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Shell's application for permission to export oil from the U.S. is the latest sign that old...

Shell's application for permission to export oil from the U.S. is the latest sign that old dogmas of the energy debate are under threat from reality. The foundational truth of four decades of U.S. energy policy - that America can’t supply itself with oil and natural gas, and certainly can't export them - is suddenly looking to be not so true. "What if all this works": 2022 U.S. production of ~12M bbl/day.
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Comments (30)
  • PeakOiler
    , contributor
    Comments (297) | Send Message
     
    Escalating costs are running up against consumption resistance. The Bakken costs for new wells is now roughly $90 per barrel according to a study published in the Oil Drum. Production can increase only to the extent that consumers will be willing to pay for the higher price of gas.
    13 Oct 2012, 08:35 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2580) | Send Message
     
    With each well companies gather more information about the best drilling practices. Presentations I've seen from the likes of MHR and CLR point to 40% rates of returns on wells costing $7 million for MHR and between $8-$9 million for CLR and prices of oil at $80. US production is the real deal, contrary to what that Red Queen article claims.
    13 Oct 2012, 09:17 AM Reply Like
  • Jason Tillberg
    , contributor
    Comments (1253) | Send Message
     
    We burned about 7 cords of wood last year. It costs us $998 for 5 cords to be dumped in my driveway. So figure $1400 a year for heat.

     

    Point is, we'll change based on cost.

     

    Oil would have cost $3000-$4000 for season..

     

    So my oil consumption was 0 where as a few years ago it was something.

     

    13 Oct 2012, 09:25 AM Reply Like
  • kmi
    , contributor
    Comments (4030) | Send Message
     
    Every single energy source is currently cheaper than oil, and will be as long as is sticky in $90 range.

     

    Demand destruction moving forward means US will continue to consume less year over year, as will other nations, in particular as the investments made into oil alternatives are high dollar long term investments..
    13 Oct 2012, 10:22 AM Reply Like
  • Ray Merola
    , contributor
    Comments (3355) | Send Message
     
    Everything except wind, solar, and geothermal. All losers. This is what our administration advocates.

     

    Yes, gas and nukes are currently cheaper than oil on a national scale.
    13 Oct 2012, 10:41 AM Reply Like
  • kmi
    , contributor
    Comments (4030) | Send Message
     
    Wind solar and geo are also cheaper than oil.

     

    Also, you don't understand the economics of renewables, clearly.
    13 Oct 2012, 01:32 PM Reply Like
  • Ray Merola
    , contributor
    Comments (3355) | Send Message
     
    I believe I do understand renewables. I spent thirty years in the energy business. Total economic cost involves power generation, storage, transmission, distribution, and retailing. It also involves ensuring that such sources are ratable, both operationally and economically. Not to mention the maze of regulatory hurdles and political challenges.

     

    Wind, solar and geo are commercial economic losers and will continue to be so for the foreseeable future. That's why the only way they can stay in business is through government subsidy (think tax receipt re-distribution and / or reduction in taxes due) that we all get to pay for.

     

    If these modes of energy become commercially viable, don't worry: they won't need the government handouts anymore. Free market capitalism will take over and it's off to the races. Investors will line up to get in.

     

    It's possible for certain individuals (typically well-to-do) who have the money, land and influence to do it for themselves. However, those folks don't move the needle for the general U.S. population.
    13 Oct 2012, 01:45 PM Reply Like
  • kmi
    , contributor
    Comments (4030) | Send Message
     
    You are making two separate points and presuming they are part of the same conversation.

     

    To the entity investing in renewable energy ROI is calculated assuming and including government subsidies. Just as for a purchaser of any product cost or money out of pocket and return on investment is the only issue of interest. This is how the investor looks at it.

     

    Railing against the government subsidy as inappropriate is a political stance that has nothing to do with an entity's ROI. And to do so accurately and honestly one needs to consider the incentives and subsidies provided to its competition as well.

     

    The reasons commercials invest in renewable energy are all about ROI. And the numbers work, wonderfully.

     

    If you want to talk about whether or not you feel government subsidies to renewable installations are appropriate I'll accommodate that, but don't conflate two separate issues.
    13 Oct 2012, 03:03 PM Reply Like
  • Ray Merola
    , contributor
    Comments (3355) | Send Message
     
    You are correct I was making two separate points. However, it is incorrect to assume that they were part of the same conversation. The first point was based upon the statement that wind, solar and geothermal energy is cheaper than oil.

     

    The second inference underlined the first point. They are congruent, but not identical issues.

     

    1. Renewables are not currently viable on a commercially economic basis. They may work for some well-off individuals or in special circumstances on a micro-scale, but they don't move the needle with respect to total U.S. demand.

     

    2. Government subsidies provide incentives for certain renewable businesses to "play" with an interest to score a buck. It's a form of re-distributive capitalism, but underlines the first point. When the economics of renewables makes them relevant, the government will no longer need to funnel taxpayers dollars to it. The free market will pick up the ball using routine regulations and tax code; and venture capital.

     

    As a third point, the problem with many government renewable energy handouts is they never seem to go away, no matter how badly the economics play out. Take the ethanol subsidy for instance.......

     

    Indeed, once an energy source becomes viable, the government tends to tax it heavily along all points along the supply chain, and cut back the freebies.
    13 Oct 2012, 03:30 PM Reply Like
  • kmi
    , contributor
    Comments (4030) | Send Message
     
    I see where we disagree, you seem to be talking about gross national demand, and, it seems, with a specific focus on transportation, whereas and I am discussing the issue from a commercial entity's perspective and with a focus on the consumption of oil outside of transports.

     

    I take issue with the comment that renewable are not commercially viable, since I see that proved erroneous in virtually any application I examine, although I don't disagree that they don't move "the needle with respect to total US demand".

     

    The most overlooked issue is the fact that renewables provide long term fixed and predictable costs, at lower rates, which is performed via capex and it's associated benefits, from the entity's perspective, and the energy used is domestically sourced as a ancillary benefit. This reduces the overall capital the economy as a whole exports, which works in favor of keeping capital and it's benefits inside the country. And that's why governments worldwide choose to subsidize them.
    13 Oct 2012, 08:19 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    Geothermal is a winner. I have one in my house and most commercial buildings in the norther have been using it for many years. My break even point on the house is around 4 to 5 years. Without tax credits it would be 7 years. I have a big house and a spouse that likes it very comfortable.

     

    Small homes likely cannot make sense of it though.
    13 Oct 2012, 11:38 PM Reply Like
  • Ray Merola
    , contributor
    Comments (3355) | Send Message
     
    Thanks for the clarifications. Yes, I'm looking at this issue as a macro domestic challenge, requiring comprehensive answers up and down the supply chain. Otherwise, it appears to me it's just our government creating new, dependent special interest groups in lieu of a focus upon moving towards energy independence.

     

    As an aside, I believe domestic natural gas represents a viable, economic bridge fuel that will create hundreds of thousands of good, high-paying jobs, permit Americans to move away from foreign oil, and reduce carbon emissions.

     

    Shale gas is a game-changer. We don't have to export vast capex anymore. We simply harness the reserves here. There are multi-national oil companies and many domestic E&P outfits that are / will do so within the free enterprise system.
    13 Oct 2012, 11:52 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    I think geothermal is part of the solution..............not for everyone but part of the mosaic. Nat Gas is a big winner that has been shunned for solar which is stupid.

     

    BTW when I say "most commercial buildings" I should clarify that is what I keep running across with builders and large property owners. Especially builders that include utilities in their rent/lease prices. I don't have the hard stats in my hand for it though so keep that in the back of your mind. Needs more research.
    14 Oct 2012, 12:27 AM Reply Like
  • kmi
    , contributor
    Comments (4030) | Send Message
     
    TVP

     

    Geo is great, but in some ways limited. For example, in the greater NYC area most large properties simply don't have the land available.

     

    Nat gas enjoyed a brief moment in the sun, as it were, as a on-site generation fuel for commercial entities with Bloom Boxes (if you remember that story), but most commercials seem to be switching to solar because of the price volatility and price unpredictability often evident in nat gas, as well as the incentives in solar and the exoticness of other alternatives.

     

    What's also getting popular in the NE only lately but still nascent is solar hot water. You see nat gas go to $5+ like some folks predict (I don't expect it but you never know) and that becomes very attractive, although what I have been seeing/hearing a lot of for smaller home owners is wood pellet.

     

    As an aside, I have been a proponent for nat gas since before it was popular, it's amazing just how much all the new capacity coming online in '08 changed the rhetoric. At the time the position was considered firmly in the left, as oil was the only right fuel even for centrists. It's interesting to see how mainstream the ideology around nat gas has become over the past few years.

     

    This is heavily influenced by the fact that the nat gas oil ratio has broken down since '08-'09 making nat gas far cheaper than oil, and should oil pull back to $50-60 and nat gas hop up closer to $5 we'll likely see this conversation change again.

     

    In the meantime, wood, solar, geo (with caveats!), wind will continue to provide energy at a constant pricepoint in depreciating dollars.
    14 Oct 2012, 07:22 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    I hope we get away from wood as a fuel. We don't need everyone chopping down trees.

     

    Got your point on geo. You also need people who have well drilling equipment to do the work and I am sure there are not that many hanging around Manhattan.

     

    Not much solar here in the upper midwest yet. Nat Gas needs to be a big part of our energy answer as we have so much of it.
    14 Oct 2012, 12:11 PM Reply Like
  • PalmDesertRat
    , contributor
    Comments (2821) | Send Message
     
    Several months ago the Economist ran an article about the future of Engineered Geothermal Systems (EGS),which is in development but has the potential to provide massive amounts of energy.

     

    Have you seen anything recently about EGS?
    14 Oct 2012, 06:53 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    No I have not and that sounds interesting.
    14 Oct 2012, 09:22 PM Reply Like
  • PalmDesertRat
    , contributor
    Comments (2821) | Send Message
     
    the Economist calls it Engineered Geothermal Systems, Wikipedia calls it Enhanced Geothermal System. I'm not sure which is correct, I suspect Wikipedia is.
    14 Oct 2012, 10:18 PM Reply Like
  • PalmDesertRat
    , contributor
    Comments (2821) | Send Message
     
    Here's an Aussie company working on it. It's developmental but their website has a bit of info on the process:

     

    http://bit.ly/P3xYS1
    14 Oct 2012, 10:35 PM Reply Like
  • Archman Investor
    , contributor
    Comments (2455) | Send Message
     
    Yes but because of refining issues Americans can look forward to ever higher fuel / gasoline costs. Americans never win.
    13 Oct 2012, 09:01 AM Reply Like
  • Ray Merola
    , contributor
    Comments (3355) | Send Message
     
    Correct. We don't "use" crude oil. We "use" refined products. The cost to refine crude into products will continue to escalate contingent upon Federal and State fuel mandates. The construction of additional or new facilities is part of the equation, too. A greenfield refinery has not been build in the U.S. since the 1970s. Nor will one be built under the current regulatory environment.

     

    Note the current situation in California. The price they are paying at the pump is not linked the price of crude oil.

     

    Another piece of the puzzle is crude and products transportation. The ability (and cost) to move oil around the nation is another factor in the quest to wean ourselves off foreign oil, albeit a smaller factor.
    13 Oct 2012, 09:57 AM Reply Like
  • Hendershott
    , contributor
    Comments (1560) | Send Message
     
    There is a refinery proposed in N.D. But we don't seem to have a refinery shortage since we are exporters of refined products, including gasoline and diesel.
    13 Oct 2012, 07:57 PM Reply Like
  • PalmDesertRat
    , contributor
    Comments (2821) | Send Message
     
    Oil is a touchy subject in the minds of most voters and politicos. It would make a lot of economic sense,I think,to export Alaska crude to Japan and import more from Mexico. but exporting crude has been prohibited for many years. I would be really surprised if the Feds reversed themselves now. economics means very little in Washington, re-election and politics means everything. RD is a foreign-owned company-it will be interesting to see how that plays in this case.

     

    imho
    13 Oct 2012, 10:11 AM Reply Like
  • BlueOkie
    , contributor
    Comments (5385) | Send Message
     
    We can be energy independent if we have the tree huggers get out of the way. We have plenty of oil, nat gas, nuclear, biomass, wind, solar if all are combined. VOTE!!
    13 Oct 2012, 12:09 PM Reply Like
  • davidbdc
    , contributor
    Comments (3158) | Send Message
     
    I do believe something like that is possible. But it would require a lot less yelling and more practical regulations that protect our water supplies - while then allowing companies to drill.

     

    We should be firing bureaucrats in DC, hire them out in the field to inspect drillings and wells and support the industry while protecting the environment.

     

    But since everything is about politics now it will just die the slow death of government rules and regulations and stupidity.
    13 Oct 2012, 05:25 PM Reply Like
  • raykrv6a
    , contributor
    Comments (2780) | Send Message
     
    Well, I just paid 4.45 gallon for diesel in Minnesota. If we are going to export oil, we need to tax the heck out of it. What are there, about 30 operating refineries in the US?

     

    Seems to me the price of energy needs to go down to help simulate the economy and job creation.
    14 Oct 2012, 02:01 AM Reply Like
  • kmi
    , contributor
    Comments (4030) | Send Message
     
    We tax fuel less than virtually any other non-subsidizing nation.

     

    It's something like 30-50 cents a gallon, for gasoline. Diesel of course was the recipient of Clinton's love in the late 90s and received a higher tax so it's like 70 cents there.
    14 Oct 2012, 07:26 AM Reply Like
  • raykrv6a
    , contributor
    Comments (2780) | Send Message
     
    Last time I looked, the gasoline usage was down 7% from 2007, couple of refineries were shutdown due to lack of demand. Yet prices are high and I read diesel was being exported as it's more profitable to export then sell domestically.

     

    Guess I will go out and look at new Prius.
    14 Oct 2012, 11:39 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2580) | Send Message
     
    There are 134 operating refineries in the US. The US already enjoys lower oil prices than most of the rest of the world, its a lack of new refineries that keep refined products prices up.

     

    http://1.usa.gov/P3cbtO
    14 Oct 2012, 06:35 PM Reply Like
  • BlueOkie
    , contributor
    Comments (5385) | Send Message
     
    I want two things from energy sources. I want it reliable and I want it mobile. When I turn a switch on in the evening, I don't want to hear the wind didn't blow today, the sun didn't come, the battery didn't get charge, we had increased demand.

     

    I want to be able to hope in my car or a airplane or train; get on my lawnmower without having to make sure there's a charged battery around that won't run out of juice.

     

    We are stuck with fossil fuels for the next 50 years while we R&D other sources of energy.
    14 Oct 2012, 09:20 AM Reply Like
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