Why Oil Will Keep Falling

The question is, as Ben Stein pointed out, there is any meaningful difference in supply and demand between when oil was $70 and now.

You put your finger directly on the issue! Ben has not done due diligence in this area because there definitely is a change in the supply demand ratio.

Back when oil was 40$-70$ range, the over production ability of the global producers was somewhere in the 3-4 million barrel per day range. This varies a bit, but we had the potential sweet crude supplies available. This fact, if you recall, caused the oil cartels to control their outputs in order to keep the price and profit stable.

This over production number has now dropped to a meager million barrel per day number, and it has also shifted more into the sour crude quality that most refiners cannot deal with, especially in the U.S. Saudi Arabia and other Mid East producers have pumped or are pumping all the sweet they have available and new fields are all sour.

This is why the price has gone up, and will continue to do so when the demands eat into the meager remaining surplus production ability.

We have one new refinery in the planning and soon to begin construction stage that can crack sour or sweet crudes,however I'm not sure if they can crack the really cruddy stuff without violating their EPA permit.This is why we have not built a new refinery in decades. Emissions and material handling problems exist and increase as the quality of the crude decreases and we are just barely keeping up now. Any disruption, no matter how small, will certainly cause a immediate reaction in the price.

This problem is not going away anytime soon. We know what we need, but it can't be done politically so we are in serious trouble and will be for at least another decade if not forever.

Ben apparently does not understand this and thinks that no real changes have occurred between 70 and 145, but he's missing a piece of the puzzel.

I mean that right now, when I pull up to the fueling station, I have a choice between oil based fuel and oil based fuel. If I pulled up to the fuel station and had a choice between oil based fuel, biofuel, hydrogen, and an electrical outlet, then oil would no longer be a monopoly.

There currently is no substitute for oil! There will never be a substitute.........Never!

Look at it from the standpoint of the energy equation that states clearly for all to see that to create man made energy, you must first expend a equal or higher degree of energy to create it!

Even at 145 dollars per barrel, man made energy still cost more than that to produce!

Oil is a natural substance that also took tremendous amounts of energy to make, but it was done by nature and it is absolutely free to us, after deduction the costs to find and refine it. What we have been paying for is the costs to produce a free energy source. We have not been required to pay for the creation of it!

With any oil substitute of any possible kind, we will now pay for the creation costs and if 145 dollars will not cover that,then some higher price will.

This is why there is no, and will be no substitute to equal the true costs and value of oil. It is impossible! It cannot be done.

There currently is no substitute for oil! There will never be a substitute.........Never!

You would have been one of those dudes shouting "get a horse" at passing motorists, lol.

Even at 145 dollars per barrel, man made energy still cost more than that to produce!

"We can't run cars on oil! Whale oil is far too expensive!"

I don't understand the "It has to be oil or nothing" crowd. Give oil a competitor. Competition works.

“With any oil substitute of any possible kind, we will now pay for the creation costs ...” Incorrect, but a nice try. The energy we use comes from the sun regardless of how you ‘process it’. Unless you could take a radiocative element and convert it inside your self, you are processing energy from the sun. In the case of petroleum products, the solar energy has been stored and we access it. Same with photovoltaic energy, we process somehting coming to us in real time, not stored.

Just for good measure, I thought I might give you the other freely created energy sources that we have available.

There is nuclear, coal, geothermal and hydro as the primary ones, and solar, and wind as a potential fill in source due to limited availability on a 24 hr basis and also geographic limitations.

Hopefully one day we may discover that we can use cold fusion or some other tech that we have yet to devise.

Until then and even after then, we have no available substitute to power what is the primary issue or transportation, or cars, as we call them.

In the future, a car will have to be powered by one of these methods directly or indirectly as in the case of a electric vehicle. Substances created to replace liquid fuel is far too expensive to ever compete with gasoline on any level.....ever....

The actual costs of a hydrogen fuel cell is staggering and any idiot with a calculator can factor this into a cost per mile, compare it to gasoline, even at 5 bucks per gallon and have a learning experience!

I suggest the the American public do a bit of self appraisal and realize that they have been a victim of a massive hoax.

We are only at the beginning of biofuel and hydrogen technology. To say never rules out any possibility of new technology and is pretty shortsighted.

At one point gasoline would have been prohibitively expensive to produce.

You are restating my argument!

I said, that no man made energy, such as ethanol, can ever be produced as cheaply and as efficiently as gasoline because we don't pay for the creation costs or the energy extraction costs on oil. We simply refine it, or crack it down to more usable components. The energy is free.

In ethanol, we pay first for the energy in the form of a food, then we convert it chemically and transfer a portion of the energy to a liquid, largely consisting of water which we also pay for, leaving a residue that still has energy in it.

At no time in this process do we get any sort of financial break like we do with oil, coal, and other freely created hydrocarbons.

Don't you get it!

You cannot replace hydrocarbons without a huge increase in costs, and even then, you will have difficulties in achieving the quantities, assuming you are willing to pay the price.

All these experiments with substitutes are highly subsidized by governments and even a government cannot do this at the scales needed to replace oil.

Gasoline was produced initially as a byproduct of producing fuel oil or kerosene. All it takes is another tap on the cracking tower. The gasoline comes off at a specific temperature, as does propane, fuel oils, and others.

It was not hard at all, and the problem initially was what to do with it.

Thus, the internal combustion engine began to become the engine of choice.

My personal preference for the future is total electric charged by nuclear power plants. It it the most efficient use of the power, and requires only a few newer technologies and can be done immediately as it will take a generation to replace gasoline engines and will also require a new and improved power grid that will take a decade or more to even get half completed.

Ethanol and other sugar derivatives are a boondoggle. Any society that burn it's food for transportation deserves to become extinct.

No, the problem initially was that whale oil was too expensive to make into anything.

My point is that the situation changes. If you were correct and gas is the only fuel that will ever be viable, most of us would be walking inside of 100 years. Thankfully, you are incorrect.

My point is that the situation changes. If you were correct and gas is the only fuel that will ever be viable, most of us would be walking inside of 100 years. Thankfully, you are incorrect.

Product viability is a bit more complex when you take into account the various economic factors. Let's go to school for a minute and let me give you two of the many simple examples regarding what I view as a corporate/government hoax called ethanol.

Start with the general public false impression that ethanol will become more viable as a fuel, as the price of gas goes up!

Now accept the proven facts that commodities such as corn, soy, sugar, wheat, and any grown crop has a price based on input costs and transportation in addition to simple supply and demand. Commodity input cost have a proved and constantly shown direct relationship to the price of fuel!!!! It just occurred in a big way when the price of diesel fuel went to 5 dollars and a slew of these ethanol plants ceased production because they had exceeded their acceptable losses even with a huge subsidy.

How then does it follow that with the increased prices of fuel that this substitute fuel becomes more viable?

Answer.........It can't.

Next fallacy is that we have not had all that much experience with ethanol tech and things will get better with time....

Actually we have been mass producing ethanol in the form of liquor for 100s of years! In my memory going back to when gas was 30 cents a gallon, a pint of everclear was $2.50. A fifth was $4.95 back in the day. Take out the costs of the bottles and caps and at best you could sell a gallon for 15 bucks. Take off a few percent for excess profit margins give booze the same margins as gasoline, and you might sell it for 12 dollars.

Guess what the true cost is for ethanol without federal and state subsidies and nothing much has changed. It still costs about 12 bucks with a fairly low margin and this as you know does not include price increases for the commodity input costs.

What I am trying to tell you is that unless and until we run out of hydrocarbon fuels, we will be using them because we have to, and not because we want to. It is the nature of the reality and as fuel costs increase, so will the input costs of any bio fuel. You will never see the graph turn positive and will always see a huge loss compared to the natural hydrocarbons like crude and nat gas.

It just won't work. Not until the day comes when we are out of it, and that day is not coming for a long time yet if ever, because we just can't burn our food. As it becomes more scarce, the price of it will skyrocket. It just occurred in reality, only a month ago.

Drill! Drill! Drill! and explore for new resources in the solar system like pure methane, hydrogen, and yes, even more crude!

It's out there!

I'm not a big ethanol proponent. But other biofuels (like butanol and biodiesel) show more promise. And why should we make them out of food? They can be made from algae, corn stalks, switchgrass, or trash. The way we have it set up now is stupid.

The basic fact of the matter is that even if you are arguing we haven't reached peak oil, we will someday. And someday there won't be any left. And a lot of the money we spend on gas is going to hostile nations.

And that leaves two options : power our cars with something else or walk.

But I'm with you on the drilling. We should be drilling everything we have right now.

We might be near peakoil, maybe not, but one thing certain is that the low hanging fruit has been found and a good percentage has been picked.

But we are far from being out.

We have a huge amount of Nat Gas that has yet to be exploited, and the interesting aspect of nat gas is that chemically, it is very similar to liquid fuels like kerosene and gas be liquefied by making some simple molecular changes. This is being done on a small scale now, and looks like it will be large scale within 4 or five years. The product can be used in jets and in diesel engines directly from the refinery's first pass, and can be further broken down for other products. Technically, it is a synthetic natural gas based liquid fuel.

Then there is oil shale, liquefied coal and that area of hydrocarbons that have not been viable until recent increases in the price of crude. These areas remain viable as long as crude stays above 70 bucks or so.

Nat gas can also be directly used in a engine, but I think it's too dangerous. I don't like the idea of driving a potential bomb. Propane's and Butane's are way safer because lower pressures are needed to liquefy. I have owned and put many thousands of miles on a propane pickup. It runs a bit hotter than gas because you get a drop in horsepower, but it works with few modifications needed. Synthetic diesel is way better for the big rigs, and is economical, believe it or not....I was surprised at the cost to convert nat gas. It's very cost efficient.

I personally think we have about 75-100 years worth of various hydrocarbons if we enact some conservation and full access to resources as well as a more complete reliance on nuclear and geothermal. We have about 45-75 years if we don't.

We won't be walking, but we won't be driving as much as now, and there will be a lot of electrics, and commercial trucks and transport powered by gas turbines that power generators for the electric motors. Gas turbines can run on just about anything, including methane.

For now, however, the United States is hording resources for stupid political reasons and not for the benefit of the country. Our economic future will be harmed drastically if we do not use what we have and do it now. Right now.

We should have started ten years ago when this problem was first identified and we knew that our oil imports were going to skyrocket out of control, putting ourselves in a bad economic situation.

Our government will go bankrupt and be unable to meet current commitments within ten years if we do nothing now. The government needs a decent economy to survive, and that economy needs abundant supplies of energy of all kinds.

It's quite simple really.......In any case, I won't be here to see how it turns out. But I do know that right now, I can't afford to by a new elecric, or do anything to change my need for gasoline. Very few can. New electrics will be priced in the 30-40K range for the econo-boxes. They still don't have reliable batteries that are better than lead/acid for high loads, and I'm not so sure that they will. It's a technical issue regarding the storage of free electrons and how they are metered as they emerge from storage. Too fast and uncontrolled, and they damage the battery. Electric motors need a surge of electrons when they begin movement, and a lot of money has been thrown at this with few results, if any. These hybrids are not the answer. It's a electric car with a gas hog generator. No help. Golf carts are reliable and efficient but slow and no accessories.....LOL (I use one to get around my property and have had them for years)

There is a reason why the universe is loaded heavy with hydrocarbons. They are natures energy storage devices. The universal battery.

We must have them. We simply must. And for the constantly oil offended Gorebatites, nothing could be more natural than oil.