retired358

Does Crude's Price Reflect Reality?

It appears that this "conclusion" is based upon OPEC excess or spare production capacity. It would be welcome if "analysts" would look more closely at the data they use before making conclusions or speculating based upon that data.

If one were to look at OPEC production capacity, one would quickly see that it is: 1) not verified (reporting agencies just accept what OPEC countries report); 2) is suspect (e.g., several years ago, the reported reserves of several OPEC countries suddenly doubled in the same year, and have not changed since, even with continuing production - highly unlikely in reality but probably done to get around self imposed production targets based upon reserves - so how can we believe reported spare capacity); and 3) likely to be much higher than reality (several countries - Nigeria, Venzuela to name but two - still have reported production capacities in excess of prior peak capacities when they are now only able to produce less than half of that peak capacity - so they obviously have no spare capacity).

Spare production capacity is defined as that capacity that can be brought on line within 30 days and sustained for at least 90 days. If one looks more closely at the data, the reported spare production capacity is highly suspect and certainly not something that I would base any conclusions upon.

Is Cheap Oil Compatible with Growth?

TomF: The pure stats of per capita consumption are misleading in that GDP and climate (e..g., Canada) are a major component.

One needs to look at the consumption of the developing world (China, India, others are a tiny fraction of OEDC - Industrialized countries consumption). What is really scary about those numbers is that they are so small - and does anyone think they do not want to improve their standard of living?

Having spend years in the industry, I do not see where this supply will come from short term (next 20 years).

Crude prices will go up.

The US needs a comprehensive energy policy and congress is incapable of understanding or doing anything constructive in this area.

An Energy Policy that Makes Cents (and Sense)

GH: Agree that nuclear waste issue needs to be solved.

However, coal can be used and converted to fuel in an environmentally friendly way and the land returned to a better state than it was (reclaimed). We can develop energy in coastal areas without destroying them (it is happening elsewhere in the US).

You point is to limit these potential sources of fuel. So, I assume that you would rather pay $6-10 for a gallon of gasoline in the future and live in a world with a much lower standard of living. You cannot have it both ways.

An Energy Policy that Makes Cents (and Sense)

Fully agree with article.

Some additional thoughts:

We need to tap all available hydrocarbon sources. North America has some of the largest deposits of oil sands, coal and shale oil in the world.

There are processes available to convert these to fuel today at prices well below current crude prices.

The problem is the very large capital expenditures needed and the risk to these investments if crude prices were to fall.

The solution (not that I like gov. intervention but we have that already) is for Congress to pass a price support for all alternatives at say $60-65/B equivalent. This would allow the massive capital expenditures necessary to bring these (and other) alternative sources on-line.

And, it would cost the taxpayers nothing assuming crude prices remained above $65/B. Should crude fall to say $40/B, then, yes, taxpayers would support less than 20% of our energy needs at $65/B but the remaining 80% would be at $40/B for an average of $45/B. Would that not be better than the current price of $100/B?

And, if this policy were announced, crude prices would fall immediately - speculators would flee the futures market and crude producing countries would increase supplies to try to persuade companies not to invest in alternatives. They fear alternatives.

Seems like a win-win.