The Future of Petroleum?

I've been doing some more research, and I'm backing off of my supply/demand position further up the thread.

And I'm starting to seea very disturbing trend economically for not just the US, but most of the world.

This first link is an article written over a year ago, and perfectly predicts exactly what's happening now, as well as explaining it. http://www.theoildrum.com/node/2331

This second is from this month http://europe.theoildrum.com/node/4112

In both cases, I urge you to take the time to read all the follow up comments both for and against the information in the articles.

And lastly, this was a highly speculative graph, but taken from those data sources...

http://www.flickr.com/photos/8745365@N04/2504887199/sizes/o

I've been following the blog www.theoildrum.com for about a year and a half now and there is some really good data coming out of there considering the limited information the oil industry has on reserves in general (we're at the mercy of the NOC's for numbers alot of the time)

A couple of posters there (Westexas and Gail the Actuary) are very very knowledgable insiders in the businsess (westexas is an independent geologist and while I don't know what gail's position is, he/she provides some very extensive research in the area). I think there is a high noise to signal ratio there for many of the commenters, but the articles themselves seem fair enough.

I wish I knew more about the information being kicked around in the 70's oil crisis to compare with today, but from what I've seen, the fundamentals are there for a peak oil situation, only to be solved by energy transfer to other technologies or total reduced consumption. In a world where global warming appears to be a definite concern (I offer no opinion on the likelihood of worst case scenarios concerning GW), coal is unlikely to be a very good fallback fuel. I think we're heading towards a more energy concious future and some very tense times until the transition is made successfully away from fossil fuels.

One of the reasons oil is as high as it is, is due to the oil companys working to artificialy inflate the price.

1. The oil companies are actually closing refineries, decreasing supply.
2. The enron energy speculation loopholes(for lack of a better term, the loopholes that made the enron debaucle possible) allows oil speculation. The current #1 holder of crude in this country is an investment firm, NOT an oil company.
3. Big oil is crying over not getting in to Anwar, but they currently have rights to over 4+billion barrles of crude a day that they are not activly drilling for.

10 years ago we had the dot-com bubble, recently we had the real-estate bubble, current speculation is in oil, hence an oil bubble.

I don't want to get political, but if the powers that be carry over, things will stay the same. But, if the situation in washington changes around the end of the year, we could see things like the enron loop-hole get closed up(and to be fair, it was actually a product of Clinton) and similar issues are resolved, we might get back below, say $3/gallon. In a best case senario this would still be about 2 years away.

Best case senario, oil will drop back to some thing more agreeable, but hopefully the wake-up call will stick with us better than it did in the '70s and alternative fuels will be better developed by the time this Finite reasourse is truly out of our reach.

Worst case senario, we are berklied as we are doing too little, too late.

neon,

With all due respect, you have no idea what you're talking about. The Enron debacle had nothing to do with oil speculation, oil companies are not closing refineries because they want to (hell, we haven't built any new refineries since the 70's due to government regulations, some of the refiniries out there are from the '20s and have to be closed down due to infrastructure issues, others were wiped out due to hurricanes) and I have no idea where the magical 4Bbbls/d of oil is supposed to be. Its not a conspiracy dude, so stop smoking the ganja.

Too bad some war money couldn't be funneled into developing funding/launching this on a larger scale.

Absolutely. If we had spent the money we have in Irag on research for alterntive fuels, we would probably aleady have it.

Same with Vietnam. With that money we would probably already have fuel cells.

As much as I despise the whole Inconvenient Truth movie, it has gotten us thinking about it.

Another gasoline-replacement biofuel that can be made from switchgrass, promising prices around $2/gal...the site's being slashdotted right now though: http://www.swiftenterprises.com/Swift%20Fuel.html

spitfirebill wrote:

Too bad some war money couldn't be funneled into developing funding/launching this on a larger scale.

Absolutely. If we had spent the money we have in Irag on research for alterntive fuels, we would probably aleady have it.

Yeah, I'd say a trillion dollars would do a nice job at putting an alternative fuel infrastructure in place. The Middle East would be a lot less relevant to us after that.

(meanwhile some projections for the war's cost hit $3 trillion)

gamby wrote:

spitfirebill wrote:

Too bad some war money couldn't be funneled into developing funding/launching this on a larger scale.

Absolutely. If we had spent the money we have in Irag on research for alterntive fuels, we would probably aleady have it.

Yeah, I'd say a trillion dollars would do a nice job at putting an alternative fuel infrastructure in place. The Middle East would be a lot less relevant to us after that. (meanwhile some projections for the war's cost hit $3 trillion)

I wonder what the TCO(total cost of ownership) for the war will be..

Basically right up until the last vet goes to arlington... How much will that be?

http://money.cnn.com/2008/06/12/news/economy/cities_oil/index.htm?section=money_topstories <-- on another note great story on the problems the expansive nature of Oklahoma city is causing..

Wow greg, you fight like a republican. You blindly throw out 4 staments, only back up 1 and then go into personal attack. Maybe if you turn off Fox News you might learn some thing.

neon4891,

Do you believe I have stated something incorrectly?

Chris_V wrote: I've been doing some more research, and I'm backing off of my supply/demand position further up the thread.

Maybe there is more of the supply/demand factor than you thought but I still think that "futures speculation" is the cause of many economic problems in this country. Not just in the oil industry, speculative futures trading has historically caused problems in the grain industry and others.

Yes, I don't smoke weed

I will conced one point, being I will look into whatever law prevents new refineries from being opened.

As for my other points, http://www.mcclatchydc.com/227/v-print/story/40360.html

neon4891 wrote: Wow greg, you fight like a republican. You blindly throw out 4 staments, only back up 1 and then go into personal attack.

I fail to see how the people on the other side of the aisle are any better. The only difference that I see is that Democrats use different insults when they go ad hominem.

neon,

you won't find "A" law that prohibits new refiniries from being opened, but like nuclear power, its prohibitively expensive to build a new refinery due to onerous amount of regulation and government review. Just like the out of control expenses that nuclear plants generate in meeting government standards, refineries can't be built cost effectively anymore.

and for your other points, the article basically is saying there is no good way to get prices down. One is to allow drilling where it was previously proibited, but even if tomorrow the florida coast and ANWR was opened up, it would take 5-10 years before any of that oil saw a pipeline. The author conceded that speculation is occuring in areas beyond US regulation, but that does not mean there is anything evil going on, just that the SEC doesn't have power there. Finally, the fed has its hands tied between sinking the US economy into recession and devaluing the dollar. They've chosen to let the dollar sink by throwing cheap money out there futively, but that's hardly a conspiracy, just poor policy (IMO).

Please present other evidence if you wish to refute my assertions. I'll see what I can pull up later, but I've got to go now.

Republicans offer the same old tired slogans that they have touted throughout the Bush years and that haven’t done anything to combat the increase in gas prices

• More Drilling: Domestic drilling has not led to lower prices. Since 2000, drilling has increased dramatically – climbing about 66 percent– while gas prices continue to increase. and gas companies have shown that they cannot keep pace with the rate of drilling permits that the federal government is handing out – over the past 4 years they have received and are sitting on nearly 10,000 permits that they aren’t using to increase domestic production. Since 1999, drilling permits for oil and gas development on public lands increased more than 361 percent.

• OCS: The vast majority of federal oil and gas resources located on the OCS are already open for development - of all the oil and gas believed to exist on the OCS, nearly 80% of oil and 82% of natural gas is located in areas already open for leasing. In 2006, the federal government opened 8.3 million new acres in the Gulf of Mexico to drilling, yet gasoline prices have increased by $1.69 per gallon. Only 10.5 million of the 44 million leased offshore acres are actually producing oil or gas.

• Open ANWR: EIA estimates that if we open ANWR today, twenty years down the road, at peak production, gas prices would be lowered at the maximum by $1.44 per barrel, which translates to only a few cents a gallon. Increased conservation and the use of alternative technologies in the last three years have cut the projected need for imported oil between now and 2050 by more than 100 billion barrels (EIA) – ten times more benefit than what we might be able to get a decade from now from ANWR.

• More Refineries: We have excess refining capacity. Last week, our refineries were running at 89% capacity – well below the 95-98% capacity use rates we’ve seen this time of year for the last decade. Republicans argue that environmental regulations are preventing new refineries from being built in the U.S. From 1975 to 2000, the U.S. Environmental Protection Agency (EPA) received only one permit request for a new refinery, which was approved. In addition, oil companies are regularly applying for – and receiving – permits to modify and expand their existing refineries.

courtesy of the Randi Rhodes Show

The top 2 points illustrate the peak oil situation that has occured in the US. We're drilling alot more for alot less returns and overall reserves are declining. Oil companies are trying to find as much oil as they can to sell, but its getting harder and harder onshore and offshore (current offshore wells cost well over $80 million/well for deepwater, greater than 3000ft)

The 3rd point just illustrates the negligible effect ANWAR would have now vs. demand destruction

Finallly, refineries are running under capacity (as dictated by the media) because this year a great deal of upgrades are being made to handle tar sands and heavy sour crude along with continual repairs to Katrina damaged refineries. Refineries do NOT want to be running under capacity, but necessity is driving them to.

You can always find a conspiracy if you try and look for one, even if it doesn't exist. Ask yourself, why does everything have HFCS in it? Sugar is cheaper to produce, but HFCS rules supreme?

That chart is haunting Greg. Seriously.

However, we must also realize that we've had haunting charts proposed in the past, with 2000 bug, and all that other stuff that never really effected us.

PHeller,

The only reason I worry now is that geology is getting in the way, not technology or politics. Granted, they're exacerbating the current situation, but the underlying problem is that the geology dictates that something will have to give on consumption to continue using oil for the next 100 years.

the argument that the oil supply should increase just because the number of drilling permits has increased is flawed because it assumes that by drilling a well, you're guaranteed x barrells of oil. obviously thats not true, otherwise i wouldn't have a job. another reason why companies are drilling more wells is because as the price of oil goes up, it becomes economical to explore for more difficult (read: expensive) reserves. which is why companies are exploring in plays like the bakken oil shale, where costs are significantly higher than in other conventional plays