst for the whole alternative energy field.
I agree with you on your bulk electricity storage plan.
Your heat recovery idea sounds great, but sounds like we will only see it in the distant future.
In regards to taxes, I am talking tax incentives, not direct taxation.
Look at the ruckus over the tax incentives oil companies get. Early pioneers and adopters (i.e. the greatest risk takers) of alternative energy do deserve tax breaks. With no incentives in play, I would rather manufacture flooring tiles rather than solar panels.
"NEW YORK (AP) -- Oil prices are tumbling, hovering around $120 barrel Monday after a weak U.S. consumer spending report triggered another big sell-off.
Another dose of disappointing data fed investors' beliefs that a U.S. economic slowdown is forcing Americans to cut back on energy use. The Commerce Department says consumer spending fell in June as shoppers dealt with higher prices for gasoline, food and other items."
Lower demand, both real and projected, is largely driving the current sell off in oil. We can much more quickly lower our demand permanently than we can marginally increase supply by opening up new areas to drilling.
I welcome a compromise on off-shore drilling , not because it is a necessary part of a sound long term solution, but it is the only way to diffuse the wedge issue Bush and McCain created by promising lower prices at the pump.
1 out of 7 barrels of oil consumed worldwide are burnt on US roadways. Our biggest area of focus must be on reducing demand in transportation.
OPEC has in fact produced mush less than they are capable of for many years, but they are not all in favor of higher prices on oil. The Saudi Oil Minister warned his brethren against pushing for high prices . High prices will force consumer behavior to change and a flood of investment into alternate technologies. He told them "the stone age did not end because the world ran out of stones".
In the short term, OPEC will likely increase production because they do not want to see further demand destruction in the US and the rest of the developed world.
Aramco is paying investing 10 billion and using an army of underpaid South Asian workers to develop what is probably their last huge oil field. It could produce 1.2MM barrels a day in about a year.
American companies need high and stable prices to proceed on their oil leases. If they get new ones, the battle will become how heavily must we subsidize them so it makes economic sense for them to take the huge risks inherent in modern drilling. They cannot compete on the global market with producers who have much more oil and can produce it more cheaply.
If you want more drilling, be prepared to either pay at the pump or through taxes to subsidize US oil.
All of our options will need a big boost from Uncle Sam. With a 9.5 TRILLION dollar debt and a half TRILLION dollar deficit, I want the bulk of my money spent developing solutions that are permanent and do not worsen global warming.
Wind, Solar, Nuclear, bio-fuel, battery development trump mindlessly throwing money into oil.
The off shore drilling issue is a gold mine for the McCain campaign. Republicans win either way. Democrats lose both ways.
1) If Pelosi continues to block a free vote on the issue, the Republicans can claim the democrats are blocking a major solution to lower gasoline prices. Pelosi will be portrayed as authoritian by single handly blocking a free vote on major issue that should be decided democratically by the house.
2) If a free vote is allowed, there will be many democrats afraid to vote against a measure seen a cure for high gas prices. McCain can claim victory as many democrats will be backing his proposal for coastal drilling.
I agree. In a perverse way, high gas prices are a gift to the GOP. There are few issues they can win on. Creating the overly simplistic myth that drilling in environmentally sensitive areas will lower prices at the pump can easily be communicated in a quick, thought-ending TV ad.
The Congressional ban has been in place for 27 years. Bush's father signed the executive order. Seven and half years into Bushs reign he lifts the executive order and republican's rally to portray the problem as something created by Dems.
Does any republican find McCain's commercial blaming O'Bama for high gas prices intellectually honest ?
The great mass of American's lack the patience and maybe the smarts to understand the complexities of the oil industry and it's place in the global economy. There is now way to explain it in a 60 second commercial.
That's why I want a compromise. Too many single issue voters will be swayed by the simple ideas being advanced . The truth about the probable costs ad benefits are simply too hard to explain to far too many voters.
I just hop someone talks about our 9.5 Trillion debt/half trillion deficit as we continue to bleed money in Iraq, in propping up banks and lending institutions and continue to pay for the housing bubble burst.
Early on, our oil barons, mostly John D. Rockefeller, saw benefit in keeping prices fairly stable. Our oil was largely controlled by the Texas Railroad Commission (not a typo) for decades and they would raise limits on output to suppress price hikes and cut output to prevent sharp price declines.
Excess US crude was released in 1951 in response to the aborted nationalization of Iranian Oil, in 1956 in response to the Suez Canal crisis and in 1967 in response to the Six Day War.
Today, I don't think US oil producers limit output solely to impact prices. It is more likely they cannot afford to develop and produce a lot of oil because the cost has been too low. Our oil reserves are largely "hard" to extract by now and OPEC can still bring a lot to the global market with less expensive processes.
OPEC, by comparison, has not invested enough to ramp up production because they do fear it would lower price. Saudi Arabia is the lone exception to that approach. There are also internal political pressures on OPEC members to invest in domestic social programs and even alternate oil instead of new production facilities.
The ugly truth is the US does not the potential to ever produce enough oil to impact global price. We can do far more to lower our consumption curve than we can on the supply side.
There is a global shortage of essentially everything needed to explore, drill, transport and refine oil. Sector production inflation is about 25% per year. Any new US oil will be very expensive to produce.
We will need some amount of oil for a very long time. Until we drastically lower our demand, we will always need foreign oil.
"Exploring Realities Of Offshore Oil Drilling"
www.npr.org/templates/...
I just listened to the NPR podcast and it is a good summary of the situation as I have come to understand it from searching many different sources. It is worth a 17 minute investment in time to give a listen.
I do think Dr. Kaufman ?? is wrong in saying the drilling ban will fade away as a campaign issue. The Rove proteges in McCain's campaign see this as a thought ending wedge issue they can exploit.
I hope a compromise is reached to open up some new areas. Not because I feel it is a sound part of the solution to our energy problem, but as a way to prevent single issue voters from being duped into placing their votes for the wrong candidate for the wrong reason.
If the ban is lifted, oil companies will not rush in to produce this very hard to get oil unless our Tax dollars heavily subsidize them. That is where the the battle over fiscal responsibility should be fought.
Either T. Boone Pickens has spoken to Obama and McCain recently or they are both starting to take their energy platforms seriously.
I was shocked to hear intelligent and coherent remarks from both of them yesterady. Mind you they are isolated remarks, but let's hope it is the tip of the iceberg.
I heard McCain say the solution to the energy dilemna is "all of the above". This is what most people on SA have been saying for the last several months.
Obama said he likes the T. Boone Pickens wind farm project and that the USA stop buying oil from the Saudi Arabia and Venezuela.
Thanks for the obvious Barack, that the USA stop buying oil from the primary terrorist sponsor of 9/11 and a left leaning country with extreme spite and hostility towards the USA.
Completely terrible...
This today from my renewable energy constituents.
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Barack Obama, despite voting 'yea' in that narrow defeat of the energy bill and in the first three attempts at extending the PTC and ITC, has not voted in the last five attempts. Together, Obama and McCain account for 40 percent of the 32 'not voting' tallies in those 8 attempts since last summer. The only other Senators to record more than one ‘not voting’ were Senators Ted Kennedy (4 - likely due to recent bout with cancer) and Hillary Clinton (3).
The problem with "all of the above" is all of the above will be very expensive and we have a 9.5 trillion dollar national debt and our deficit will soon hit 500 million.
Our biggest opportunity is to reduce demand by conservation and alternate technologies. Oil is below 118 barrel right now because of lower US demand - real and projected.
The potential off shore oil at issue is below 7,000 feet of water and probably miles below the ocean floor, I don't see oil companies proceeding very far without a lot of government help.
People are dreaming if they think the relatively small amount of oil we might bring to the global market will lower price - it will be very expensive oil to extract.
We will always need foreign oil until we drastically reduce our consumption of gasoline. That is where the smart money should be focused.
"People are dreaming if they think the relatively small amount of oil we might bring to the global market will lower price"
I think you are missing the point. The averaged extraction cost (low Saudi Aramco @ $8 ppb. High shale extraction @ approx $14-28) let's say is $28 ppb. Add 100% markup for reasonable profit that brings us to $56 ppb. The CL contract is thereby all built upon psychology above $56 ppb. This "psychology" is a melange of supply and demand, geopolitical risk etc which is being distorted to manipulate the price. This is being done primarily by Goldman Sachs.
SO -- if you imply that there will be increased supply in the future, just the implication it will be available will defeat the psychology and traders will sell off the market right now today for immediate decrease in price. We don't need to drill anything to lower price. All we need to do is say we will and there will be a much broader supply base out into the future and we will recede below $100 now. The wild card is Iran. Notice how we never hear anything re Iran until we start seeing oil back off $3-4 per session? Part of the game...
You are 100% correct on the lack of leadership. The other side of the coin is people will not vote for a leader that will do what needs to be done. Look what happened to Jimmy Carter when he ran on a platform with a comprehensive energy plan for his second term.
T. Boone Pickens is doing an excellent job of slowly shaming BO & JM onto the right course. This fiesty 80 yr old man with his forward looking plans is really making Obama and McCain look like a pair of dinosaurs. I like the airplay he is getting.
BlueTea,
Conservation can be legislated with minimal cost to the government (except lost fuel taxes)
1) Bring back the 55 MPH speed limit.
This will reduce America's oil demand by 15% immediately
2) Enforce a tough, but achievable a CAFE standard of +45 MPG now. This will reduce oil demand by another 33% as most of current fleet is replaced with fuel efficent cars over the next 10 yrs. Ford made cars (i.e. the Model A) capable of 30 MPG in 1928, why are we still making sub-20 MPG cars today ?
3) You implement T. Boone Pickens plan to replace the 20% of all electric plants in the USA (that are gas fired) and you will have reduced imports by another 20% in the next ten years. This will cost the government money in the form tax subsidies, but is well worth it in the long run.
With these three items alone, you can reduce consumption by 68%.
Go through more items on the "all of the above" list and you can reach complete energy independance.
You are preaching to the choir on conservation and slower driving. I have been among a very small group of people where I live who have taken the bold approach of simply not speeding. In the northeast, everybody does the limit plus at least an additional 10MPH. I would go slower, but people get enraged if I simply don't speed.
Tire inflation is huge even though McCain has mocked Obama - it is low hanging painless fruit.
Look at the downward pressure on price that has been in part driven by a 1 month reduction of just 2.4% in US gas consumption.
It will take political courage to push a 55mph limit. I'm also not sure how it would effect truckers - our big rigs themselves consume more petrol than all of Germany - but time is built into the logistics of supplying goods in our economy. Probably should look at what can be shipped effectively on trains.
Trains get 250 miles/ton/gallon, whereas trucks only 60 miles/ton/gallon. River barges are the best with over 500 miles/ton/gallon.
There is a lot of great ideas out there that make up my "all of the above" list. I recommend the following sites if you are interested:
1) pickensplan.com (very simple video, but really illustrates the potential of wind power)
2) simmonsco-intl.com/res...
(Great power point slides by Matthew Simmons, a Texas oilman and forward thinking individual like T. Boone Pickens)
3) netl.doe.gov/publicati...
(Robert Hirsch Report commissioned by DOE on Peak Oil. It is a very comprehensive energy plan that unfortunately has largely been ignored to date)
I do not buy the idea that the mere suggestion that US will drill in restricted areas will move the needle on price for more than a day or 2.
The really big investors know how the global economy works and that any "new" US oil will be marginal in amount and relatively expensive to produce.
I really am curious how many US companies will jump on the new "opportunity" if the OCS is opened up. THe oil, whatever exists, is below 7,000 feet of water and probably 1 to 3 miles under the ocean floor.
longoil :
I already am on Picken's mailing list. That does not mean I'm 100% behind all aspects of his plan, but I think he has the experience, money and ego to raise the level of political discourse . I really can't seem to get unbiased info. on how clean and domestically available natural gas truly is. Nor how quickly - 10 years as he suggests - we could move a lot of US vehicles to run on natural gas.
His weekly newsletter will come out today as you probably know.
I also am not convinced about peak oil theory of 85MM barrels a day. I think OPEC could move that number up if there were so inclined. Even if true, there is too much risk in hoping they will.
The 85mbl/day figure originates directly from EIA (Energy Information Administration) data. There is a good power point on TheOilDrum.com (A peak oil site) that summarizes much of the EIA data. www.theoildrum.com/nod...
T.Pickens Boone, of course, has ulterior motives: To get tax incentives to make more money for himself and to create a legacy for himself. But at least his crusade will benefit millions of people and the planet along the way.
NEW YORK (AP) -- Oil prices slipped beneath $118 a barrel Wednesday -- $30 below their record high -- after a jump in U.S. crude and other fuel supplies fed beliefs that high energy prices are eating into demand.
Oil market traders are paying close attention to see if oil falls below $117, a key resistance level expected to trigger a rash of technical selling by computers programmed to dump oil contracts once prices fall below a certain threshold.
Let's keep driving demand down. Slow down, tune up , and ignore McCain and inflate your tires. with 240 million cars on US roads - we can all make a difference.
Note the comments about oil having a threshold price of $117 - if true, we could be near a major drop in price.
If it happens, please keep the SUV parked anyway.
I read the oil drum presentation. Lot's of good information. The insights into the technical and economic limitations of producing oil are something that far too many American's don't grasp.
The same is true for the fact that oil has to be priced high before oil companies can produce the difficult sites that remain.
I think the real wild card is just how large are OPEC's reserves ??
I understand the idea that they are probably inflating their position. Alan Greenspan was all over the energy issue while Chairman of the federal reserve and had access to all the information on Oil Drum. He also knew a lot of the OPEC oil ministers. He thinks they have enough to ramp up production to at least 115 MM barrels a day by 2030 - but there is great risk to assume they will do so.
Regardless, we are fast approaching the day when demand outstrips supply.
The other wild card is how quickly China and other emerging markets will grow their demand. High prices stunt their demand as well. Chinese leaders are much more astute at economics than most realize and they may steer their country toward more alternative stuff than is presently predicted. The Olympics are show casing their terrible air and could be a positive in this regard.
Regardless, we are at a critical juncture under any scenario and need to make cutting down our consumption of oil the highest priority.
I'll pass that link around.
I'm not advocating we just keep on keepin on with the same ol hydrocarbon scheme... Far from. Don't worry about the demand exceeding OPEC or any other producers cumulatively. The world will move away from a oil based energy paradigm FAR FAR before we even near running out. No worries. The venture community (predominately US VCs) invested $92bn and $148bn in 2006-07 respectively and it's already starting to payoff. Just take a look at the one investment by John Doerr at Kleiner Perkins named EEStor. A radical revolutionary (not evolutionary) change is upon us and mark my words, oil will collapse long before any of that "Escape from NY, Mad Max" stuff. No -- we won't be running around in tight black leather pants with bad haircuts careening towards the last drop of high test in a car straight from the set of the Munsters...
OPEC reserves are definitely overexaggerated.
Between 1981 to 1985, Canterall, Prudhoe Bay and North Sea all come on line and glut world oil market with 20% excess capacity. Oil prices tumbled from $40 /barrel to $10 barrel. At the same time OPEC members lose 75% of their revenue. OPEC production quotas are based on a percentage of self-declared reserve sizes. Shortly afterwards OPEC members all boosted their reservation numbers so that they can sell more oil and make up for the recent shortfall in revenues. Look at the 1985 point on figure 2 on this article.
anz.theoildrum.com/nod...
I follow the price of oil throughout the day and have seen no one pushing the idea our gridlocked country may produce more oil in the fairly distant future has impacted the price slide.
The sell-off has been been driven by concerns over demand decreasing and increased above-ground supplies in the developed world. The latter has been caused by a combination of the effects of oil speculating and a marginal increase in production.
US gas consumption was down 2.4% a month, a huge figure in a country with 240MM cars. Our economy is slowing down , facing inflation and strapped with debt - a recipe for further short term demand erosion and longer term destruction.
High prices have slowed down economies and demand growth worldwide. Thankfully for us, it has chilled China's expansion for now.
In June the Saudi's invested 10 billion in what is perhaps their last huge oil field with a goal of bringing 1.2MM barrels a day by late next year. No meaningful impact on global price resulted.
It will interesting to see if we get to the 117/barrel threshold and large programmed selling occurs.
Whether or not OPEC is greatly overstating their reserve position, I think we all agree the long term focus has to be on reducing our demand for oil.
Coal displaced wood, oil largely displaced coal, and alternate energy sources must displace oil as quickly as possible.
Greenspan thinks OPEC could ramp up and the world could produce 115MM barrels a day by 2025 or so. Pickens says 85 MM is the peak.
They both agree that demand must be destroyed or the ability to produce will fail to meet global consumption at some point.
That Battery technology that Kleiner backs sounds very promising. I've read about some big companies getting close to solar breakthroughs that will be affordable to the mass of people.
For now, I do my small part to conserve, drive less and drive more intelligently and see a fairly quick and painless way to further erode US demand if we can get all 240MM or so US cars on board