The new forums will be named Coin Return (based on the most recent
vote)! You can check on the status and timeline of the transition to the new forums
here.
We now return to our regularly scheduled PA Forums. Please let me (Hahnsoo1) know if something isn't working. The Holiday Forum will remain up until January 10, 2025.
Inexpensive oil or the lack there of.
Posts
Noticeable lifestyle changes is a somewhat pessimistic but not completely unrealistic prediction. But I don't believe that changes need to be more than minimally painful, as demand side responses to more expensive energy will be to reduce wastefulness. Oil prices have spiked heavily currently and in the past, and it hasn't lead to a massive reordering of western life, more a shift to more sophisticated and less wasteful machines.
The thing about peak oil is that it is something that in many ways the market can handle in the long term. There are things that the free market can't deal with at all, but this isn't really one of them. There are alternative sources of energy, and there is money to be made by providing them if oil becomes more expensive. If there weren't a number other potential sources of energy unexploited for economic reasons there may be cause for concern.
Resource wars don't seem all that rational after a point, because it quickly starts becoming a lot more expensive to wage them than just bite the bullet and go to an alternative fuel even if it is suboptimal.
Oil companies control a resource that is vital for the continuation of modern civilization. That they are making approximately five metric fucktonnes of money each year should not come as a surprise. This is sort of the way things work.
That, and the irrational fear surrounding transport to reprocessing sites.
That profit is probably due to the fact that the supply of oil is controlled by a cartel of countries who are by in large in a bad neighborhood, and the price of oil is inflated heavily due to the premium of risk that someone might go nuts and the supply will be greatly impeded almost immediately. Since you are paying so much on top for monopoly and risk premiums over the raw cost of extracting the stuff, then there is bound to be massive profits.
It seems that you're forgetting that war... war never changes. In the twenty-first century, the spoils of war are also its weapons.
They really are not controlling supply. They controlled supply in the 70s. Right now, theyre pretty much pumping out as much as they're able to.
The high price of oil is largely due to the risk premium and rising demand.
Fixed it for you. Yeah, the oil companies should have the shit taxed out of them. Both for their repeated "whoops, sorry about your coastline" and just for the hell of it.
I said it wasn't rational, not that it wasn't going to stop. But yes it will probably be rational for countries here and there getting less than they could muscle out.
A fifth of the cost of gas (for me) is already going to taxes. You know what's totally awesome and not horribly regressive at all? Higher energy prices. Sounds great, you get right on that.
Really all I was trying to say is that Fallout is awesome. You make me sad.
I wanted to play it, but by the time I learned of its awesomeness I couldn't find it.
OPEC is not artificially inflating the price of oil.
I love how conservatives only care about regressive taxation when it comes to little kids getting healthcare or cutting back our dependence on the oil that funds foreign dictatorships.
Even if they aren't immediately restricting supply now, they have done so in the past and the risk of them doing it again is something factored into the price of oil. They don't have to play their cards to affect the price, just hold them and have it known that they can play them.
Your theory is that the risk of an oil embargo - which has not happened in the last 33 years and which OPEC has not even hinted at doing again - is a risk that is being factored into the price of oil.
I never said they were rational, just that countries might have them anyway. ;-) Having to deal with increased scarcity is one of those things that can make countries behave pretty irrationally, and the idea of going over and securing vital resources through invasion sounds semi-plausible enough to gain the support of a lot of idiots. Remember, one of the stated reasons for the Iraq war was that it would pay for itself with oil revenues. Because, you know, nothing makes a country secure and productive like turning it into a war zone. But yeah, probably won't happen.
It doesn't have to be a full embargo. Monopolies and cartels work by producing only up to the point where marginal revenue is equal to marginal cost, which is short of the supply and demand equilibrium. It's in their best interest to restrict supply partially to pump up costs, but not fully as they want to get paid off on those costs. The problem for cartels is that the individual members have the incentive to individually output more while their partners still restrict supply, which is a collective action problem. OPEC works as a cartel because Saudi Arabia has the means and will to punish cheaters and the number of members, and thus potential cheaters, is restricted.
Also, if shit goes (edit: more) crazy in the Middle East, then OPEC members are the ones who get to decide what their best interest with the oil supply is.
I dismissed the demand side because I don't have to talk about the demand side. The model is broken on the supply side, which undermines the predictive power of the whole thing.
I'm not big on regressive taxation at all, dude. Furthermore, the demand for oil is pretty inelastic, particularly in this country where public transport is often infeasible, particularly for the poor who wouldn't be able to afford new cars that run on fairies even if they wanted to. I'm all for reducing foreign oil consumption - it's a big part of why I favor TDP and ANWAR drilling. But simply raising already nigh-ludicrous sales taxes on gas won't do that.
I would not be surprised if we stumble upon/create a bacteria that can make it safe within a decade.
Edit: Either way you read the end of the sentence works.
Most other industrialized countries have a much better public transportation system than America.
Feel free to add me on whatever network, it's always more fun to play with people than alone
[Edit: Left the window hanging for five minutes and was pre-empted. Ah well.]
You are so wrong.
You know what the price of oil (per barrel) was in 1998? Like 12 dollars.
Now its 90.
OPEC was around now and ten years ago. Figure it out.
Canada doesn't, and we're a larger country with shit loads more open spaces of wilderness, and we also pay higher gas taxes. We seem to get by just fine. So fine that the provincial government of my home province (BC) is on the verge of announcing a carbon tax, which will add another 10 cents or so to what I have to pay at the pump.
The fuck you saying? If you have a point, go ahead and make it. I don't have time to try to sift through this sort of implication bullshit.
I know that dollar has been going to shit, the risk premium has gone through the roof, and that demand has gone continually up especially in the developing world such as China, which have all pushed the price upwards. And oil demand is rather inelastic, at least in the short term, exacerbating this. If you would be nice enough to point out why this makes OPEC irrelevant, then do so. Don't be a condescending prick.
OPEC doesn't effect the price of oil to any degree. They're actually all producing at max output more or less right now. The risk premium doesn't give a shit about OPEC.
I was describing this point using actual ppb numbers.
My point was that they don't have to be actively blocking the pumps to affect price. The price of oil takes into account the perceptions of the probabilities of different outcomes in the future with respect to oil. If there is a perception that OPEC will do X or Y in situation Z which affects the oil supply, then that will affect today's price even if that situation never occurs. The perception of risk plays heavily into this, and OPEC has at least some power over those perceptions.
So . . . I think geckhan's point carries the day.
Over the long run it becomes elastic.
Example: New Hampshire has been using the exact same amount of gasoline every year since 2004 when prices rose.
I think this deserves special mention:
"As police investigated the crime scene, BP then raised its price for a regular gallon of unleaded gas from $2.96 to $3.09."
http://en.wikipedia.org/wiki/Hirsch_report (link to the pdf is at the bottom of this wiki summary).
See also http://en.wikipedia.org/wiki/Peak_oil for a good general overview with some for and against arguments..
A couple of points to keep in mind:
1) Global oil field discoveries peaked in the 60's. The early days were when the industry found most of the 'supergiant' fields (Cantarell in Mexico, Ghawar in Saudi etc). Despite the money thrown at exploration, the trend has been irreversibly down ever since.
2) Oil field product profiles generally generally show a bell shaped curve. You find the field, poke some test wells down, then drill like crazy (and therefore rapidly expand production). When approximately 50% of the oil has been pumped the pressure drops and production falls. Regions (such as the North Sea, Texas etc) show the same profile - production ramps up until eventually there are more fields in decline than in their upswing.
3) There are a couple of things that tend to distort the 'perfect' bell-shaped production curve. If the global economy takes a hit (such as after the oil shocks of the 70's) then demand - and production - falls. Countries also have internal problems (Iraq, Soviet Union) which can affect production. In a few cases (such as the North Slope in Alaska) late discoveries can cause a 'bump in production.
4) Most global oil resources are now managed by state-owned companies such as Pemex (Nexico) and Aramco (Saudi Arabia). The big western conpanies, such as BP and Shell, are minnows in comparison. Russia has been quite aggressive in pushing western conpanies out, as has Venezuala. Expect more 'resource nationalisation' in the future.
5) Of the worlds 98 oil-producing nations, 60 are in decline (amusingly, Indonesia is an oil importer despite being an OPEC member). Most new productions is coming from a small number of countries, such as Russia and Angola (!). The wiki article has a list of countries where production has peaked, but it looks like an abbreviated one.
5) To keep global production growing, you not only need to find new fields, you must offset declines from existing fields. This is perhaps the main point the a lot of people don't seem to get - reserves matter, but to paraphrase Clinton it's the production rate, stupid. It doesn't matter if you have 2, 5 or 10 trillion barrels of oil booked in reserves if you can't raise the rate you are getting it out of the ground. Due to a combination of geology, politics, and expense, this is getting harder and harder. To grow production to the 120 mbd the IEA is saying the worlds needs by 2030, we need to find and put into production about two new Saudi Arabia's.
7) Enhanced oil recovery helps recover more oil from 'mature' fields but does not increase the maximum rate of output. EOR is frequently cited as a factor that negates peak oil, It usually refers to steam or water injection, or drilling at different angles to increase the flow rate. The problem this argument has - apart from these 'new' techniques' often having been around for decades) is that they normally provide most benefit on the 'downward' slope of production, i.e. over time you get more oil from the well, but it doesn't increase the maximum production rate.
8) Despite the best technology, the most money, and the largest number of skilled engineers, both the US and the UK have peaked (the US back in 1971, the UK around the turn of the millenium). 'Throw money at it!' and 'we have technology!' seems to not hold much water - if these countries haven't been able to, who can?
9) There are many alternatives being developed - ethanol, biodiesel, solar, hydrogen fuel etc etc. These tend to be casually thrown into counterarguments along with 'the market will solve the problem'. And maybe they will. Consider however, you are facing an industry that is still loudly claiming it can raise production any time it wants (or at least Saudi can.. maybe) and wants to discourage alternatives as long as possible. Consider many people confusing 'reserves' with 'production'. Consider many of these alternatives are not as scalable or energy dense, or - in the case of hydrogen - have been 'just around the corner' for decades now. Consider the amount of new infrastructure needed to support these alternatives. Personally, I think lithium-ion electric cars are the best bet, but who knows?
I tend to facepalm at the doomers as well as those who think the market fairy will solve it all. I think we are in for some hard economic times (yeah, I giggle when I read opinion pieces that energy isn't important in 'the new economy') but we will get through it.
TL,DR read the wiki links.