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OT: peak oil - a myth or a real threat?

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  • #31
    Oh brother.

    "It's a conspiracy!"


    No it's not.



    Somebody lock this before the UFOs show up.

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    • #32
      The simple fact is that the US cannot supply it's own demand from North American supplies, not even close. Canada is self sufficient plus a net exporter but cannot make up the entire difference, not even close. The US has no other option, it must import oil regardless of the price.

      There is no current supply shortage. The price of oil is being driven by other factors including geopolitical events and good old fashioned speculation. The lack of refining capacity in the US does not drive the world price of oil. It's a cyclical business. The price of a barrel of oil right now is only slightly higher than it was around 1980 in inflation adjusted dollars. Based on the likely business cycles and the inevitable adjustments that are going to occur to rebalance world trade we can expect the price of oil to fall in real dollar terms, in Canada at least. That may not be readily apparent in the US though since the cost base for oil is very likely to shift to the Euro or some other currency as the Gnomes lose faith in the US and it's ability to repay it's debts and address trade imbalances.
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      • #33
        Yes of course,Evan, but Canada has, what, one tenth the population of the US and a lot of resources for sale.
        The refining capacity in the US only helps to drive up the price of US refined products.
        The price of oil is primarily driven by demand. Speculation is an effect not a cause.
        The cost base isn't going to change anytime soon. US growth is .9 so far this year.

        Comment


        • #34
          Originally posted by Evan
          The simple fact is that the US cannot supply it's own demand from North American supplies, not even close.
          That is of course, discounting the un-used oil locked in sand and rock across 8 or 9 western states....... most of which the tree-huggers would die rather than use. I will hug trees, but I also have some streak of practicality.
          1601

          Keep eye on ball.
          Hashim Khan

          Comment


          • #35
            That is of course, discounting the un-used oil locked in sand and rock across 8 or 9 western states.......
            If they start this evening to exploit it it will be from ten years to forever before it comes on line.

            The price of oil is primarily driven by demand. Speculation is an effect not a cause.
            There are three commodities that do not follow conventional supply and demand economics. Gold, diamonds and oil. The price of each of these products does not reflect the amount of the commodity in existence, the availability of the commodity on the market or the potential end uses of the commodity.

            Gold trades on some days up to ten times more gold on paper than actually exists. To explain how and why is beyond the scope of this post. Diamonds are no longer hard to find or rare as virtually any size of flawless gem quality diamond can be manufactured at will. Oil exists in quantities that far exceed current demand and the oil suppliers have the capability to increase production well beyond demand at any time. The price of oil is constantly manipulated by the major players in the market, both suppliers and buyers. The US government in particular is active in intentionally keeping the price high. I won't offer any speculations why but the result of numerous actions taken by the US gov make it clear that their interest is in a high oil price.

            Of course it is also in the best interest of the suppliers that the price be as high as possible. Greed is a very reliable human trait and can always be depended upon when money and power are at stake. The markets are controlled by the wealthy and you don't become wealthy by worrying about the welfare of your fellow man. Once wealthy then you may be inclined to indulge in such philanthropism but you won't see it during the accumulation phase.

            Markets can be manipulated and so they are. Supply and demand are secondary factors and are manipulated at both ends as well. The taps are turned on and off for reasons that have nothing to do with demand and often not the price either. One only need look at the history of the markets to see enless examples of wholesale market manipulation. Some is under the table and illegal and some is above board and legal even if not ethical. The attempt to corner the silver market by Bunker C. Hunt is an excellent example.
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            • #36
              Originally posted by Rustybolt
              The price of oil is primarily driven by demand. Speculation is an effect not a cause.
              Total commodies investment in oil in 2000 was 9 billion dollars. Just 8 years later, it is now 250 billion dollars. In this case, speculation is a cause and effect.

              ==========================================

              Commodities bubble brews?

              By John Waggoner, USA TODAY

              Potash (POT) isn't what you would call a glamour stock: It makes fertilizer. Nevertheless, the stock has soared 203% the past 12 months.
              The world isn't running short of potash. At current consumption rates, there's enough to last 300 years, according to the International Fertilizer Industry Association. But there does seem to be limitless optimism about future fertilizer use — as well as the upward spiral in the cost of potash itself, up 150% over the past 12 months.

              It's not just potash. Across the board, commodities prices are soaring. On Wednesday, light sweet crude oil closed at $133.17 a barrel, more than double the price 12 months ago. Overnight it topped $135.

              Commodities are the first growth industry of the 21st century. The prices of energy, basic metals and foodstuffs have soared, and so, some say, has speculation. This year alone, cocoa is up 40%, copper has soared 24%, and corn has risen 33%. And the price charts for some commodities are beginning to look suspiciously like the Nasdaq fever line in 1999, just before the tech-laden stock index crashed in March 2000. And, as the economy continues to work through the more recent crash in home prices, the question inevitably arises: Is there a commodities bubble brewing?

              Possibly, say many experts.

              "Certainly, we're seeing a lot more interest (in commodities) across the board," says Barry Cronin, chief investment officer at Taylor Investment Advisors, a Greenwich, Conn., money management firm. "There's no mistaking that there's a significant amount of speculative money in the market." But is it a bubble? "That's the $100,000 question," Cronin says.

              Price bubbles involve irrational behavior by investors drawn to the prospect of quick profits. But such manias aren't entirely measurable. There's no magic indicator that flashes bright red when a reasonable investment trend suddenly becomes unreasonable. Instead, you have to look at several different ways to measure bubble behavior. By those measures, the bubble in commodities is forming, but it's not at full froth.

              Nevertheless, new signs of commodities mania keep bubbling up. The basic sign is a near-vertical rise in prices, says Ben Inker, director of asset allocation for the GMO funds. "If you look at the way oil has been moving lately, it's almost inconceivable that there is information about the future supply and demand of oil that's driving this," Inker says. "It cannot be the case that, relative to three weeks ago, we have information that would make the price of oil go up that significantly." The price of a barrel of light, sweet crude oil has soared 17.4% the past three weeks.

              And Wall Street, for one, thinks that the market for commodities is hotter than the market for stocks.

              Responding to price run-ups, the mutual fund industry has in the past 12 months rolled out dozens of commodity-related exchange traded funds, with tickers such as MOO— a fund that specializes in agricultural stocks. Others include a coal fund, KOL, and a raw materials fund, RAW. The funds typically invest in commodities futures contracts and have attracted billions in new investments the past 12 months.

              Top financial exchanges

              The world's largest financial exchange company as measured by market capitalization is no longer NYSE Euronext (NYX), which deals in stock trading. It's the CME Group (CME), formed from the merger of the Chicago Mercantile Exchange and the Chicago Board of Trade. The CME now has a market capitalization of $25 billion, vs. $19 billion for NYSE Euronext. CME averaged 10.2 million futures contracts a day in April, up 30% from a year ago.

              Assets in managed futures programs, limited partnerships for the wealthy that invest in futures, total $218 billion and are up 6.3% this year, according to BarclayHedge, a Fairfield, Iowa, company that tracks hedge funds. True, $218 billion is minuscule in comparison with stock funds, and not all managed futures programs are in commodities. But assets in managed futures pools are up 474% from 2000, when they had just $38 billion. And interest in commodities is "at a level I've never seen before," says Sol Waksman, president of BarclayHedge.

              Pension funds and other big, institutional investment pools are starting to pour money into commodities, too. Calpers, the California public pension fund, announced in March that it's devoting $1 billion to commodity investments, up from $450 million in past years. It's part of a long-term, inflation-linked strategy, spokesman Clark McKinley said.

              Unlike the wealthy investors who choose actively managed commodity pools, pension funds and other public entities tend to prefer passive, indexed investments. Index funds have no manager and simply follow a commodity index, such as the Standard & Poor's GSCI Commodity Index (GSG)— the index that most of Calpers' commodity investments follow. The index soared 18.7% this year through April.

              Individual investors, too, are choosing commodity index funds. PowerShares DB Agriculture ETF (DBA) has seen $22.5 billion in new money flow through its doors the past 12 months. Investors poured $1.2 billion into its more diversified twin, the PowerShares DB Commodity Index ETF (DBC).

              Until commodity ETFs came along, average investors were largely excluded from the commodities markets. "It's not just for the ultrahigh-net-worth investor anymore," says Robert Maroney, principal at Connecticut Investments, an investment advisory service.

              In fact, the mutual fund industry has rolled out 52 new exchange traded funds that invest in diversified commodities, energy or precious metals in the past 12 months, according to industry tracker Morningstar.

              That's rarely a good sign: Fund companies are notorious for rolling out many sector funds at the top of a bubble. By the time fund companies identify a trend, put together a fund and get approval from the Securities and Exchange Commission to sell shares, the trend is often on its last legs. For example, the fund industry rolled out dozens of new Internet and technology funds in 1999 — just before the tech bubble collapsed.

              Every bubble starts with a rational investment thesis and, in this case, it's the roaring economies of India and China, whose voracious appetites for steel, copper and oil have been pushing up the prices of raw materials. Improved diet and nutrition in emerging markets, as well as U.S. mandates for biofuel use, have driven up the cost of food. And India and China seem to be in the throes of a wage-price inflation cycle. China's inflation rate rose to 8.5% the past 12 months ended April, vs. 3.9% in the USA for the same period. India's inflation rate rose to a 3½-year high of 7.6%. Wages in both countries have skyrocketed. As a result, the prices of Chinese imports — long an important method of controlling price inflation here — have started to rise sharply.

              Normally, whipping inflation is a job for a nation's central bankers. They push up interest rates to slow down the economy and cool off demand, shutting down inflation. But most central banks are doing the exact opposite.

              China and many of the oil-rich Persian Gulf states, for example, have been buying dollars — and to do that, they have been creating money. "The Saudis and the Chinese have flooded their economies with their own money," says Paul Kasriel, chief economist for investment bank Northern Trust.

              And U.S. central bank policy, at the moment, is aimed at avoiding recession, not taming inflation, says David Wyss, chief economist for Standard & Poor's. The Federal Reserve has pushed its key short-term fed funds rate down seven times since September, to 2%, its lowest level since 2004.

              The question, then, is whether the rush of money into the commodities markets has helped push prices higher than they would be otherwise.

              Lucjan Orlowski, professor of economics at the John F. Welch College of Business at Sacred Heart University in Fairfield, Conn., thinks so. "Without a doubt, that's propelling prices," he says. For example, Orlowski estimates that, given current supply and demand, a barrel of oil should cost about $70 a barrel.

              The answer to the bubble question, at least for now, may be somewhere in the middle. Craig Caudle, a principal at Liberty Funds Group in Dallas, says only crude oil has reached its inflation-adjusted high. So he doesn't think that wild-eyed speculation has set in yet.

              But he does see the impact that big money flows are having on the commodities markets. Normally, financial advisers recommend commodities because they aren't closely correlated with stocks and bonds. And, in fact, many commodity prices move independently of each other: Wheat doesn't necessarily rise when oil does, for example. Putting 5% of a portfolio's assets into commodities tends to reduce the portfolio's overall volatility.

              Because many institutional investors are pushing money into commodity indexes, however, many commodities are starting to move much more in lock step, Caudle says.

              Comment


              • #37
                Governments want higher prices, because the tax rate rolls in more Revenue ! (taxes.) without legislative action !
                (Look at Chicago Folks , if you don't believe it.)
                Government restricts exploration which controls the supply side
                Define tougher MPG standards which looks like good to some folks, but is an excuse so they can say "Not my fault, you are not reducing demand !
                The Demand side is further hurt, because the Government does not run a balanced budget, thus devaluing the dollar, that directly leads to higher prices, because we have to go oversea's

                I am not a conspiricey theorist, but all the above looks like a back handed slap to me.

                If we had a balanced budget and a real Energy policy, we would not be here.

                Striving for Ethanol is not only stupid, as most are suddenly (sic) realising, but does not give us what we need for our FACTORIES and for JOBS!

                Carbon Credits,,will send more jobs and work to China, and you will have to pay for it---- double down the road.

                Rich

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                • #38
                  I agree with Rich and Milacron of PM, the market price is driven by speculation and demand. A problem of taking away the speculation now is the suppliers won't drop the price and in fact may continue to raise the price as they see fit. If they know their fields are running out of oil the price will go up.

                  Conspiricy, I guess some think so but it is really greed and profit and governmental taxing.
                  It's only ink and paper

                  Comment


                  • #39
                    Originally posted by Evan
                    There is no current supply shortage.
                    Evan, everytime you post that, I post the following:

                    OT: Fuel Price Hikes...

                    "According to all accounts, including the US Department of Energy, the world-wide production of crude oil peaked in 2005 at 85.24 million barrels per day, and has been flat ever since. US oil consumption has been increasing at 3%/year. But India and China's consumption of crude has increased 35%/year since 2005. Note that 2005 is when gas prices started to rise explosively.

                    This chart is from the US Department of Energy:"

                    "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did."

                    Comment


                    • #40
                      Originally posted by Evan
                      Originally posted by JTiers
                      That is of course, discounting the un-used oil locked in sand and rock across 8 or 9 western states.......
                      If they start this evening to exploit it it will be from ten years to forever before it comes on line.
                      The US won't touch the tar sands in Colorado and Utah because we're not willing to pay the ecological costs to get to it. As we established in the "tar sands" thread, the majority of Canadian tar sands is processed by strip mining (62% of the total tar sands crude yield in 2006):

                      Last edited by lazlo; 06-01-2008, 12:00 PM.
                      "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did."

                      Comment


                      • #41
                        Lazlo, I assume the oil production chart is from all the fields EXCEPT the USA because I don't think the USA sells oil outside the USA. If so that means the oil sources other than the USA are running out or they are cutting production. Which is it? Whatever the reason it along with speculation is causing the rise in cost.

                        I feel certain when we NEED the shale oil the greenies and environmentalists will go for the oil. Very few will go back to horses or walking or bicycles.

                        Just today I read in the Courier-Journal of Lou. Ky that Germany is stripmining lignite coal, the highest in carbon output. They are going against GREEN and in the Rhine Valley stripmining and building huge coal powered electric plants. Germany is a country that supports Green but they need electricity and will get it despite the greenies. It's an article out of the Los Angeles Times by Kim Murphy.

                        When you need food or fuel your attitudes change.
                        It's only ink and paper

                        Comment


                        • #42
                          I don't think the USA sells oil outside the USA.
                          The oil business is much more complicated than you think. The US exported over 1 million barrels per day in 2004 and nearly 1 million per day in 2006.
                          Free software for calculating bolt circles and similar: Click Here

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                          • #43
                            Originally posted by Carld
                            Lazlo, I assume the oil production chart is from all the fields EXCEPT the USA because I don't think the USA sells oil outside the USA. If so that means the oil sources other than the USA are running out or they are cutting production.
                            That data is from the "Energy Information Page" at the US Department of Energy, and it includes all countries, including the US.

                            There's a good summary page here:

                            http://tonto.eia.doe.gov/country/index.cfm

                            This part of the US country summary is fascinating:

                            Country Analysis Brief
                            • The United States of America is the world's largest energy producer, consumer, and net importer. It also ranks eleventh worldwide in reserves of oil, sixth in natural gas, and first in coal.
                            • U.S. oil production has been declining for years. In 2005, Hurricanes Katrina and Rita slashed oil output from the Gulf of Mexico.
                            • The U.S. is the world’s largest consumer and second-largest producer of natural gas.
                            • The U.S. has the world’s largest coal reserves, with the Western U.S. accounting for 55 percent of current U.S. coal production.
                            • U.S. electricity demand is increasing, as are prices.


                            The US is also the world's third largest oil producer, at 8.3 Million barrels/day, ranking behind Saudi Arabia and Russia.

                            You can look at the monthly DOE updates in Excel here:

                            www.eia.doe.gov/emeu/ipsr

                            To re-create that chart I posted, download the May 2008 .XLS file from the DoE, sweep the summary column, and click the Chart Wizard icon.

                            Like Evan mentions, the US exports around 1.3 Million barrels/day of crude, which is really odd, since the main importers of US crude are Mexico and Canada, which are also the largest exporters of crude into the US. The conspiracy enthusiasts could go nuts on that one , but I'm guessing it's a combination of multi-nationals like Exxon/Mobil transferring crude from country to country, as well as shipping crude to externally-owned refineries:

                            http://www.eia.doe.gov/emeu/aer/pdf/pages/sec5_14.pdf

                            Last edited by lazlo; 06-01-2008, 03:33 PM.
                            "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did."

                            Comment


                            • #44
                              a couple of points here. the chinese govt controls the price of gasoline in China, so it doesn't matter what we are paying in the U.S., the chinese consumers are paying MUCH less. in fact, one of China's largest oil companies (it is Sun-something or other, i'm too lazy to look it up), is constantly trying to cut production because it actually COSTS the company money to refine and sell gasoline in china. the chinese govt has to heavily subsidize Sun-???? or they would stop refining.

                              i don't understand Evan's explanation of "drilling two barrels and selling one". if it takes one barrel of oil to extract and refine one barrel from the tar sands, then it doesn't matter if you extract 5 billion barrels, because it will take 5 billion barrels to extract and refine it. the only "extra" they will be selling will be to themselves to continue the extraction and refining process.

                              the U.S. uses somewhere around 8 BILLION barrels of petroleum products per year. if there are 16,000,000,000 barrels of reserve in Alaska, that is only two years worth.

                              http://www.eia.doe.gov/emeu/aer/txt/ptb0511.html

                              andy b.
                              The danger is not that computers will come to think like men - but that men will come to think like computers. - some guy on another forum not dedicated to machining

                              Comment


                              • #45
                                a couple of points here. the chinese govt controls the price of gasoline in China, so it doesn't matter what we are paying in the U.S., the chinese consumers are paying MUCH less.
                                No they aren't. Price now is $5.62 US per US gallon in Hong Kong. The US, Canada and just about every country in the world controls the price of gasoline in thier country. In most western countries it is controlled via gas taxes.

                                i don't understand Evan's explanation of "drilling two barrels and selling one". if it takes one barrel of oil to extract and refine one barrel from the tar sands, then it doesn't matter if you extract 5 billion barrels, because it will take 5 billion barrels to extract and refine it. the only "extra" they will be selling will be to themselves to continue the extraction and refining process.
                                First, it doesn't take a barrel equivalent of energy to produce a barrel of oil. Second, note I said "energy", not oil. Tar sands oil is produced with the main energy input being natural gas which is abundantly available in the tar sands fields. They are trading a source of low density and energy poor hydrocarbons for another. The first source is abundant and easy to process but hard to store or deliver to market and sell and the second has high energy density and is easy to sell and store.

                                The actual cost of energy is reflected in the cost to extract the product. In Saudi Arabia it is only a few dollars per barrel. Even in the Alberta tar sands it ranges from around $30 to as low as $15 or so per barrel. The real current dollar value of a barrel of oil is around $60 to $70 dollars so there is a very long way to go for the extraction cost to come close to the energy value of a barrel of oil.
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