retired358

OPEC Cuts, Oil Falls: Something's Not Sustainable

The problem with the West is that as long as crude prices are low, the attitude is "what, me worry"?

The time to act really is now when we have a chance - but, what is the solution?

Some would say tax petroleum products at a higher rate to force conservation. That is not an intelligent solution as it may help conservation but it will also worsen the financial/economic crisis and will just provide more of our money for the gov. to spend unwisely.

Some would say fund a massive research program - again, a waste of taxpayer money. There is plenty of company/private research and gov. funded research in the past has not been productive. And, there are plenty of potential processes available to commercialize now.

The real issue is the volatility in crude prices - which makes investing in newer processes/technology difficult when investments would be on the order of $20 billion for the equivalent of 300,000 bbls/day of products - the output of a large refinery.

Long term, our energy will need to come from solar or biofuels from algae (the only two sources large enough). Nuclear could work but there is currently no acceptance of that route by the public.

So, how do we bridge the gap (until solar or biofuels are viable)? Congress could easily pass a bill to set a floor price for all renewables, alternatives or unconventionals at say $65-70/bbl equivalent. That would allow companies to invest the large sums necessary and would ensure that the best processes were commercialized (rather than having the gov. mandate - via subsidies - solutions which are morally and socially unacceptable - including food to fuel).

How Low Can Crude Oil and Gas Go?

One of the reasons crude may be down over the past 3 months (besides lower demand) is that Mexico hedged about 1/3 of its 2009 production (export vol.). When about 330 million additional bbls. are essentially sold into the market over a short period of time, it should have a very negative impact on price.

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.