Letters to the Editor
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Good news for alternative energy
I think this kind of report should give reassurance to investors in alternative energy that their efforts will not be undercut by a future return to cheap oil. The other alternative, proposed by Al Gore, Tom Friedman and others with global warning in mind, would have been to tax gasoline purchases so that it always remains expensive regardless of oil prices, but we know how politically feasible that is.
It's no time to sing victory, but from what I'm seeing the good old invisible hand of the market may do for us what our spineless politicians and so-called leaders have been unable to: save us from ourselves and the looming global warming cataclysm.
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I fail to understand
Not purely on topic, but there's something I don't get. The financial reporters often say that crude prices have risen on a reduction of refinery capacity. How can a shortage of refinery capacity can lead to an increase in the price of a barrel of crude? Isn't the oil pump the supplier and the refinery the consumer? Based on supply/demand reduced refinery capacity should lead to lower oil prices - unless oil production is intentionally dropped too.
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Not entirely alternative sources
But certainly all the long discarded ones. Like oil sand, oil shale and such. It's simply a matter of making it pay for a given price of production. The Alberta Tar Sands are cost effective at the equivalent of $80 a barrel.
See for a long time the argument has been 'what about OPEC' as if that's the really the issue. But for example Saudi crude and Iraqi crude is important because it's
A) of high quality
B) of low sulfur
C) close to the surface
Where as Russian oil for example is of good quality, very high sulfur and under massive rock formations. But there's more potential Russian oil than there is under Saudi Arabia. The challenge is to get at it at a price you can sell it for.
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@ dazzum
But not such good news for the world in terms of economic development. Correct me if I am wrong, but it seems the world may be between a rock and a hard place.
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Answer to Tyler_Mason
Tyler_Mason:
I believe the answer to your question has to do with the differences between crude and crude. Some crude is better than other crude. When refining capacity is tight, there is more demand for the higher grades of crude oil that are easier to refine and yield more gasoline when refined (gasoline demand and prices are high). The higher grades of crude also happen to be the benchmark grades whose prices are most frequently quoted. Heavier crude oil with higher sulphur content is relatively cheaper.
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Not Great News for the Environment
@ Dazzum
Running out of cheap oil does not, by itself, reduce our appetite for energy.
Declining availability of affordable sources of "cleaner" forms of hydrocarbons will make dirtier ones (such as coal) more attractive. Oil sands and deep oil tend to have a less favorable EROEI (Energy Return on Energy Invested) causing more environmental damage per unit of energy output.
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It's not the price that's the problem.
People will pay for their oil. This, we know.
Cost is not the issue, as even a little thought will illustrate. The real "breaking point" will come when that difficult-to-extract oil requires more energy to extract than it yields. In other words, when it takes more than a barrel of oil's worth of energy to get a barrels' worth of oil from the ground to the gas pump.
Once it becomes a net energy loss, oil is over, no matter what cash prices are.
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@HT
Thanks very much. Is this kinda what you are saying?
In all cases, assume 60 units good stuff @ $70/unit and 80 billion units OK stuff @ 60/unit.
Case 1: refinery capacity = 100 units.
bought 60 good for 4200 + 40 OK for $60 = 100 units for 6600
result $66/unit
Case 2: refinery capacity = 90 units.
bought 60 good for 4200 + 30 OK for $60 = 90 units for 6000
result $66.67/unit
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The Cost of Oil
Prior to the build up for war with Iraq, oil was selling for about $28 per barrel. As stated, the market now seems to be at a $70 per barrel plateau. Suppose the occupation of Iraq had succeeded and we now had an additional 3-4 million barrels per day on the market. That could easily drive today's price per barrel down $10. The US imports more than 12 million barrels per day. That would have produced a savings of at least $120 million per day. Or $3.8 trillion per year. And on top of this, the price of energy cascades through almost every aspect of an industrialized economy.
Just food for thought.
-sindvik
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Alternative Energy
@AKA Smith
I'm not saying that the transition to alternative energy will be cheap or easy, but if it all comes down to chosing between several years of global economic slowdown (while other energy sources are developed) or permanent damage to the planet, with a cost too high to quantify, there's not much of a dilemma, is there? Besides, the world has been able to live with high oil prices for a couple of years now without significant impact on economic growth, and according to many experts it only takes a sustained oil price of $60 dlls/barrel or higher for investment in alternative energy to be attractive.
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Investment Opportunity!
I am looking for a few visionaries to join me in building a big sailboat freighter for the Great Lakes, a schooner.
Here's our cargo: We will pick up cabin cruisers and speedboats at every Great Lakes port and marina. And we will bring them to be recycled into something useful, something economically ecologically sustainable. Possibly we can recycle them into sailboats!
Perhaps, if you are visionary enough and rich enough, we can build our own Cabin Cruiser Recycling Facility! I have a location in mind, just down the Detroit River from my house. Millions in tax breaks and sweetheart deals are available from the all-but-broke City of Detroit and the all-but-broke State of Michigan
Once in an era opportunity! Operators are standing by!
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the real issue
Alan L. wrote:
People will pay for their oil. This, we know.
Cost is not the issue, as even a little thought will illustrate. The real "breaking point" will come when that difficult-to-extract oil requires more energy to extract than it yields. In other words, when it takes more than a barrel of oil's worth of energy to get a barrels' worth of oil from the ground to the gas pump.
Once it becomes a net energy loss, oil is over, no matter what cash prices are.
***********
this is the real issue. Once fossil-fuel extraction becomes an energy-sink, all the commodification in the world cannot change that fact.
Still, it's worth considering the additional fact that oil is used for many things, not just for the energy it contains. Considering how precious hydrocarbon-based products are (they are legion, from most of your computer, to...well...everything!) that have nothing to do with gasoline, we'd be better off hoarding oil for the other things we can make with it..
The commodification of oil is the great fraud we have perpetrated on ourselves (as realname's post makes abundantly clear. He thinks the price is all that matters. Sorry, realname, wrong again)
Did you know that you can actually make money on extracting oil even when the process is an energy-sink? I won't go over that one again (trust me on that one, it can be done, and is done, all the time, right now) but it's one of the reasons all the people who *should* understand the concept of an energy-sink, do not understand it. Because the power of the printed-money value of the commodity trumps all.
The world's about to get a lot more difficult. The party ain't over, but the booze is definitely running a little low.