Why Do Higher Gas Prices Anger You?

indeed

its not about the rate of inflation, its about real commodity prices.

The FT btw is the best newspaper in the world. I just cant afford it.

And no sports coverage

or suduko.

Absolutely. Good night -- I need to go to bed.

The German edition of the FT has sports, is above my banc account as well and lacks of suduko, too.

and good night to you Thomas. moi aussi.

i like both the FT and the economist - but don't like to pay for it. our library used to carry the economist - donated -, but now no longer carries it.
i find that the mcgraw-hill "businessweek" magazine ( www.businessweek.com ) is a pretty good business magazine - and i get it free at the library.
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the september 26 issue of "business week" has three articles dealing with the price of gasoline and energy in general.
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the first article is headed : "open season on big oil - an angry public wants quick relief from high prices. here is why none is in sight."
it states that the real crunch is in the refinery business. while supply of crudestock has risen from about 75 million to 85 million barrels per day during the last five years , global refining capacity has increased only slightly from 82 to 85 million per day. refiners are not anxious to sink untold millions of $ into building of new refineries; they took a beating in the 80's and 90's and are now very cautious with their shareholders' money . added to this is a shortage of skilled workers; mr. browne of BP says : " the industry has not been an attractive place for people to work".
with demand surging, a dearth of equipment and skilled trades has led to a doubling of dayrates for drilling rigs in the past 18 months - to $200,000 for sizable offshore rigs and to $400,000 for jumbos - note that these are dayrates !
the article further states that even promising projects are harder to pull off. the example given states that the royal dutch/shell project at the sakhalin II gas project has doubled in cost to $20 billion . the cost of finding new reserves has risen from $4.94/barrel in 2000 to $8.61 today. companies see these developments as costly and risky enterprises.

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following this article is a happier one : " getting more miles to the gallon - fast. off-the-shelf technologies could increase fuel efficiency by up to 30%".
here are where the fuel-savings are - and their cost per vehicle :
- lighter materials, added cost $0 - gain 8%
- drag reduction, cost $185 - gain 6%
- smart engines, cost $415 - gain up to 13%
- starter/generator, cost $660 - gain 11%
- six-speed tranny, cost $0 - gain 9%

the article further states this on "fleet economy averages for new vehicles" :
- united states , 22 mpg
- china, 32 mpg
- E.U. , 40 mpg
- japan, 45 mpg

they do not expect averages for u.s. built cars to increase greatly, but expect fuel economies for the others to increase further. seems we have some catching up to do in north-america.

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finally an article on : "the new clean fuel : coal".
american electric power co. has developed a process that will burn as clean as gas-fired generators - at a cost ! coal will be transforned into non-polluting synthetic gas - at a cost of $1.2 billion per unit - 20% higher than the usual polluting plant. a small price to pay, i'd say.

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it seems that the energy news isn't all bad.
also keep in mind that there is plenty of "frozen gas" in the mackenzie river delta in canada (outstripping all other known reserves).
finally we have plenty of uranium in temporarily closed mines in northern canada (an example is elliott lake in northern ontario. this mine has been closed - but not sold - and is right now a "retirement city " with nice bungalows available for less than CAN $ 50,000 , and quite popular with seniors (we have visited there - but not moved - yet) !
that's it for today ! hbg

"refiners are not anxious to sink untold millions of $ into building of new refineries; they took a beating in the 80's and 90's and are now very cautious with their shareholders' money ."

How strange, demand forcast to go to 120 mbd fairly soon but oil companies refuse to invest in more refining capacity. Could it be that they know present refining capacity is sufficient for all that can possibly be extracted out of the ground? There is actually a shortage of tankers for just the same reason imo.

There are other factors operating here as well. First, it is very difficult to get government and local approval for the construction of a new refinery in the United States: indeed in most states it is virtually impossible. Second, the environmental liability for shutting down a refinery, given our laws that make owners liable for known hazards and others that may be identified many years later, make it very difficult to calculate a net return on the capital invested. We have an analogous problem with respect to baseload electrical power generating plants.

I suppose, whe we all start walking again and use our Voltaic solar bags ... :wink:

(Ooops, I can't: I don't have a laptop )

read an interesting article re. oil prices in the "canadian business" magazine(sept 26 issue).
future contracts for oil delivery in may 2006 are US$66 a barrel; march 2007 US$ 64; december 2011 US$ 59 !
if one assumes that the price of oil will hit US$ 100 by june 2006, one could buy a call option for US$ 2.41 a barrel(or 1,000 options at $ 2,410) ; in june 2006 one can buy the oil for the optioned price of $ 80 a barrel and immediately sell it for $ 100.
so : 1,000 barrels sold at $100 each = $ 100,000
less : 1,000 barrels bought at $ 80 = $ 80,000
less: options purchased = $ 2,410
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profit $ 17,590
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even at $ 85 or $ 90 there would still be a profit.
of course, if the price doesn't go above $ 80 you have lost $ 2,410 (your initial investment).
the writer argues that since "the people in the know" are willing to sell for $ 66 for future delivery, the chances of the price going much above that are quite slim.
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what to do now ? is shelling out $ 2,410 now and hoping that the oil price will increase a good bet ?
i think i'll sit this one out ! hbg

I would really like to know how economics will triumph over geology

http://www.feasta.org/documents/feastareview/fleming.htm

steve : an interesting article !
for me the problem is that there are about as many different reports/opinions as there are "experts". whom do we believe ?
imo the time of cheap oil and natural gas is over (a good thing perhaps ?). looking at the price for natural gas shows that it has risen much more steeply than oil - a business reporter today attributed the rise in natural gas prices to the switchover to NG by many manufactures and electric power producers that had formerly used oil . (we still have an oil-burning furnace in our house; not sure if we'll want to switch to NG if furnace needs to be replaced).
canada has large deposits of so-called "frozen gas" in the mackenzie valley delta - can the gas ever be extracted economically ? there is a lot of guessing going on. until a few years ago the canadian oilsands were considered useless - too costly to develop, but with the increase in the oil price and a reduction in the cost of recovering the oilsands, the producers are now shovelling money - literally!
stay tuned ! hbg

gas prices
here is an article re....CANADA'S FROZEN GAS DEPOSITS...

"The GSC published its first comprehensive inventory on gas hydrate distribution and volume in Canada in the July 2001 AAPG BULLETIN, when authors J.A. Majorowicz and K.G. Osadetz estimated that, on the high side, in-place gas hydrate volumes sequestered in sediments in the continental shelves, ocean margins and below terrestrial permafrost may approach 30 times those of conventional natural gas resource."

Very interesting article Hamburger thanks. If you were to strip out the hydrogen and sequestrate the carbon dioxide, power from hydrates might be the answer to both global warming and "peak oil".

But not for 30 years would be my guess. And we have to get through those decades dependent on depleting conventional fossil fuels.

Further, if global warming (which is in the pipeline anyway) causes the permafrost to melt and methane from hydrates to be liberated, then that really could trigger run away global warming. So are you an optimist or a pessimist?

Like you said before who do you believe in these matters? When it comes to proven oil reserves, I would say definitely not OPEC governments, or certain big oil companies (who I will not name for fear of getting sued), just mention Shell who had to revise downwards their "proven reserves" 4 times last year.

Why would they lie, you might ask? An oil company's share price is supported by how much oil it has. Opec governments are allowed to produce oil, and hence get revenue, in proportion to their oil reserves. Hence its in their interests to (how shall we put this delicately) massage the figures, put an optimistic slant, change the statistical analysis....or as you and I know it LIE.

It won't. It will work around it.

Personally, I choose to believe those experts whose arguments have the better track record. "The world will run into a catastrophic shortage of ____" is an argument that has been around for centuries. When we look into the historic record, we can see its predictive success in economics and geology, which is comparable to the average doomsday cult's predictive success on the Second Coming. Hence, I nourish a comparable skepticism to both doomsday cults and "limits to growth" types, as I do to the messages they propagate.

How? By forcing through new ideas/technology?

There is a good saying "Necessity is the mother of invention".

But with conventional oil and gas about to peak, we better start inventing something pretty soon because we've been looking for alternatives for years now.

Yes. Through the price system, and through selfish people trying to maximize their profits under its constraints.


Which steps have you taken to find out if an alternative to conventional oil and gas has been found yet? Maybe there already has been a major shift from oil to this alternative?

Kenneth S. Deffeyes, a professor emeritus of geology at Princeton, is the author of "Beyond Oil: The View from Hubbert's Peak."

This is what he says

But if the question of whether to drill in the Arctic National Wildlife Refuge is the wrong one, what's the right one? In 1997 and 1998, a few petroleum geologists began examining world oil production using the methods that M. King Hubbert used in predicting in 1956 that United States oil production would peak during the early 1970's. These geologists indicated that world oil output would reach its apex in this decade - some 30 to 40 years after the peak in American oil production. Almost no one paid attention.

I used to work with Mr. Hubbert at Shell Oil, and my own independent research places the peak of world oil production late this year or early in 2006. Even a prompt and successful drilling operation in the Arctic refuge would not start pumping oil into the pipeline before 2008 or 2009.

A permanent drop in world oil production will have serious consequences. In addition to the economic blow, there will be the psychological effect of accepting that there are limits to an important energy resource.

Maybe. I'm not sure it's true because it has been predicted too often, but I have no basis for disagreeing with you on that point.


"Serious consequences" is a flexible phrase. Personally, I expect that a drop in the world oil production will have consequences. I also expect those consequences to be about as serious as the drop that already happened in the world production of steam engines and sailboats.

Here we get back to the such as what? question I asked a couple of days ago.

Of course I dont know the secret work that is going on in every energy company laboratory. But I do understand basic thermodynamics, and I also understand human greed. If such an alternative energy source had been discovered, it would be impossible to keep it secret. Remember Fleischman and Ponds and cold fusion?