The oil problem

[welsh]

Hey- remember, Fallout begins as a war over oil and other resources!

SO what's with the expensive gas?

(You elect an oil man president and then are surprised that the oil companies are making a mint? What the Fuck were you thinking?)

Plenty in the tank
Jun 11th 2008
From Economist.com

The problem seems to be getting to enough of the oil that is known to exist

“WE’RE not running out of hydrocarbons,” insists Tony Hayward, the boss of BP, one of the world’s biggest listed oil firms. To back up this view, he cites various comforting figures from the latest edition of the firm’s “Statistical Review of World Energy”, released on Wednesday June 11th. Enough oil has already been discovered around the world, Mr Hayward says, to maintain consumption at current levels for another 42 years. As he recently put it, humanity has guzzled through 1 trillion barrels, but has its next trillion already lined up, and could probably unearth a third trillion if it really applied itself. Why then, are oil prices hovering over $130 a barrel?

Mr Hayward blames poor policy-making or, in his florid phrase, “the madness of men”. Some 80% of the world’s oil reserves, he says, are in the hands of state-owned oil firms, which tend to allow firms like his only limited access. He believes that if these riches were fully exploited, the world could easily produce 100m barrels a day (b/d) or more. That’s a big increase on last year’s figure of 82m b/d, and a level that other oilmen, such as the boss of Total, another big Western firm, think impossible.

Or in other words, much of today's oil is controlled by state owned enterprises- essentially monopolies that get to decide what they want to sell oil for. If the SOE decides that oil is too cheap, it can control supply, which increases price as demand increases.

Put enough SOEs together over a common resource- oligopoly!

At first glance, BP’s own data seem to support the gloomier case. The firm reckons that global output fell by 130,000-odd b/d last year. Worse, proven reserves also fell, by about 1.6 billion barrels. This suggests that the world is consuming oil faster than it can be found—a worrying thought, even if reserves are large.

And... this is the peak oil problem?

One of the main challenges of the peak oil idea is that alternatives are likely to be found to replace petroleum. For instance- organic fuels- made from corn or sugar. But if you rely on organic fuels from things that people are supposed to eat- the price of food goes up.

But Christof Rühl, one of the report’s authors, points out that data on reserves are slow to appear. For several countries, BP had to make do with last year’s numbers. When the updated figures are in, he expects they will actually add up to an increase. Global reserves have risen by 36% since 1987.

As for output, Mr Rühl breaks last year’s decline into involuntary and deliberate portions. There are countries, such as Mexico and Norway, whose output is in inevitable decline. Others, such as Nigeria, saw declines brought on by political unrest. But by far the most precipitous drop last year took place in Saudi Arabia. Some argue that it too is testing the limits of geology’s bounty. But ostensibly, at any rate, the production cuts were intentional.

Possible that this might have to do with recent discussions on global warming, with poor countries demanding a reduction of petroleum use and countries, like Saudi Arabia, asking that the poor countries about to drown pay them for NOT producing oil.

Early last year OPEC was worried about rising stocks and falling prices. It resolved to trim its output, and Saudi Arabia did most of the trimming. Mr Rühl, for one, believes that it could raise its output again if it wanted.

But it doesn't want to.

In terms of consumption, too, BP reports a mixed picture. Demand for oil in rich countries fell by almost 1% last year—the biggest decline since 1983. But in poorer ones, it grew by over 4%, partly because developing economies are growing faster than those of the rich world. But subsidies for fuel consumption also play a big part. According to Mr Rühl, consumption is falling in countries with heavy taxes and rising only sluggishly where taxes are moderate. But in countries with subsidies, it is rising faster than normal, and fastest of all in the countries with the highest subsidies.

In other words, the root of the high oil price in BP’s view is not a mismatch between strong demand and feeble supply, but failure on the part of various governments to allow markets to work their magic. There are hints of an improvement on the demand side: several Asian governments have recently decided they can no longer afford subsidies. But it is hard to imagine the world’s ardent energy nationalists suddenly throwing their doors open to foreign investment.

That obliges the likes of BP to concentrate on marginal projects, either in difficult surroundings (the Arctic or deep water, for example), or with trickier forms of oil (such as tar sands). The development of such fields has been hampered of late because of a shortage of qualified engineers and suitable equipment. The traders who have been driving up the oil price believe that these bottlenecks will prevent global output from keeping pace with the developing world’s thirst for oil. For the past few years, BP’s number-crunching suggests, they have been right. But by the firm’s own admission, its statistics, although illuminating about the past, are no guide to the future.

And then there is the speculation of commodities traders.

This shit will be with us until we find alternatives.

 

[Kyuu]

One of the main challenges of the peak oil idea is that alternatives are likely to be found to replace petroleum. For instance- organic fuels- made from corn or sugar. But if you rely on organic fuels from things that people are supposed to eat- the price of food goes up.

Ethanol (the fuel you can produce from corn) is a joke, really. It's not a viable alternative to replace gasoline on a large scale, at all. And as far as I'm aware, we're still not all that close to a workable solution for fuel cells either. Electric cars merely shift the energy used to that produced by power plants... which relies overwhelmingly on fossil fuels: coal and oil. The need for crude oil to provide the great bulk of the world's energy is not likely to go away anytime soon.

 

[[PCE]el_Prez]

I took an environmental science class in college (the only lab science class I could get in that fit my schedule) and my professor was asked by someone in the class: What do we do about our oil crisis (eventually running out of oil and whatnot)?

He said that we need to slowly but steadily raise the price of gas now while we're not completely in dire straits. That would [hopefully] force people to be more conservative with gas. I don't know if thats whats going on now, but I definitely know that that IS happening. My car has been beaten up for the last 5 years I've had it and it recently took a dump and would cost more to fix than it was really worth so it was time for me to get a new ride. I did some research and I definitely wanted a car with some good MPG - and I checked out the new fuel efficient cars on the market (Honda Fit, Toyota Yaris, Nissan Versa, etc. etc.). Apparently, dealerships can't even keep these cars on the lot. People are trading in their SUV's and going green like theres no tomorrow (which we don't know for sure if there is ).

Like I said, I don't really know if this was some kind of fuel conservation strategy. Anyway - ended up going w/ a 2005 Civic

 

[Maphusio]

This is a fun one eh? Watching food industries / organizations address congress on CSPAN last month enlightened me a bit on food prices. The president of the USA's farmers council laid it right out there. The problem with food prices in America is mainly issues with the cost of transportation. Other factors contributed, but that is the main one.

Here in Washington State we pay upwards of $4.50 a gallon for regular... I'm 25... I remember using one $20.00 bill to fill up a 15 gallon tank... Sad times.

I can't complain though, I am one of the lucky few that moved very close to my work (4.8 miles away). I don't have to pay the many ridiculous $3-5 tolls on major freeways in Washington State that have been implemented in the past year and I get to coast down a few hills totaling 2 miles.

At this point in time... I am still willing to take out a loan to purchase a hybrid (if only Subaru made one).

The reduction of traffic is really quite amazing. Mass transit is seeing such a surge that it is to the point of overflow... In the USA, overflow, that just seems so 1920's... Anywho, /end rant and rambling

 

[Zaij]

food prices in America is mainly issues with the cost of transportation.

A dickload also goes into fertilizers. Like, a real whopping donkey dickload.

 

[Slaughter Manslaught]

food prices in America is mainly issues with the cost of transportation.

A dickload also goes into fertilizers. Like, a real whopping donkey dickload.

You guys could get cheaper deals IF your governament dind't keep barriers and subsides to keep food from third world countries away. Your farmers also get rid of a LOT of food so food won't go cheaper. That also makes competing against food from the USA quite difficult for countries like Brazil, which causes misery and poverty in third world countries. And that's BAD.

 

[welsh]

To be honest, I think if you want to do Brazil a good favor, as with much of the tropical third world, and resolve the oil problem- switch to sugar based fuels. You could quickly switch to sugar fuels and reduce transaction costs, get away from petroleum dependency and help out a lot of tropical countries that have been in hard times because sugar is so cheap.

El Prez- is that a Civil hybrid or a gas guzzler. I have a civic (2001) and its.... ok. Next car will probably be a hybrid.

That the Asian manufactures are ahead of us on hybrid is a result of the US government offering tax support to people purchasing SUVs. Republican oil man as president- what did you expect?

While I think the economic effect of higher prices is leading to what your professor suggested, I doubt this is by design. Rather, I think its oil speculations and SOEs determining supply that drives up prices.

 

[Slaughter Manslaught]

To be honest, I think if you want to do Brazil a good favor, as with much of the tropical third world, and resolve the oil problem- switch to sugar based fuels. You could quickly switch to sugar fuels and reduce transaction costs, get away from petroleum dependency and help out a lot of tropical countries that have been in hard times because sugar is so cheap.

True, that is. You are right. In fact, most or all the cars produced here recently (I think 2006 and ahead) are hybrids. Most people just don't do the switch because they either have older cars, or because prices for alcool fuel are a complicated factor. Here, in Belém, it's not worthy to use alcool because it's cheaper, but it's not cheap enough to be economic, you're pretty much paying almost the same for a inferior fuel. In other cities, it IS worthy enough to use it because the prices are better. And there's the harvest, the prices and all that. I really think we should switch to sugar fuels as fast as we can. It's better in the long run. And also, no, they don't destroy the Amazon Rainforest and no, they don't cause food shortage problems. Why the U.N tried to pin the use of bio-fuells as "Crime Against Humanity" or something? I mean, WTF?! In fact, I think we should use the start ahead phase we have and really invest heavily in sugar based fuells and other bio-fuells so we can become the Saudi Arabia of bio-fuel and give ourselves a great way to grow.

 

[welsh]

My wife, a Brazilian, had a sugar-alcohol car. It really sucked. Hopefully they got the kinks out by now.

But she tells me that there is another form of vegetation that is actually better than sugar and grows pretty well in Brazil's dry northeast. True?

 

[Starseeker]

An idea just hit me after a discussion about Sino-US trade.

Are oil prices and food prices putting a dent in globalization?

Will there be a bigger demand for local produce? Will this hurt the economy of third world countries, even big ones like China?

If transportation prices skyrockets, does the savings from going offshore dips below the costs?

What would that do to the world trade? Commodities speculation, options trading, and currency fluctuation?

The next sub-prime mortgage loan crash could very well happen in China in 3-4 years. Housing price has skyrocketed beyond the reach of most middle income families. Beijing's refusal to let people move around wherever they want in the country is taking its toll. The ancient census system of tying a person to their ancestral birth place is getting seriously out of date.( not to mention leading to a seriously case of caste system)

If the Chinese housing market crashes, will it ripples out like what happened in Japan in 1989?

A lot of these countries are already heavily oil dependent. Would farther price increase lead to farther militarization to secure oil reserve, thus leading to the FO problem?

 

[[PCE]el_Prez]

El Prez- is that a Civil hybrid or a gas guzzler. I have a civic (2001) and its.... ok. Next car will probably be a hybrid

It's not a hyrbrid but I wouldn't go so far to say that it was a 'gas guzzler'.

 

[Dracon M'Alkir]

Fill every rooftop with solar panels. Switch all cars to electric.

Problem solved.

 

[[PCE]el_Prez]

Fill every rooftop with solar panels. Switch all cars to electric.

Problem solved.

Not all the way - solar panels are expensive and electric cars have sub standard performance.

 

[Loxley]

I talked about that with one of my roommates recently since he was complaining about the high gas prices. And we basically concluded that he was porbably the last of his generation of students that can afford to have a car for casual use. Pissed him of a bit.

As for the qoutes in the OP I smell blamegame. Most people today blame alot of the oilprices on the oil companies that they feel is trying to play the oil market to make a maximum profit. What this is about is probably just an attempt by the companies to spread a rumor so that the buyers in the US or elsewhere will have enough and take it to the voting booth to get lover gas prices. In the US that would mean a president that used the cartell laws against them.

Cause if oil prices are high because of companies, elected leaders can do something about it, if they are high because of some countries outside the reach of those elected leaders is playing the price game.

Is the oil prices going upp because of countries demading more money for selling its own oil? hell yeah it is that was what started the 1973 oil crisis, but I bet the high oil prices is being kept up by the oil cartels aswell.

 

[Paladin Solo]

Fill every rooftop with solar panels. Switch all cars to electric.

Problem solved.

Where does the electricity come from? Oil-powered power plants?

 

[Phil the Nuka-Cola Dude]

Where does the electricity come from? Oil-powered power plants?

My knowledge on this is limited, but I believe that a good portion of the west coast's electricity comes from hydro power.

I don't think that eliminating our fossil fuel dependency is out of the question if we greatly expanded on the existing wind farms and worked on making solar electricity cheaper and more accessible.

I'm thoroughly ignorant on how nuclear power plants function though, so I can't comment on that area of generating electricity.

 

[Yoshi525]

Don't worry, within 80 years stochastic succession will occour and plants shall rule supreme once again!

Gashol/biofuel is overrated, and isn't realistically a long term solution to energy problems.

 

[[PCE]el_Prez]

Where does the electricity come from? Oil-powered power plants?

My knowledge on this is limited, but I believe that a good portion of the west coast's electricity comes from hydro power.

I don't think that eliminating our fossil fuel dependency is out of the question if we greatly expanded on the existing wind farms and worked on making solar electricity cheaper and more accessible.

I'm thoroughly ignorant on how nuclear power plants function though, so I can't comment on that area of generating electricity.

I believe coal is the fossil fuel that is the biggest supplier of electricity to homes/businesses in the U.S. Also the US has one of the biggest supplies of coal in the world. It's the oil we're coming up short on.

 

[Ah-Teen]

el_Prez]

Where does the electricity come from? Oil-powered power plants?

My knowledge on this is limited, but I believe that a good portion of the west coast's electricity comes from hydro power.

I don't think that eliminating our fossil fuel dependency is out of the question if we greatly expanded on the existing wind farms and worked on making solar electricity cheaper and more accessible.

I'm thoroughly ignorant on how nuclear power plants function though, so I can't comment on that area of generating electricity.

I believe coal is the fossil fuel that is the biggest supplier of electricity to homes/businesses in the U.S. Also the US has one of the biggest supplies of coal in the world. It's the oil we're coming up short on.

Off the top of my head 70% jumps out at me.

 

[myzko]

Nuclear Power ftw.