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The Cost of Oil And Hubbert's Peak
The Record, Bergen County, NJ ^ | Tuesday, August 16, 2005 | William Tucker

Posted on 08/17/2005 11:10:59 AM PDT by rockthecasbah

World oil prices pushed up to $67 a barrel last week. Is it just a seasonal phenomenon, a reflection of summer driving patterns, a sign of Saudi intransigence, a conspiracy by the oil companies? Perhaps. But far more likely, it has something to do with Hubbert's Peak.

In 1956, Shell Oil geologist M. King Hubbert made a startling prediction. Judging from the rate new oil was being discovered, he calculated that American oil production would reach its peak in 1969.

The prediction received little attention. After all, people had been predicting that oil would eventually run out since Colonel Drake drilled the first well at Titusville in 1859. These pessimistic forecasts had always proved wrong.

But Hubbert had some logic on his side. A veteran prospector, King had noticed that - largely because of requirements by the Securities Exchange Commission - oil companies did not immediately add new discoveries to their official "reserves" as soon as they were found but parceled them out year by year. This created the illusion that new oil was continuously being found.


TOPICS: Business/Economy; Culture/Society; Extended News; Miscellaneous; News/Current Events
KEYWORDS: energy; hubbert; oil
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To: rockthecasbah
For later read.

Very interesting. I knew some former oil guys, and they always said that the reserve numbers where lies. Say they are to big, the price drops. Say they are to small, to many people start to scream.
61 posted on 08/17/2005 1:37:25 PM PDT by redgolum ("God is dead" -- Nietzsche. "Nietzsche is dead" -- God.)
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To: Brilliant

The price of gas in Germany was more than $4.00 a gallon when I was there in 2001. Didn't keep people from driving Mercedes. If the climb in prices is gradual enough, habits will change gradually. SUVs will likely be replaced by minivans, and then minivans by smaller minivans. Maybe we can get beyond the ritual of giving every 16-year-old his own car.


62 posted on 08/17/2005 1:39:41 PM PDT by RobbyS (chirho)
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To: Outland
You are thinking of methanol. Ethanol won't affect the gaskets at all. If they can handle gas, booze is no problem. Methanol will "dry" out gaskets fairly fast.

The only problem with the injectors is that the ethanol will clean off everything in the tank and fuel system. If you have a car that has been on regular gas for a long time, all that gunk freed up will give the injectors fits. For a new car, there is no problem. For an old car, you just need to take the time to clean the gas tank first.

At the plant I used to work at, a guy used to run his car on 85%, with no modifications. Ran ok, but the timing was certainly off.
63 posted on 08/17/2005 1:44:46 PM PDT by redgolum ("God is dead" -- Nietzsche. "Nietzsche is dead" -- God.)
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To: GOP_1900AD

"Check this out and get back to me: http://www.dieoff.org "

Many of the same petroleum industry scientists.

I worked on oil field economic models in the early 70s. When prices popped from $2.50 to $7.50 per bbl., it went off our charts.

We smiled. It meant marginal projects would become quite profitable, giving us jobs. It was a nice place to work, so we smiled some more.

In the late 70s through the 80s I worked in the oil services industry. We built the capital infrastructure, for production, transport and processing of oil & products.

Based on projected prices up to $40 per bbl. companies and governments invested. We built and we smiled.

My personal investment portfolio reflects my belief in science. Finite Original Oil in Place. Supply and Demand. Growing demand, restricted supply equals high(er) prices.

I smile. Chevron/Texaco (buys) Unocal. Fluor/Massey. Dow/Praxair.

Higher fuel prices will push America to use it more carefully. Recall following the 70s price rises, we got smarter about energy use.

It will happen all over again. I am amused everytime I see a soccer mom driving her two kids in her Suburban.

Her family has had every right to select this big safe vehicle, in America, and fuel has been cheap.

I predict higher prices will make a push for lighter vehicles, but retaining safety and utility. Tough tradeoffs.


64 posted on 08/17/2005 1:45:42 PM PDT by truth_seeker
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To: chaosagent
It takes more energy to plant, fertilize, harvest, and refine the corn into ethanol than you get from burning the ethanol in your car.

Depends on how you work the numbers. Most of that corn is going to be grown anyways. Making ethanol out of it provides a fuel source that most people forget about, cattle feed. It is actually better for the cows to eat distillers grains, than raw corn. Higher protein and lower carbs. The biggest profit in an ethanol plant comes from the feed side. In fact, there are a number of ethanol plants that exist primarily to produce feed.

65 posted on 08/17/2005 1:48:10 PM PDT by redgolum ("God is dead" -- Nietzsche. "Nietzsche is dead" -- God.)
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To: redgolum
At the plant I used to work at, a guy used to run his car on 85%, with no modifications. Ran ok, but the timing was certainly off.

It seems to me that switching out the computer chip and adding a fuel tank sensor to detect the mixture is all you would really need then to make it a viable design.
66 posted on 08/17/2005 1:51:56 PM PDT by JamesP81
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To: JamesP81

Probably would. Most newer cars from Ford and GM can run higher percentages of ethanol than you see at the pump. The oxygen sensor will adjust the timing for it.


67 posted on 08/17/2005 1:54:15 PM PDT by redgolum ("God is dead" -- Nietzsche. "Nietzsche is dead" -- God.)
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To: rockthecasbah
I haven't read all the posts so this may be a repeat.

"Passing over Hubbert's Peak doesn't mean we're "running out of oil." It means we're running out of cheap oil. Saudi wells, Caspian wells, Nigerian wells, Texas wells - all will continue to pump oil. But like Alice and the Queen of Hearts, we'll have to run as fast as we can just to stay where we are."

I was listening to Bob Brinker on Money Talk last Saturday and he said that with inflation the price of oil today would have to be $90/bbl to equal the price of 1990. The price of oil needs to be higher to make it profitable to exploit the abundant oil in the shales and sands in Canada and elsewhere.

The biggest threat brought to light by the present situation is the continuing threat of Communism. The Russians are faking and they have conspired with the terrorists to defeat us militarily and are trying to isolate us economically. They are rapidly expanding in Central and South America and the Islamists control much of the world.

The biggest threat is our own domestic Communists called Democrats. They are aided and abetted by their fellow travelers in the MSM, the unions, and in academia.

It seems foolish for them to ally with the Islamists as the Islamists hate them, too. However, each tolerates the other in order to defeat the USA. If they are successful, the Communists will simply eliminate the Islamists as they did their enemies in every other country they have conquered, Vietnam and Cambodia being the most recent.

68 posted on 08/17/2005 1:55:54 PM PDT by Mind-numbed Robot (Not all that needs to be done needs to be done by the government.)
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To: JamesP81

I looked up some reports to see if I could back up what I said. What I found shows that improvements in technology are indeed being credited with a slight positive benefit for ethanol. Look at the first table in this document:

http://www.ethanol.org/pdfs/energy_balance_ethanol.pdf

It suggests that a factor of 1.34 can be used showing that ethanol can produce about 34% more energh than it takes to make it. (However it is still a lot less stored energh than petroleum which means mileage will fall, but you can use ethanol to reduce our dependence on foreigh oil.)


69 posted on 08/17/2005 2:22:04 PM PDT by KC_for_Freedom (Sailing the highways of America, and loving it.)
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To: rockthecasbah
Wyatt's torch??

Read a novel by the title Atlas Shrugged.... By Ayn Rand.

Remember two parts, the beginning and the ending. I had to read it twice to figure it out.

Please let me know what you think when you finish the tome.

5.56mm

70 posted on 08/17/2005 2:37:37 PM PDT by M Kehoe
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To: M Kehoe
Read a novel by the title Atlas Shrugged.... By Ayn Rand

I did, though it's been a while. Wasn't Wyatt the Colorado wildcatter who disappeared along with the other industrialists?
71 posted on 08/17/2005 2:45:02 PM PDT by rockthecasbah
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To: rockthecasbah
Wasn't Wyatt the Colorado wildcatter who disappeared along with the other industrialists?

I see, you have been exposed. What was the name of the gulch? What was the first sentence of the book, and what was the last.

And no, I don't have a copy...

Only on FR. Fun, huh?

5.56mm

72 posted on 08/17/2005 2:52:24 PM PDT by M Kehoe
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To: cake_crumb
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.

This is debatable but, regardless, irrelevant.

In all markets one charges for the product the buyers will accept. What you are doing is comparing the acceptance levels across industries/markets.

73 posted on 08/17/2005 2:59:08 PM PDT by ExitPurgamentum
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To: Brilliant

"I doubt that there will be any significant relief from escalating prices until consumers reduce their consumption. It's supply and demand. If you're not bothered by the high prices, then the price will have to go up a lot in order to clear the market."

Exactly. In reality, we all could be driving cars that run on a blend of ethenol and veggie oil if we had too. The market economics are a little complex, but it is supply and demand and the higher prices have not slowed consumption. It may soon, but I can still afford to drive my V-8 F150. When it costs me $80 a week to fill up instead of $50 I will start to do something about it, like buy a Prius or something...


74 posted on 08/17/2005 3:04:17 PM PDT by quantfive
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To: Pessimist

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. "

The main cost that keeps it from being feasible is the energy it takes to convert it into fuel. It would cost as much oil to convert it into ethenol then it would produce. Nuclear power plants in a few locations in the mid-west would solve this problem and power the mid-west and clear up California power problems. Note the multi-billion in tax-breaks and government loands to start building nuke plants as part of the energy bill...


75 posted on 08/17/2005 3:07:53 PM PDT by quantfive
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To: JamesP81

then use biodiesel. That stuff seems to work rather well"

Yes it does. Bet Crisco would love a multi-billion dollar contract for veggie oil and we would all be paying $1.00 a gallon for it retail. Only need real gas or deisel blend to warm up the engine. A company in Conneticut sells the converter kit to do just that for around $800. Real problem is that we are super busy or lazy and most of us don't want to bother to go down to the local Mcdonalds or Chinese place to fill up for free. Some people do not know these alternatives are beginning to exist.


76 posted on 08/17/2005 3:11:35 PM PDT by quantfive
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To: quantfive

from http://www.forbes.com/finance/feeds/afx/2005/08/17/afx2183733.html

"At 4.49 pm, new front month October-dated Brent futures contracts were down 1.46 usd 63.60, well off Monday's record of 66.85 usd.

"Meanwhile, US benchmark September-dated contracts were down 1.53 usd 64.55, also well below the record 67.10 set on Monday."
-----

Brent down $3.25 since Monday. Sep -$2.55 since Monday.

The next week could be really interesting in oil futures.


77 posted on 08/17/2005 3:50:42 PM PDT by AFPhys ((.Praying for President Bush, our troops, their families, and all my American neighbors..))
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To: ExitPurgamentum

You can buy an SUV very cheap right now. That's why they sell so many of them. I tried to trade mine in a month ago. Paid $35,000 for it 5 years ago. They wouldn't even give me $3,000 as a trade in, and that was assuming that it was in good condition.


78 posted on 08/17/2005 4:13:03 PM PDT by Brilliant
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To: Brilliant
I believe you, of course, and not surprised: people act on the total cost of ownership. With gas prices up, the cost of the vehicle goes down. This is much like fall in house prices when interest rates rise.

But the fact that SUVs are still being hot, however, tells us that people perceive prices of gas as still low.

What's even more telling is that DEMAND for gas was up in July, together with prices.

79 posted on 08/17/2005 4:33:05 PM PDT by ExitPurgamentum
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To: OXENinFLA
"Oil has dropped over $2pb today........"

Actually almost $3.

One of my favorite quotes [and if he did not say it --- he should have] maybe a little off point but I don't get to use it very often:

When asked what he thought the stock market was going to do, J.P. Morgan replied "It will fluctuate."

So will the price of oil. Oil has had a real upward run of late. What it does this week ... this month ... or the month after that won't matter much in the long run. If we are at or very near the peak in oil production, the price will be much higher in the months and years ahead. If not, then party on.

80 posted on 08/17/2005 4:56:13 PM PDT by R W Reactionairy
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