The Price of Oil - Part ??

[jackellis]

Enjoy cheap fuel while you can. This article was quite sobering, especially before coffee.

[tommyt654]

Well now that we have gotten an oil man out of office I believe we will see a trend where speculators will no longer be able to raise the cost of a barrel of oil based on fears of lack of production. Saudi Arabia alone has new technology that will keep us and others well supplied into the future and while the price of a barrel has dropped significantly in recent months(no doubt due to the election)speculators will no longer feed on the fears of the American people or Global demand. There is plenty of oil out there and the careful manipulation of the markets will come under keener scrutiny in the future. New technology and refined distribtion will help as well ,as demand slows due to recession. Do not be fooled by old school thinking. We as a nation should stand up to these companies and demand lower prices as well as better services for without us they would perish.

[JR]

...speculators will no longer be able to raise the cost of a barrel of oil based on fears of lack of production.

I disagree with your analysis. "Speculators" are a key part of the "refined distribution" structure, providing a market well in advance of actual shipment requirements.

...There is plenty of oil out

Oil is a commodity with limited availability. It's just a question of time when it gets in short supply and eventually runs out. New fields coming on line do not change that fact. Prices will trend upward from now until the end. We will eventually have to wean ourselves from this fuel.

...We as a nation should stand up to these companies and demand lower prices as well as better services for without us they would perish.

Very funny.

JR

[LCHIEN]

Well now that we have gotten an oil man out of office I believe we will see a trend where speculators will no longer be able to raise the cost of a barrel of oil based on fears of lack of production. Saudi Arabia alone has new technology that will keep us and others well supplied into the future and while the price of a barrel has dropped significantly in recent months(no doubt due to the election)speculators will no longer feed on the fears of the American people or Global demand. There is plenty of oil out there and the careful manipulation of the markets will come under keener scrutiny in the future. New technology and refined distribtion will help as well ,as demand slows due to recession. Do not be fooled by old school thinking. We as a nation should stand up to these companies and demand lower prices as well as better services for without us they would perish.

That's the kind of thinking that gets us in trouble. The oil companies you associate with high prices actually control a small fraction of the world's oil. The rest is being tied up by Russia, China, venezuela, and middle eastern entities etc. that may or may not be hostile in the future, its trending towards hostile. Available oil IS getting difficult and expensive to acquire, and then burn. We need to deal with that reality.

[jackellis]

Some time back I (think?) I posted a link to a report from UC Berkeley that estimated there might be as much as 18 trillion barrels of oil equivalent worldwide that's still in the ground and unexploited. On that basis, it's entirely possible we won't run out any time soon.

However, with or without new technology and with or without a global recession and no matter who controls the stuff, extraction costs are increasing at a pretty good clip. Shell is spending $12 billion to build facilities in a huge Siberian oil field without any assurance they'll make a dime on the project. Deepwater drilling platforms cost $1 billion to build before they produce a drop of oil or gas.

We can have all the oil we want, but it's going to cost us - the more we want, the higher the price. If we want cheap oil, there's not much available and for prices to stay down, global demand would have to drop to around the level of Saudi Arabia's daily production of 11 million barrels. However that's how much oil the US uses for transportation fuels alone and it doesn't even begin to account for what's used elsewhere.

Personally I think we're gong to be using pond scum to produce significant amounts of motor and aviation fuels by 2015.

[LCHIEN]

Some time back I (think?) I posted a link to a report from UC Berkeley that estimated there might be as much as 18 trillion barrels of oil equivalent worldwide that's still in the ground and unexploited. On that basis, it's entirely possible we won't run out any time soon.
....

May be true, unfortunately most of it is in 10 million small pockets of less than 1000 bbls of oil each. Not worth the $10 million dollars per well to drill ( more than $10,000 per barrel) for it and then the added costs to get it out and transport it. (disclaimer - probable scenario, not based on researched facts)

Think about this: One day we'll not be using gasoline for transportation because its too expensive and we'll be paying $200 for an oil change and lube for our electric/alternative fueled cars because we used all the oil to make gasoline and there's few good substitutes.

[jackellis]

May be true, unfortunately most of it is in 10 million small pockets of less than 1000 bbls of oil each. Not worth the $10 million dollars per well to drill ( more than $10,000 per barrel) for it and then the added costs to get it out and transport it. (disclaimer - probable scenario, not based on researched facts)

I think the authors had in mind deposits like the tar sands in Canada and oil shale in the western US. Both are very abundant and both are costly and environmentally harmful to extract.

Turns out there's a fair amount of natural gas under the Appalachians, though it isn't as easy to reach or as abundant as the Gulf or parts of Texas. Still, it's being exploited profitably, even at today's prices.

As far as an oil change, somehow I can't see corn or canola oil doing the job.

[Alex Franke]

Once Harbor Freight starts stocking these tiny nuclear reactors, we'll all be in better shape energy-wise. Especially if they offer one of their 15% off coupons along with it.

Plus we could use the spent fuel to heat our water!

[Woodboy]

Oil and Gas

I have a Masters degree in Mineral Economics and have worked in the oil patch for 25 years. I am convinced we will not run out of oil, but we will run out of economic oil in the next 50 plus years. Many of the reserve numbers that come out of the middle east and elsewhere cannot be relied upon as accurate and such things as oil shale will probably never get off the ground. There is a great deal of uncertainty around the topic of how much oil exists in the world, but it is declining and every marginal barrel is more expensive to find and produce than the last.

I have lived through two boom bust cycles in my lifetime and we in the oil community are sliding into another bust with all the associated negative consequences such as massive layoffs, etc. You cannot sell a product that goes from $150 / bbl to $46 / bbl in a few months without a significant negative and disruption effect. I don't expect we'll see any bailouts out of congress, however.

The solution to America's energy dilemma will be a broad smörgåsbord of nuclear, natural gas, solar, wind, etc., and oil for the foreseeable future. Domestic natural gas is a good compromise over artificial subsidized sources such as ethanol.

If you asked people in the oil business they would tell you what they really want is consistent and predictable oil and gas prices - not super high, or low, just fairly consistent over time. I suspect the big 3 Detroit auto makers feel the same.

[LCHIEN]

Once Harbor Freight starts stocking these tiny nuclear reactors, we'll all be in better shape energy-wise. Especially if they offer one of their 15% off coupons along with it.

Plus we could use the spent fuel to heat our water!

And forget the CFLs, we'll all glow in the dark.

[LCHIEN]

I can tell you this, $46/bbl of oil will certainly dampen efforts to find new oil and then there'll be another crisis and massively soaring oil prices in a few years,
and it will also dampen efforts to develop renewable energy sources which will also then do nothing to help keep demand and prices down inthe future. Businesses and markets are very short sighted.

[tommyt654]

Average price of gas in U.S.A in March 2000 $1.54, New regime take over, Current price of gas in U.S.A IN Dec.2008 $1.61, nice exit strategy. I agree we need newer renewable sources of energy. Especially for electricity and heating. However the fuel cost for gasoline associated with oil production are absurd. Having personally watched as my father shut down refineries for Shell here in the U.S. for years because of their inability to meet E.P.A. specs (supposedely to cost them billions to retrofit) I truly believe that we are fine we just need to stop all this waste. I for one get tired of watching unregulated flow of traffic burn up billions of gallons gas because no one will install proper traffic management systems in their communitys. Get after your civic leaders. We control our environments, not Big Business or Big Gov,t stand up and fight for your right. It is We the People. As a side note I found it humerous that a guy named JR and a Texan were doing most of the criticism.

[jackellis]

Average price of gas in U.S.A in March 2000 $1.54, New regime take over, Current price of gas in U.S.A IN Dec.2008 $1.61, nice exit strategy.

I suppose one could construct a conspiracy theory out of those two data points but my take is that it's coincidence.

Things like traffic management will help, but not as much as buying vehicles for fuel economy instead of size; building energy efficient homes and office buildings; and minimizing driving trips..

Tommy, maybe you could help the rest of us by explaining the "rights" you're talking about? Certainly not an entitlement to cheap fuel?

[pecker]

We as a nation should stand up to these companies and demand lower prices as well as better services for without us they would perish.

I think you have that backwards. Without them we would would be freezing in the dark.

[tommyt654]

O.K. Great points by all. With regards to what rights I am speaking of constitutional rights, Remember that we as a sovereign nation and government have the means to promote The General Welfare of all of it,s citizens regardless of class/race etc. now and for future generations. Unfortunately we seem to have abandoned our Constitutional rights to General Welfare for radical free market policies so beloved by New Democrats and Republicans alike.T Boone Pickens has a plan right up to the point where he doesnt get filthy rich and who has purchased the leasing and land rights to all of these natural gas deposits we are sitting on? Wake up people. My wife and I drive fuel efficient autos and even have solar panels on our roof but that does not stop us from vocalizing our concerns to our local/state and federal govs.