Article

2005-06-26 Home Front: WoT

Simulated oil meltdown shows U.S. economy's vulnerability

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Posted by Steve White 2005-06-26 00:00|| || Front Page|| [11129 views since 2007-05-07] Top

#1 Cute story. The subtext is that a stable Arab dictator on our side beats an unstable democracy any day.

The story fails to mention just how elastic oil prices/demand can be. At some point, i.e. a higher point, substitutes will come into play whatever oil is used for at that point.

This also "simulation" fails to take into account myriad economic factors that could occur. The story only addresses the politics of spiking oil prices.

Anyone remember 1982? I did. That year gas prices in Oklahoma spiked at 2.38 a gallon, that was more than 20 years ago. Only a few months later, prices were halved, a year later they were halved again.

When I see oil companies trying desperately to offload their oil and gas properties, I will worry.

Posted by badanov 2005-06-26 01:55|| http://www.freefirezone.org]">[http://www.freefirezone.org] 2005-06-26 01:55|| Front Page Top

#2 All of the shortfalls simulated will happen in the next 12 months without supply disruptions. Without a major recession demand over the next 12 months will increase by between 2 and 3 millions barrels. This is up to 5 times larger than the simulated disruptions. I am sure you figure the rest out for yourselves.

Posted by phil_b 2005-06-26 02:50|| 2005-06-26 02:50|| Front Page Top

#3 Another 1/2 percent off the annual growth rate if oil hits 82? Hardly the end of the world. How much tax does Australia lay on gasoline Phil?

Posted by Shipman 2005-06-26 07:10|| 2005-06-26 07:10|| Front Page Top

#4 Ship, you don't get it. We are at the limit of oil supply. Absent a major new source of energy, economic growth will slow to the point that oil demand doesn't rise further since there is no more supply, irrespective of the price. In practice this means economic growth will slow to the rate at which we become more energy efficent. Historically and from memory this about 1% perannum and remember this will be distributed across all economies. But then you have to factor in the sustainability babble which I don't have hard data for for but I am convinced is significantly slowing the increasing energy efficiency trend. China and other parts of Asia will continue to grow, and hence most of the world goes into prolonged recession. To me the logic seems unassailable.

Posted by phil_b 2005-06-26 08:05|| 2005-06-26 08:05|| Front Page Top

#5 No I understand completely. It means those with the funds will be the ones buying the oil. I suspect the west will have funds for an indefinite time. I expect the pinch to hit India and China thereby cutting demand. But seriously, (I'm curious) does Australia tax fuel to the extent of the Eurozone?

Posted by Shipman 2005-06-26 08:21|| 2005-06-26 08:21|| Front Page Top

#6 Gas is $5,80 a gallon in Germany.

Posted by True German Ally 2005-06-26 10:37|| 2005-06-26 10:37|| Front Page Top

#7 Pre-Kyoto mathematics... in another year or so you'll have to leave your first-born child as a deposit to fill your tank.

Posted by .com 2005-06-26 10:40|| 2005-06-26 10:40|| Front Page Top

#8 Okay, a question - we have heard for years that one reason we aren't pumping more of our own oil is that is wasn't 'economically feasible' at $25.00/bbl or even $30/$40 bbl. Well, here we are at almost $60/bbl, and I've heard nothing about reopening US production - just a lot about ANWR, which wont come on line for 5-6 years yet, IIRC. So at what point does it become 'economically feasible' for the capped US wells to reopen?

Mike

Posted by Mike Kozlowski 2005-06-26 12:33|| 2005-06-26 12:33|| Front Page Top

#9 Don't believe everything you read, especially an article written by people with an alterior agenda.

The problem here is that they completely left out a major factor:

As oil prices rise, a lot of "unporfitable" sources become profitable enough to be used. Oil shales, old fields in the US that have been capped, lower yield fields in Texas, Oklahooma and PA, etc. Then add to that coal gassification and other technological fixes. Also coming into play are things like more drilling & production in areas set aside now. The US in particular has reserves in Alaska and off both coasts in the US, as well as in the western US (huge natural gas reserves, especially) that are currently "off limits" - and these certainly will be made available before such dire conseqeunces are reached - as long as the nutter enviros dont manage to block them.

People overlook these things in their rush to be the Malthus of Oil.

Posted by OldSpook 2005-06-26 12:35|| 2005-06-26 12:35|| Front Page Top

#10 OS, you also forget: we past the point a while back about much of the unprofitable sources being profitable. A lot depends on the estimated price of oil three or so years from now still being high.

I think we're there now, especially with the projected contraction in supply from a certain S. American country.

Posted by Phil Fraering 2005-06-26 12:59|| http://newsfromthefridge.typepad.com]">[http://newsfromthefridge.typepad.com] 2005-06-26 12:59|| Front Page Top

#11 Don't forget, more recoverable hydrocarbons in Alberta than in Saudi Arabia. What keeps most of them in the ground is the threat/likelihood that oil prices will collapse again.

Posted by Classical_Liberal 2005-06-26 14:38|| 2005-06-26 14:38|| Front Page Top

#12 Most of the "recoverable hydrocarbons" available in Alberta are from northern Alberta tar sands. Extracting them would produce large quantities of contaminated water.

Posted by Tom 2005-06-26 14:55|| 2005-06-26 14:55|| Front Page Top

#13 More on processing Alberta tar sands:
http://www.wired.com/wired/archive/12.07/oil.html

Posted by Tom 2005-06-26 15:00|| 2005-06-26 15:00|| Front Page Top

#14 Petrol prices vary by state in Australia. In WA, unleaded is around a dollar a litre, diesel - $1.20 and LPG a widely used fuel here, 45 cents/litre.

Actually the problem is significantly worse than what I have implied. For most oil producers we don't have good data, but for those we do, specifically UK, Australia and Norway, several years of pumping at the max has produced a sharp reduction in production. In all three oil production has declined by more than 10% over the last 12 to 24 months. I don't doubt that the same is happening with some other producers - Russia?

Posted by phil_b 2005-06-26 15:42|| 2005-06-26 15:42|| Front Page Top

#15 [R]ecent improvements in mining and extraction techniques have cut heavy oil production costs nearly in half since the 1980s, to about $10 per barrel, with more innovation on the way.

If that's accurate this stuff is already commercially viable. Our cost to produce light crude on a small scale in the midwestern US has exceeded $10 for years.

Posted by AzCat 2005-06-26 18:57|| 2005-06-26 18:57|| Front Page Top

#16 Alberta oilsand production is expanding as fast as infrastructure, equipment and expertise constraints allow. There is little that can be done to make it go faster. As well development leadtimes are several years, not much less than building nuclear power stations.

Posted by phil_b 2005-06-26 19:31|| 2005-06-26 19:31|| Front Page Top

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