Seeking Alpha

Gregor McDonald debunks what he calls Spare capacity theory: the assumption among western...

Gregor McDonald debunks what he calls Spare capacity theory: the assumption among western bankers, policy makers, economists, and stock markets that OPEC producers can lift oil production at will, and, export all of that spare production to world consumers. OIL +3.6%. BNO +4.1%.
Comments (13)
  • Finally someone not drinking the Kool Aid.
    23 Feb 2011, 12:05 PM Reply Like
  • wyostocks: Man, the lefties sure don't like it when you start talking about kool-aid. I don't have enough thumbs down either, so let me say this:
    I listened to Barack tell me a year ago that we were headed for the big recovery per all his hard work (besides the golfing that is).


    But, instead, I took the advise of a well known conspiracy theory guy.
    I went out and purchased the 40 MPG Honda Civic instead of the big bad V-8 F-150 with leather and a nice big engine.


    I expect that within a year, the demand and price to be gotten for the Honda will be higher than that for the Big expensive F-150.
    What ever the lefties say, just do the opposite.
    Now- bring on them thumb downers. It sure hurts to be right.
    23 Feb 2011, 12:23 PM Reply Like
  • Mad, the lefties live in Obama fairy world....of big government, and more money to the parasites....
    23 Feb 2011, 12:47 PM Reply Like
  • Can't tow or haul much with a Civic...
    23 Feb 2011, 01:56 PM Reply Like
  • Thanks for the comment but I really was not referring to the lefties.
    I really was responding to the comment that "OPEC producers can lift oil production at will, and, export all of that spare production to world consumers."


    I think when the SHTF that there will be spot shortages and prices will boom.


    I can't wait for O to tell Americans how his policies helped them when gas is $4.50 or $5.00 a gallon. Oh stupid me, it is all George's fault.


    BTW, Brent crude is at $110 per barrel.
    23 Feb 2011, 02:11 PM Reply Like
  • It will take a while, but when the Obumbler's shutdown of Gulf drilling begins to bite, it will really bite hard. Failing to refresh the source of one-third of US oil production will be a disaster. Unfortunately (in this case) the clown probably won't be in office to face the angry citizenry.
    23 Feb 2011, 11:14 PM Reply Like
  • We saw two years ago that this administration sought to pursue tactics, kool-aid or not, which would replicate the recession-extending behaviour of the FED and administrations after 1929. So far, we can crow - the "other side" needs to find the crows to eat... and wash it down with that great kool-aid, eh?
    23 Feb 2011, 12:40 PM Reply Like
  • Oh, to the point above, consumers should wonder why big oil and green groups are so cozy - because the one impels the other to make monstrous profits by constricting supply. One wonders what might happen should the general knowledge of the billions of barrels of oil rumoured to be under the Dakotas and Montana ever leak out, so to speak. It's been pretty well covered I understand by both green and oil execs whose bread is buttered by constraining supply. Any new supply takes 10 years or so to come to market, but if never developed, it never makes it to market, right?
    23 Feb 2011, 12:50 PM Reply Like
  • drill in the dakotas, or montana or wherever you want to drill. the easy oil is gone. the price of the easy oil, which our system depends on, and that allows are economy to continue humming. there is a lot more oil available: deeper in the ocean, in countries with less civil stability, or you have to dig it up with giant trucks and separate the dirt from it. all this costs more, which will be passed on. there will be more and more economic adjustments to a system built on a commodity that is getting expensive very quickly. no green group, obama or george talk here. just economics. there will be as many opportunities as risks.
    23 Feb 2011, 03:47 PM Reply Like
  • "easy oil" is a cliche that lacks relevance. We're finding and extracting oil economically in the Bakken, Eagle Ford, Canadian oil sands, etc. that was either unknown or could not be economically extracted just a few short years ago. There's oil on the US continental shelves if we go after it. McDonald was speaking very clearly of near-term production growth potential from OPEC. He used the term "immediately" multiple times to make his intent very clear.


    Your "dig it up" oil sands reference and implied high costs doesn't reflect technology advances and reality.


    "Where Cenovus has a huge advantage is costs. Operating costs per barrel at Foster Creek and Christina Lake averaged $11.82 in the first quarter, a 28% decline from $16.33 in the same period of 2009, mainly due to higher production volumes and a lower level of workovers and repair and maintenance activities."

    24 Feb 2011, 12:17 AM Reply Like
  • so your statement is the oil sands are just as "easy" as drilling a hole in the ground and oil running out of it? it is very relevant. lots of oil to be had but with greater and greater effort. wanna guess how much it costs saudi arabia to produce a barrel of crude?


    while $100 oil makes projects like foster, oil sands, profitable they would not have worked 20 years ago. they only work now because oil demand is outpacing supply. what will happen in 20 years when more "easy" oil is gone? the price will continue to rise obviously.


    look for this trend invest wisely. yes there is a lot of oil, but the easy oil is gone.
    24 Feb 2011, 08:56 AM Reply Like
  • No, my statement is "easy" is meaningless. Is it economical is the question? It doesn't matter that it costs Cenovus more than the Saudis. The fact is oil currently is way above what is needed to make it worthwhile for Cenovus to make money in the oil sands. Ditto for oil elsewhere in the world. Costs matter, and there's a lot of oil out there that is economical at $60-$80 oil. Over the long-term history shows that the kind of spread between costs and market price that we see currently can't be maintained indefinitely.
    24 Feb 2011, 10:38 AM Reply Like
  • agreed scratch the word easy. we are saying the same thing. oil prices will increase as we have to spend more to extract it...which we keep having to do.
    24 Feb 2011, 10:47 AM Reply Like
DJIA (DIA) S&P 500 (SPY)