Nice AJC article on oil

[TheAnvil 0]

I learned a thing or two from that...left wingers will like the ANWR bit. I don't agree with their reasons against drilling there, but this fellow has a point about the potential effect of any drilling there on prices.

http://www.ajc.com/search/content/opinion/stories/2008/06/22/oiloped.html

Vinny the Anvil
Post Traumatic Didn't Make The Lakers Syndrome is REAL
JACKASS POWER!!!!!!

[StreetScooby 5]

Good article. Thanks for posting it.

Quote

U.S. DOLLAR TO EURO
June 2003 —- June 2008
(Monthly prices)
Chart tracks the value — specifically:
June '03: .86 and .91
June '08: .64

Bernanke has been printing a huge amount of money. They've only recently stopped the rate of printing. He needs to stop it. It's driving inflation around the world.

Quote

PER CAPITA OIL CONSUMPTION
2004 (*2006)
(Barrels per day per 1,000 people)
a bar chart comparison:
Canada: 71.7
United States: 70.5
Netherlands: 58.1
South Korea: 44.6
Japan: 43.6*
France: 32.3*
Germany: 32.1
United Kingdom: 30.5
Russia: 17.4*
China: 5.0*

So, what are those pesky Canadians doing? Trying to stay warm or something?

Quote

"Excess refining capacity historically caused profitability of the refining sector to be low compared to many other industries," the Government Accountability Office concluded in a report last year. In the first quarter of 2008, for example, Chevron made an overall profit of $5.17 billion, but its profit from refining amounted to just $4 million.

I worked for Exxon for many years. A friend of mine was a planner. That's someone who works in the refinery, and keeps a steady supply of oil coming into the refinery. This must be planned weeks to months in advance.

Refineries are a HUGE capital investment, absolutely HUGE. The return made on that investment is next to nothing. I've worked for investment firms in NYC with 50 people that made $1MM per day.

This planner told me the only way they really made money was through "fire sales". If a refinery had already purchased crude, and it's on the high seas, it's theirs. If the refinery has an operating problem where they can't accept that tanker, then they have to sell it at a loss to another refinery.

Quote

A newly released study by the federal Energy Information Administration says that would not happen. According to the EIA, if drilling began in ANWR this year, oil production from that region would peak around 2027-2030. At peak production, ANWR would produce enough oil to lower the world price of oil by about 1 percent. If gasoline is selling at $5 a gallon in 2030, that would amount to 5 cents a gallon.

What this would do is ensure a longer time frame for us to transistion our economy. We're looking at a 50 year time line here. Adding another 10 to 20 years will help us through the transistion.

We are all engines of karma

[idrankwhat 0]

I just skimmed the article but it looked pretty informative and straight forward. And it addresses the questions that I've been asking recently regarding the reality of "US" oil in the global market and the new refinery question.

Hopefully some of this straight talk will make its way into the campaign speeches this summer. I find the recent flip flop by McCain and some Florida legislators regarding offshore drilling to be curious. Considering that the increased oil production would do little to help alleviate oil price increases and that there's actually a greater risk that states like Florida will suffer from lost tourism dollars, why the big swing in convictions? Is it simply politics?

IMO, conservation and newer technologies are the answer to our oil based lifestyles. If we were to take the resources (tax dollars) that we use to subsizize the oil industry and divert those to expanding on alternative technologies then not only would we start actually moving towards energy independence but we'd also be creating a new, lucrative industry that is ripe for domestic, economic benefit.

Thanks for the article.

Quote

I learned a thing or two from that...left wingers will like the ANWR bit. I don't agree with their reasons against drilling there, but this fellow has a point about the potential effect of any drilling there on prices.

http://www.ajc.com/search/content/opinion/stories/2008/06/22/oiloped.html

[VTmotoMike08 0]

Good article.

One thing that I want to understand: it states that if we drill in ANWR, that OPEC would cut production to keep world oil levels at the same level. By that logic, it would follow that if we cut consumption my all using less and buying more fuel efficient cars, then they would again cut production. Their motivation would be to cut supply to correspond to the cut in demand to raise prices and keep their profits the same.

So can someone tell me either where my logic is flawed?

If it is not flawed, then how can you reasonably oppose offshore oil drilling and ANWR exploration? If prices are going to be high regardless, would you not rather the profits go to the US, where we can tax it, have it support our economy, and create jobs for us? You still have the enviro impacts, but dependency on foreign oil is not the best thing either.

So if we are stuck with high prices (because OPEC refuses to allow us to increase world supply vs. demand levels), we could at least have it being pulled out of the ground here right?

Probably more random thoughts to come as I think of them...

[StreetScooby 5]

Quote

So can someone tell me either where my logic is flawed?

I think that argument is flawed, also.

Quote

If it is not flawed, then how can you reasonably oppose offshore oil drilling and ANWR exploration?

I personally think we should open up our resources, including shale oil and coal. We're going to need time to transistion. We also need to protect ourselves during that transistion period.

We are all engines of karma

[Andrewwhyte 1]

Opening up ANWR and domestic offshore drilling will do little to the price of oil, but it will do lots for the US current account deficit. That sadly is not much of a hot button issue for voters these (or any) days. Politicians who delve into financial technicals don't sell as well as platitudes and baby kissing.
The truth remains that improving energy efficiency is still the most powerful tool to be applied to the problem. The concept that you need to open up other sources while you 'transition' is only marginally useful, as we have seen all to well in the inter Gulf war period. If the price is brought down all 'transitioning' comes to a complete halt; in true capitalistic fashion price is the principle agent of behavior change.

[AWL71 0]

We need to start drilling in ANWR. I know it would be 10 years before we saw a return but they were saying the same thing 10 years ago. Every little bit helps.

The most terrifying words in the English language are: I'm from the government and I'm here to help.

[StreetScooby 5]

Quote

in true capitalistic fashion price is the principle agent of behavior change.

not that there is anything wrong with that...

We are all engines of karma

[billvon 3,120]

>By that logic, it would follow that if we cut consumption my all using
>less and buying more fuel efficient cars, then they would again cut
>production. Their motivation would be to cut supply to correspond to the
>cut in demand to raise prices and keep their profits the same.

Well, in addition, their goal is to prevent development of alternatives which will undercut their sales. So they would tend to try to keep prices low enough (when they can) to prevent that from happening.

The solution is to develop alternatives anyway. Get to the point where if OPEC raises prices and you don't like it, then you get a PHEV, natural gas or ethanol car. Then they HAVE to be competitive.

>If prices are going to be high regardless, would you not rather the
>profits go to the US, where we can tax it, have it support our economy, and
>create jobs for us?

Yep. But we should use it when we really need it, not just because we don't want to buy a smaller car.

[Andrewwhyte 1]

Quote

Quote

in true capitalistic fashion price is the principle agent of behavior change.

not that there is anything wrong with that...

No, that is it's function.

[billvon 3,120]

> We need to start drilling in ANWR.

No, we don't. There will come a day when we desperately need that oil, but that day is not today. We should save it for the day when we need it to run our military and our imports have been forcibly cut off, not use it so we don't have to sell our favorite big SUV or reduce the cost of jump tickets by 1%.

"Well, we should drill it now to get READY for that day!" That's a nonstarter. If we drill it we will use it, as we have every other oil field.

[VTmotoMike08 0]

Quote

> We should save it for the day when we need it to run our military and our imports have been forcibly cut off

Then what is the Strategic Petroleum Reserve for? Not linking to it because I know you are familiar with it and what it has been used for in the past. How much do we really need to save for this emergency? There's already a good bit there.

[jcd11235 0]

Quote

We need to start drilling in ANWR. I know it would be 10 years before we saw a return but they were saying the same thing 10 years ago. Every little bit helps.

I believe it would be much wiser to take the capital required to recover oil in ANWR and invest it in alternative energy solutions. The payoff in ten years is likely to be much higher than investing in drilling for petroleum.

I'm not aware of any indication that drilling in ANWR would decrease fuel prices by more than trivial amounts. It's not as though it would be recovered and refined by non-profit organizations. Domestic petroleum companies are just as likely to make every attempt to maximize profits (i.e. sell at the highest possible price) as foreign companies are.

Global energy demand is growing. A very small increase in global oil supply, such that ANWR might provide, will be absorbed by global demand without any significant decrease in price. Decreasing demand for oil by developing alternative energy sources seems to be a much better plan, short term and long term, as well as in terms of economics and ecology.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[StreetScooby 5]

Quote

I believe it would be much wiser to take the capital required to recover oil in ANWR and invest it in alternative energy solutions. The payoff in ten years is likely to be much higher than investing in drilling for petroleum.

Shouldn't the market be allowed to decide that? I think that's the whole gist of this discussion. Having worked for Exxon, I see their senior management as being extraordinarily competent and responsible people. I expect other oil company executives are not too different.

We are all engines of karma

[billvon 3,120]

>Then what is the Strategic Petroleum Reserve for?

In theory to run our military during supply disruptions. Historically to buffer price shock in our oil supplies.

We currently have about 4 years worth of supply for our military, assuming no one else uses it and we don't use more oil during a war. (And assuming we don't release it for civilian usage as we have in the past.) Four years is just about enough time to get ANWR on line during a national emergency.

[StreetScooby 5]

Quote

We currently have about 4 years worth of supply for our military...

That sounds high to me, though I don't have the data to back up that impression. How did you come up with this?

We are all engines of karma

[billvon 3,120]

>How did you come up with this?

160 million barrels a year used by the military, 705 million barrels in the reserve. It may be less than 4 years since most of the oil is sour crude, and sour crude has a lower yield than light sweet.

[AWL71 0]

I think we need to do both, drill in ANWR and activley develop alternative transportation methods. They both make sense.

The most terrifying words in the English language are: I'm from the government and I'm here to help.

[StreetScooby 5]

Quote

I think we need to do both, drill in ANWR and activley develop alternative transportation methods. They both make sense.

Yep.

We are all engines of karma

[jcd11235 0]

Quote

Shouldn't the market be allowed to decide that? I think that's the whole gist of this discussion. Having worked for Exxon, I see their senior management as being extraordinarily competent and responsible people. I expect other oil company executives are not too different.

I think you have too much faith in the market. The management of energy corporations are not motivated to produce inexpensive energy; they are motivated to produce maximum profits for their shareholders. Any coincidence is just that, coincidence.

Based strictly on physics, solar power is among the best, if not the best energy source possible. The sun showers the earth with energy at a rate that far exceeds our rate of consumption. Today, the price of solar panels is affordable to a fairly large group of middle class Americans. That is due to past (and present) government subsidies that artificially increased quantity demanded, making it worthwhile for more firms to enter the market, increasing total supply and reducing price to compete. With the reduced prices came a further increase in quantity demanded. Today, solar power is becoming a viable option for many Americans because the market was not allowed to decide what energy technology was best.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[jcd11235 0]

Quote

I think we need to do both, drill in ANWR and activley develop alternative transportation methods. They both make sense.

I have yet to hear an argument for drilling ANWR that makes sense. If you know of one, please share.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[StreetScooby 5]

Quote

I think you have too much faith in the market.

I am a capitalist. Functional markets have proven themselves many times now as the best mechanism for resource allocation.

We are all engines of karma

[kelpdiver 2]

Quote

Quote

I believe it would be much wiser to take the capital required to recover oil in ANWR and invest it in alternative energy solutions. The payoff in ten years is likely to be much higher than investing in drilling for petroleum.

Shouldn't the market be allowed to decide that? I think that's the whole gist of this discussion. Having worked for Exxon, I see their senior management as being extraordinarily competent and responsible people. I expect other oil company executives are not too different.

The market is responsible for the current situation.

and it's funny you point to Exxon on this - they've been very upfront that they are an oil company and do not have expertise in other forms of energy. While BP is making a point of alternative forms, Exxon is sticking to its core competency and will make money on oil as long as it can. That makes them rather useless to the point you're making here.

ANWR is our life insurance policy - when things get bad, we have it ready. Cashing out this policy now only delays our adaptation to the new world, and will make the experience far worse.

If the account balance matter is hurting the economy too much, that's a hell of a good reason to ban 14mpg Dodge SUVs and the Hummer.

[kelpdiver 2]

Quote

Quote

I think you have too much faith in the market.

I am a capitalist. Functional markets have proven themselves many times now as the best mechanism for resource allocation.

What do you mean by functional?

I've pointed out that the markets have failed with every other natural resource (in particular, fisheries). What counterexample can you provide?

[FreeflyChile 0]

Quote

Quote

Quote

I believe it would be much wiser to take the capital required to recover oil in ANWR and invest it in alternative energy solutions. The payoff in ten years is likely to be much higher than investing in drilling for petroleum.

Shouldn't the market be allowed to decide that? I think that's the whole gist of this discussion. Having worked for Exxon, I see their senior management as being extraordinarily competent and responsible people. I expect other oil company executives are not too different.

The market is responsible for the current situation.

and it's funny you point to Exxon on this - they've been very upfront that they are an oil company and do not have expertise in other forms of energy. While BP is making a point of alternative forms, Exxon is sticking to its core competency and will make money on oil as long as it can. That makes them rather useless to the point you're making here.

ANWR is our life insurance policy - when things get bad, we have it ready. Cashing out this policy now only delays our adaptation to the new world, and will make the experience far worse.

If the account balance matter is hurting the economy too much, that's a hell of a good reason to ban 14mpg Dodge SUVs and the Hummer.

While I think that mileage requirements probably will speed things up as far as using less fuel/making more efficient cars, it seems the market is already deciding:

http://www.msnbc.msn.com/id/25125212/

I'm sure that's a repost, and it's not exactly breaking news...but it does show that people not buying Hummers is hurting the brand to the point where the higher ups at GM have to weigh their options.