Saturday, December 5, 2009

Oil Price "Perfect"

Saudi Arabia’s Al-Naimi Says Oil Price Is ‘Perfect’

Yes, Mr. Al-Naimi, the price of Oil is perfect - for OPEC.

With Oil prices trading between $70 and $80 per barrel, OPEC feels that the political will necessary to develop alternative transportation infrastructure and energy supplies simply will not be there in the developed nations. "Perfect".

Trade surpluses into the Oil exporting nations are sufficient to maintain the position of the elite and placate their masses. "Perfect".

Oil prices are such that the exporting nation's elite can continue to triangulate the political pressures on them from the importing nations, and these nice folks can continue to fund all sorts of "kooks, loonies, and squalid criminals" (Ronald Reagan). "Perfect".

And if all involved would just maintain the status quo, forever, things will continue to be: "Perfect".

The sad fact is our leadership here in the U.S. and the West is simply hopping to extend the status quo until the next administration takes office, which the current one hopes is 2017, to which I answer:

NAFC. Perfect.

Libertariananimal (at) gmail

9 comments:

bureaucrat said...

I work with a couple of alternative vehicle fuels (ethanol and natural gas), and I've researched them all (methanol, propane, etc.) They all suck. They are all "lesser fuels." I think for the time being, we can safely say that there are NO real alternatives to gasoline and diesel. The closest we have to an alternative is ethanol/E10/E15/E85, and there isn't enough corn ethanol, nor will there ever be enough corn ethanol, to displace anywhere near 150 billion gallons of gasoline and 60 billion gallons of diesel in the U.S. We can't grow sugarcane ethanol in sufficient quantities in America (too cold), and they haven't been able to make cellulosic ethanol at a profit after 30 years of trying. Electric cars will always be hobbled by the batteries. We can forget about alternatives to oil for now.

A Quaker in a Strange Land said...

Bur:

They do all suck.

I was speaking more toward mass transportation, and incentives to cease "wasting" petroleum products.

Doesn't matter, its not going to happen.

Anonymous said...

Oil's been stable for quite a while now, at least in US$. OPEC has never really had the discipline to keep prices up for too long. Are they doing it now? Is there reserve capacity to keep the price at $80 if the economy improves? Doubtful.

The alternatives suck until the good stuff gets scarce. Give it a couple more years. People love their cars and the freedom that cars provide. They aren't going to give them up without a fight. I'm betting on Oil shale ( the US has 800 Billion barrels ) and coal and NG to liquids. When people are waiting in line at the gas station, they won't give a rat's a$$ about global warming or anything else. The enviro-nazis will be blown away like leave in the wind. This won't happen for a while yet, but it will be unstoppable.

Regards,

Coal Guy

Stephen B. said...

Coal Guy, I have to disagree with the ultimate viability of alternatives to gasoline and diesel.

Just because people love their cars and the freedom to drive (which is very true, of course), won't make alternatives happen by and of themselves.

Particularly shale "oil", which is really kerogen, there just isn't enough energy density in shale to make it practical to mine and transport to the refineries as a feedstock. If there were, we would have seen it developed during the past oil shocks, but instead, we've seen everybody give up on it, and for good reason.

I also agree that people won't give a rat's rear about Warming concerns, but they still need to find a high enough energy density fuel at a reasonable price, to fuel 300+ million vehicles an average of 35 to 50 miles per day without further bankrupting personal economies.

I say it hasn't happened because it can't happen, barring something like cheap, in-car cold fusion development or something similar. (Mr. Fusion anyone?)

NG and/or coal to liquids? Yes, that will buy some time, but I'm still convinced that those fuels will also be just too expensive to allow people to continue the high-mileage family lifestyle the way we now live it. As well, I recall when union-backed coal miner strikes threatened to curtail electric production nationwide or at least across the Midwest. What happens when the nation becomes dependent on coal miners for their car fuel? Yes, mining technology is less labor intensive than in the 1970s, but the margin of improvement still leaves me wary.

When talking to others about the changes to come, I always mention Oil Depletion, and casually add to them that "...and no, electric and biodiesel won't save us" and oh the looks of protest I get! Peeps are always thinking that they need not do anything because "technology will save us."

Ummm, not necessarily, or at least not at a price that will allow anything like the current social paradigm to continue.

Anonymous said...

Lots will be possible at $200 a barrel. At that price, I'll still be driving my diesel Jetta for under 15 cents per mile.

The tar sands in Alberta were too expensive too, at first. But, the processes have been refined and oil from tar sand is competitive at any price for crude we are likely ever to see again. Same will happen for other technologies. They are only impractical below a certain price point. Never say never.

Naturally, higher prices will cause economic adjustments. There will be less driving of more efficient cars. More freight will move to rail, etc. But I just don't foresee a pedestrian economy for a long time.

Regards,

Coal Guy

Stephen B. said...

"Naturally, higher prices will cause economic adjustments. There will be less driving of more efficient cars. More freight will move to rail, etc. But I just don't foresee a pedestrian economy for a long time."

Agreed.

bureaucrat said...

2008 showed us that the price per barrel of oil will not stay above $80 a barrel for long without adversely affecting the economy and oil prices coming back down again. Higher oil prices = slows economy = drop in oil demand = lower oil prices. It's a feedback loop.

I'll have to print my list of the conventional oil alternatives and what is wrong with them ... the oil shale in the Mountain states has the energy density of shaving cream, as the guy above hinted at. Coal may not be as plentiful as we've been lead to believe. And we have just started this horizontal drilling/hydraulic fracturing thing that is producing all this natural gas -- some have said it is being overhyped. Oil sands of Canada only delivers 1.1-3 BTUs for every 1 BTU put into the process.

The future is filled with gasoline and diesel, probably at sustained higher prices (for those who can afford it). We have to start walking more, wearing warmer clothes, building public transit, and getting used to a lower standard of living. A race to the bottom. :)

westexas said...

Saudi Arabia, the US & China (EIA Data)

The cumulative shortfall in Saudi net oil exports, between what the they would have (net) exported at the 2005 rate and what they actually (net) exported was 840 million barrels (mb), from 2006-2008 inclusive, as US oil annual oil prices went from $57 in 2005 to $100 in 2008.

On the import side, the US and China are respectively prime examples of the OECD and non-OECD responses to rising oil prices.

The cumulative shortfall between what the US would have (net) imported at the 2005 rate and what we actually (net) imported from 2006-2008 inclusive was 687 mb.

The cumulative increase between what China would have (net) imported at the 2005 rate and what they actually (net) imported from 2006-2008 inclusive was 839 mb.

So, China not only offset our cumulative decline, their increase exceeded our cumulative decline.

This pattern is what I expect to see in the future--OECD and non-OECD countries battling it out for a share of declining net oil exports, with OECD countries generally being forced to reduce their consumption. I had been expecting more of a short term decline in US demand, primarily because of large anticipated reductions in government payrolls and government services (initially local & state, with the feds joining in later), but the stimulus spending is apparently postponing that day of reckoning. But I do think that the longer it takes for another downward leg in US consumption to occur, the less impact that it will have on global net demand.

Most companies, most governments, and most individuals are essentially basing their economic decisions on what I call the FIM--the Fantasy Island Model. On Fantasy Island, oil fields don't deplete.

In my opinion, a more realistic scenario is that oil importers worldwide, in just the past four years, have already burned through 20% to 25% of our post-2005 global cumulative supply of net oil exports.

In any case, based on our export models, governments worldwide are doing precisely the wrong thing at precsisely the wrong time--by encouraging consumption, when we should be doing everything possible to discourage consumption.

A Quaker in a Strange Land said...

Hi Jeffrey:

Glad to see you here. I hope all is well.

Given the burn thru of 20% to 25% of the remaining exports in that time frame, it would be reasonable to expect an acceleration in the import decline rate during the 1/1/2010 to 12/31/2013, and then a slowing in the rate of decline for the last part of the decade.

Another interesting point is the huge growth in ethanol production in the US - 651k bpd if memory serves so far this year. By volume, this might explain the lack of decline in gasoline consumption... but it begs the question on food prices at much above this rate of consumption. And given that the import decline rate might well accelerate right about now...

The implications for Grain, NG, Meat, etc.... prices are interesting from an investment perspective.

BTW, I used the charts you sent me last year (with due credit of course) at a presentation recently to a group of institutional investors... you'd have though I told them all they had testicular cancer. Hysterical.