The cost of oil vs. the value of oil

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  • Make_My_DayMake_My_Day Senior Member Posts: 7,192 Senior Member
    You can always pay for your own health care if you don't like your socialist medicare options. That would be the conservative, free market, personal responsibility solution.
    I said nothing about Medicare, so I have no idea what this comment means in reference to what I said, but....whatever. Funny thing is, I get healthcare from my retirement system, but since I turned 65 they force me to use Medicare as primary and my regular insurance as secondary.
    JOE MCCARTHY WAS RIGHT:
    THE DEMOCRATS ARE THE NEW COMMUNISTS!
  • blueslide88blueslide88 Member Posts: 273 Member
    Yes he did. Neither party has a monopoly on selling out the future for the benefit of the present. Frankly it makes perfect political sense. Promise tax cuts and other benefits to current voters (did anyone complain about the trillion dollar unfunded Medicare prescription drug plan Bush gave away to seniors?) and push the cost onto future generations who have no say. It is the ultimate taxation without representation. Bottom line is the $14T in debt we have should have been paid for by the generations that spent the money either in lower benefits/spending or higher taxes.

    Since I started this thread about oil, some statistics on Boomer energy consumption are also worth noting. In the 45 years between 1965 and 2010 when boomers were in their prime earning years 5 times as much oil has been consumed as all previous generations (1,000 Billion Barrels vs. ~200 Billion Barrels) which accounts for 1/2 of all oil known to exist and ~1/3 of optimistic estimates of how much oil might possibly exist making optimistic assumptions about new discoveries. All that oil includes most of the easy/cheap stuff.

    http://www.peakoil.net/uhdsg/weo2004/TheUppsalaCode.html

    In terms of greenhouse gas emissions they're a bit better in that they've only emitted 2X as much as all previous generations going back to the start of the industrial revolution (200 B tons of carbon vs. 100 BtC)

    http://www.usgcrp.gov/usgcrp/ProgramElements/recent/carbonFY2006.htm

    To be clear I'm not saying Boomers are mean, evil people who intentionally screwed everything up for us (generation Y+), I'm just pointing out how short sighted they have been and the bind that they've left the rest of us in. I foresee a lot of future political battles that are going to split not right vs. left, but old vs. young. Traditionally old usually wins those battles and they may again, but I'm not so sure this time.

    It doesn't seem to be worth the effort, but here I go again. For one thing, the DOE is a joke, and always has been. It has mismanaged its nuclear duties, as has Congress. Reagan wanted to dismantle it all the way back then. Here's a Cato report on the nuclear mess government and the DOE have created:

    http://www.downsizinggovernment.org/energy/subsidies

    Secondly, the whole Peak Oil thing is in serious dispute. I question your link, and offer one I found (of many). From Bloomberg Businessweek, in total disagreement:

    http://www.businessweek.com/magazine/everything-you-know-about-peak-oil-is-wrong-01262012.html

    Additionally, there are enormous natural gas reserves world-wide which will continue to be developed, and offer a giant cushion when oil gets scarcer in X number of years. It will supplement and eventually become the number one energy source for a long, long time:

    http://www.naturalgas.org/business/supply.asp

    The only point left is the enormous U.S. debt, which now you blame on a selfish generation (as well as energy consumption). That's a silly statement. Let's get Paul Ryan to the forefront with a plan. The only plan there is, as Obama and the Dems spend us into oblivion.
  • alphasigmookiealphasigmookie Senior Member Posts: 8,784 Senior Member
    Secondly, the whole Peak Oil thing is in serious dispute. I question your link, and offer one I found (of many). From Bloomberg Businessweek, in total disagreement:

    http://www.businessweek.com/magazine/everything-you-know-about-peak-oil-is-wrong-01262012.html

    Additionally, there are enormous natural gas reserves world-wide which will continue to be developed, and offer a giant cushion when oil gets scarcer in X number of years. It will supplement and eventually become the number one energy source for a long, long time:

    http://www.naturalgas.org/business/supply.asp

    Every time someone wants to dismiss peak oil they trot out Daniel Yergin. I met the man last fall and even have an autographed copy of his new book but frankly he struck me as nothing but an overpaid, overconfident schill. While I think many in the "peak oil" community are overly pessimistic, I also think people like Yergin are far to optimistic and frankly their jobs depend upon lying and saying everything is great until the last minute and there's not enough uncertainty to hide behind.

    The most important point that I want to make is that people trying to refute peak oil often claim we have X number of years of oil left. 10, 50, 100, 1000 years of supply in the ground is irrelevant. Peak oil says nothing about running out of oil. Peak oil is about hitting a production bottleneck. It's about not being able to produce as much oil as society demands. It is that point when supply begins to fall short that prices start to rise and the availability of oil becomes a constraint on global economic growth. You can have 1000 Trillion barrels of oil in the ground, but if you can only produce it at a rate of 5 barrels a day, that's all the oil you can use. Peak oil is an emergent property of a complex system and exactly when it occurs is a complex function of oil discovery, the rate of drilling which is controlled by the availability of physical and financial capital which in turn are a partial function of energy prices, the geological realities of the resources themselves which include the rate of production and decline of individual wells, the state of technology and the ability to access resources, along with numerous geopolitical factors. There is an absolute certainty that peak oil will eventually occur, the only uncertainty is when. Being only 31, there's a reasonably high probability that I'll have to deal with it at some point in my lifetime.

    In the quotes are lots of words I wrote about the different types of resources discussed in the link you posted. Since most people won't care, I set them aside to spare them.
    One of the dirty tricks that cornicopians like Yergin trot out are things like including oil shale (not shale oil, BIG difference) and tar sands and comparing the level of resource to existing demand. Oil Shale has never been produced commercially and for good reason. It's not really oil, but a coal like substance called Kerogen that's basically oil that nature never finished cooking. It can be converted to oil if you dig it out of the ground and spend tons of energy to finish the process nature never did, but in the end your "energy return on energy invested" starts to look a lot more like corn ethanol than conventional oil. Even with oil at $200/bbl it's unlikely to be economic without subsidies.

    Tar sands are better, but they still take a ton of energy and water and the process is rate limited. Tar sands are literally exactly what they sound like, massive deposits sand coated in heavy tar...not exactly an easy separations process! The resource may be huge, but there is a limit to how fast the resource can be processed which means that even if there's 1000 year supply you may never be able to produce at a rate fast enough to meet even 5-10% of your demand.

    Shale gas and shale oil are the latest hot plays and for good reason. New technology has unlocked a significant resource that was previously inaccessible, but even those have issues. The most significant is an extremely rapid decline rate in excess of 50% per year over the first few years. High initial production rates and short production histories have lead to a lot of overestimation of how much oil and natural gas can actually be extracted. Total production in many of the plays has or will peak rapidly as soon as drilling activity reaches steady state which can be only a matter of years. In order to just maintain production at a constant rate you've got to continuously drill thousands of wells a year in each play. In order to justify drilling oil (or natural gas) prices have to be high enough to justify the $8-10M/well investment. If prices drop, drilling will pretty rapidly stop, leading to decline in production. We're already seeing this with natural gas. Drilling activity in the gas shales has dropped significantly in the past year.

    The prospects for natural gas are better than for oil, but much of that is predicated on shale gas living up to expectations long term. That is still an open question. The ultimate recoverable reserves from many of the earlier shale gas wells are coming in at significantly less than was initially estimated based upon early production because the production rate declines so fast. After only 5-10 years many wells are down to the point of being barely economic "stripper" wells that contribute virtually nothing to overall supply. Based upon recent production history EIA slashed it's estimates for shale gas resources by almost half and I expect those estimates to be further revised down as we gain more experience and data on these resources. This isn't to say that it won't be a useful bridge fuel, but I think people making major 20-50 year investments in natural gas infrastructure like power plants and transportation may come to regret them at some point in the future when the shale gas bubble pops.


    In the end I actually hope I'm quite wrong on this issue and you are right. An unplanned, forced transition away from oil and natural gas through constrained supply and depletion will not be a pleasant process to live through. Then again it's better to be aware of it and do what you can to prepare than to ignore it and hope it doesn't happen.
    "Finding out that you have run out of toilet paper is a good example of lack of preparation, buying 10 years worth is silly"
    -DoctorWho
  • BigslugBigslug Senior Member Posts: 7,099 Senior Member
    I would tend to think that a major contributing factor to this concept of "Peak Oil" would be those. . .ummm. . ."Heirs to the Massengill Fortune" who do everything they can to prevent it being drilled out of the ground.
    WWJMBD?

    "Nothing is safe from stupid." - Zee
  • alphasigmookiealphasigmookie Senior Member Posts: 8,784 Senior Member
    Bigslug wrote: »
    I would tend to think that a major contributing factor to this concept of "Peak Oil" would be those. . .ummm. . ."Heirs to the Massengill Fortune" who do everything they can to prevent it being drilled out of the ground.

    Never heard the phrase "Heirs to the Massengill Fortune", google doesn't seem to be much help either. Guess just one of those meme's I missed somewhere along the line.

    As to your main point, yes there is an impact, but the amount of oil that is "off limits" in the US is pretty insignificant in terms of global reserves and supply. In a way having it off limits could be a good thing long term. While there is a ton of push for "energy independence" the better strategy long term would actually be to buy as much oil as you can while it's still relatively cheap and available (and $100/bbl is still pretty cheap relative to the underlying value of a barrel of oil) from other countries. I'd much rather burn every barrel of oil in the middle east before touching a single barrel of our own oil in a perfect world. As oil becomes more scarce, you can expect to see a lot more "resource nationalism" where countries try and keep their own resources for themselves. At some point oil could become so valuable that no country will be willing to sell it to another country and the market will cease to function. At that point the only oil available will be the oil we can produce ourselves from our dwindling reserves. I'd much rather have 2-3 extra years of our own supply in the ground for the future than a $0.05-0.10 decrease (at best) in the price of gas today.
    "Finding out that you have run out of toilet paper is a good example of lack of preparation, buying 10 years worth is silly"
    -DoctorWho
  • blueslide88blueslide88 Member Posts: 273 Member
    Bigslug wrote: »
    I would tend to think that a major contributing factor to this concept of "Peak Oil" would be those. . .ummm. . ."Heirs to the Massengill Fortune" who do everything they can to prevent it being drilled out of the ground.

    New to me, so I googled it. Wasn't difficult at all. Massengill is the commercial name for a female sanitary douche product. So when applied to a person means just that. Urban dictionary:

    http://www.urbandictionary.com/define.php?term=Massengill

    It can used in other ways, too, but that's the main thrust. I would say it's derogatory. It looks like Bigslug doesn't care for anti-oil greenies. Just my opinion......., but I don't care for them either. Just look at Alpha's perpetual hand wringing about our "dependence" on oil, and the dark, dark future the world faces because of it. Too many science fiction movies? The world will adjust, one way or another, trust me. Peak oil theories or not. More blah blah. It's tiring.
  • BigslugBigslug Senior Member Posts: 7,099 Senior Member
    The phrase "Heir to the Massengill Fortune" was spoken by Jason Segal in an episode of How I Met Your Mother in which he and Josh Radnor were discussing the degree to which someone was a douche.
    Just look at Alpha's perpetual hand wringing about our "dependence" on oil, and the dark, dark future the world faces because of it. Too many science fiction movies? The world will adjust, one way or another, trust me. Peak oil theories or not. More blah blah. It's tiring.

    I figure the guys with Humvees and S-R/T Hemi Chryslers are actually doing Alpha's stomach lining a favor by taking care of the oil issue sooner, rather than later. Of course, since liberals can't survive without outrage in their lives, who knows?
    WWJMBD?

    "Nothing is safe from stupid." - Zee
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