The Cost of Oil And Hubbert's Peak

The Record, Bergen County, NJ ^ | Tuesday, August 16, 2005 | William Tucker

[truth_seeker]

There are "original oil in place" reserves. They become reserves when you find them.

There are "economically recoverable" reserves. They become reserves when the prices and technology arrive.

Alberta has more total hydrocarbon reserves than Saudi Arabia. Oil shale and tar sand.

[jpl]

Speculation does have some impact, but speculation alone simply could not cause all of the price increase we've had in the last three and a half years. It's mostly being driven by increased demand (especially in booming China), plain and simple, in the same way that the huge spike in the late '70 and early '80s was driven by the artificial supply cuts created by OPEC.

[FightThePower!]

What do you base you bet on? Is supply going to increase or is demand goign to decrease?

[JamesP81]

For most vehicles on the road, it's not that simple. Some components of the fuel system such as hoses and gaskets may not be compatible with high concentrations of ethanol. The fuel injectors may also need upgrading.

Because of regulations enacted in the 80s, some states started requiring ethanol in gasoline. Auto manufacturer's have been producing engines that ethanol is safe for for about 20 years now. The seals being used these days are not conventional rubber. I can't remember the name of the material they're using now, but it is specifically designed to be impervious to ethanol.

It is possible that some vehicles might require fuel-injector replacement. This would not, however, be a cost prohibitive conversion for a dealership to make.

[RightWhale]

Inland America was once an open sea. Oil seems to occur at the edges of seas and oceans. That's one speculation, that sealife fell to the bottom and was compressed by sediment where it gradually turned to bitumen and oil and then emerged along the shoreline. That would account for oil deposits from Indiana to Texas/Louisiana and the tar sands from Colorado to Alberta.

[Pessimist]

"And there really isn't any limit on the amount that it could go up,.."

One limiting factor is the availability and suitability of alternatives. At some point along here, alcohol will actually become economically viable on it own two legs for a change.

[KC_for_Freedom]

Some ethanol makes sense, even though it is a loser to plant, grow, and refine ethanol. It does act as an antiknock compound in small quantities. Much better on the ground water than MTBE.

[JamesP81]

It takes more energy to plant, fertilize, harvest, and refine the corn into ethanol than you get from burning the ethanol in your car.

Who said anything about corn? Sugar would be a much better choice...

And if you don't like ethanol, then use biodiesel. That stuff seems to work rather well.

[7.62mm]

Let's not forget the entire Eastern Gulf of Mexico. Florida wacko/extremist/environmentalists have successfully fought and blocked exploration of both the Western and Eastern coasts of Florida. It is my understanding (I've been in the oil industry for over 20 years) that the reserves in those areas are at least as large as the Western GOM, which are huge.

Not to mention the entire East and West Coasts of CONUS, Alaska, The Rocky Mountains, and Alaska.

Next time you fill up, remember the radical environmentalists; THEY are some of the major culprits.

They have been driving this country to this point deliberately for years. They have us exactly where they want us.

Regards,

7.62mm

[Pessimist]

"t takes more energy to plant, fertilize, harvest, and refine the corn into ethanol than you get from burning the ethanol in your car."

I've heard similar statements, but I've never seen any categorical data on that analysis. Know where I could find any?

[JamesP81]

Some ethanol makes sense, even though it is a loser to plant, grow, and refine ethanol.

Bluntly, I don't believe that, especially if you use sugar instead of corn.

I am related to some people who did hard time for moonshining. They could make 20 gallons of that stuff in a couple of days with supplies they could move in a pick-up truck (and not a very good one either, considering we're talking about the 1930s) and a homemade whisky still. If American industry has degraded to the point we can't even make moonshine anymore, then we really are in bad shape.

[RightWhale]

63.25 -2.83

5% move in one day?

[RightWhale]

They burned some wood to cook up that product.

[Glenn]

It's mostly being driven by increased demand (especially in booming China)

Great! Quantify it!

How much American drilled oil is being delivered in that market?

[Pessimist]

From www.iowacorn.org/ethanol/ethanol
Q: Will we deplete human and animal food supplies by using corn and other grains for fuel production?
A: No, actually the production of ethanol from corn uses only the starch of the corn kernel. All of the valuable protein, minerals and nutrients remain. One bushel of corn produces about 2.7 gallons of ethanol AND 11.4 pounds of gluten feed (20% protein) AND 3 pounds of gluten meal (60% protein) AND 1.6 pounds of corn oil.

So, you get all that other stuff PLUS 2.7 gallons of ethanol / bushel. I don't know what corn prices are right now, but they're probably somewhere in the $4 something / bushel range.

Granted, when gas was <$2.00 / gal, it wasn't feasible. It may not even be now. But at some price point it will be.

[cake_crumb]

"Are you telling us that this is different in any other market?"

Yes. It's different than, say, the service industry and certain commodities, but the same as the utilities market. The public WILL cut way back on restaraunts and travel while shopping for cheaper sources of food and necessary paper products before cutting back much at all on gas or utilities.

[rockthecasbah]

"Alberta has more total hydrocarbon reserves than Saudi Arabia. Oil shale and tar sand."

I agree but the tar sands will be capacity limited for some time. An interesting company to follow in this regard is OPTI Canada Inc. They have raised significant capital to put to work in the tar sand play. It's worth watching.

[JamesP81]

So, you get all that other stuff PLUS 2.7 gallons of ethanol / bushel. I don't know what corn prices are right now, but they're probably somewhere in the $4 something / bushel range.

September Corn is currently trading at $2.13/bushel on the Chicago Board of Trade.

[rockthecasbah]

"July sales of SUVs were very strong"

That probably had more to do with price cutting by automakers. At some point, there will be demand destruction due to high oil prices. We just haven't seen it yet. What will it take? $60, $70 or $100 per bbl?

[truth_seeker]

Here is a fairly massive resource:

http://quasar.physik.unibas.ch/~fisker/401/oil/hubbheir.html#http://www.postcarbon.org/DOCS/2002/11/General-Knowledge-in-the-Post-Carbon-Age.delivered-edited.lecture-only.sans-Q&A.2002-11-10.pdf

A collection of scientific writings, supporting Hubbert