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Big Dave 12-23-2008 10:11 PM

Boom And Bust
 
Daniel Yergin in his book about the oil business called “The Prize” discusses at length the “boom and bust” nature of the oil business. That “boom and bust” cycle has been there ever since Col. Drake stuck oil in Titusville. Check out this link:

EIA - Short-Term Energy Outlook - Real Petroleum Prices

In particular see the top graph entitled “Real Gasoline Pump Price: Annual Average 1919-2009.” That will give you a ninety-year overview of the cyclical nature of gas prices with all the local/short-term noise filtered out.

We see a peak in real gas prices in the middle of the Great Depression followed by a thirty-five year decline. It kicked up again in the late 70s then declined again for another couple decades. Now we have another peak and it certainly looks like another sustained decline is in the cards. If you slice off the late 70s peaks the long term real price has been declining at a very steady rate for nearly seventy years.

Of course, this long-term decline is the major factor militating against alternative energy sources. The wise old head says “Don’t panic. Ride out the peak. The price will drop off again.”

We hear about “peak oil,” but that sounds a lot like that little slogan we hear before every economic bubble bursts: “But it’s different this time.” But it never really is different.

Fischer-Tropsch process synthetic fuels are not competitive when the price of crude drops under $80/bbl. Algal biofuel (if perfected) will need the price of crude to be about $50 or more to be competitive.

Environmental regulations make investment in US energy infrastructure a slow and costly thing. Given that regulatory straitjacket and the long-term decline in the real price of fuels, alternatives are always at a disadvantage.

Frank Lee 12-23-2008 10:14 PM

Gotta think that given: a)finite resource and b)incredible consumption, sooner or later it comes to a halt.

The Atomic Ass 12-27-2008 04:28 PM

Quote:

Originally Posted by Big Dave (Post 80102)
Of course, this long-term decline is the major factor militating against alternative energy sources. The wise old head says “Don’t panic. Ride out the peak. The price will drop off again.”

We hear about “peak oil,” but that sounds a lot like that little slogan we hear before every economic bubble bursts: “But it’s different this time.” But it never really is different.

Environmental regulations make investment in US energy infrastructure a slow and costly thing. Given that regulatory straitjacket and the long-term decline in the real price of fuels, alternatives are always at a disadvantage.

I couldn't agree more. The only part of me happy about the current decline is my wallet. Every other part of me, mouth included, :p is screaming for the price to go WAY back up and stay there.

If we happen to find more oil like we did during the last few booms, perhaps we will go through another complete cycle. But I'll put my money on us not finding said oil. ;) But one thing is for sure, this cycle will end. Perhaps not this time, or even the next, but it will end at some point.

And that is a point that confounds and baffles me. The GW worshippers want us to cut back on our emissions, but then turn right around and restrict a lot of area's from having any kind of wind or solar generation on them. :confused:

dremd 12-28-2008 09:48 PM

Eventually oil will no longer be feasable. When? Will it wreck the planet first? What price are we willing to pay? Are we willing to switch to alternatives before that point?

Big Dave 12-28-2008 10:22 PM

It all depends on whether alternatives will run your car.

jamesqf 12-28-2008 11:01 PM

Quote:

Originally Posted by Big Dave (Post 80102)
The wise old head says “Don’t panic. Ride out the peak. The price will drop off again.”

Depends on whether your wise old head belongs to an optimist or a pessimist. The pessimist says "So the price is going down now. Give it a few years, and it'll be back up again, higher than before."

Clev 12-29-2008 03:22 AM

Quote:

Originally Posted by jamesqf (Post 80551)
Depends on whether your wise old head belongs to an optimist or a pessimist. The pessimist says "So the price is going down now. Give it a few years, and it'll be back up again, higher than before."

My wise old head tells me that 62% of the oil I buy comes from out of the country, and only 20% of that comes from countries I'd want my dollars to go to (like Canada.) I'd rather spend as little of that money as possible, since it probably isn't going to a place that likes us.

Daox 12-29-2008 10:11 AM

Great point Clev.

captainslug 12-29-2008 11:21 AM

Quote:

Originally Posted by Clev (Post 80579)
I'd rather spend as little of that money as possible, since it probably isn't going to a place that likes us.

Which would be Venezuela, which accounts for around 6.6% of Oil imports.
The rest of the Top 10 don't have any active majority or governmental animosity towards us.
The countries that really don't like us have primarily have Oil trade with Russia.

Clev 12-29-2008 12:11 PM

Quote:

Originally Posted by captainslug (Post 80597)
Which would be Venezuela, which accounts for around 6.6% of Oil imports.
The rest of the Top 10 don't have any active majority or governmental animosity towards us.
The countries that really don't like us have primarily have Oil trade with Russia.

Crude Oil and Total Petroleum Imports Top 15 Countries

Regardless of their official "friendliness" status, Saudi Arabia has a large, growing and.. ahem.. active minority animosity towards us, and their government tolerates, if not encourages, terrorist training camps (unlike, say, Iraq.) The Nigerian government certainly is doing no good to its people with the money we send it, and I think we already send enough money and jobs to Mexico.

And those average 652,000 barrels a day we import from Iraq, those are free, right? The war's paying for itself with free oil like I was promised, right?

jamesqf 12-29-2008 12:29 PM

Quote:

Originally Posted by Clev (Post 80606)
...and their government tolerates, if not encourages, terrorist training camps...

Not terrorist, jihadist. Think about the purpose, rather than the tactics - then maybe you start to wonder whether there's all that much difference between so-called "terrorists", and the official military of many oil-exporting countries.

Then you have to remember that oil is oil, and oil's bought and sold in a world market. The fact that much of the oil the US uses actually comes from Canada or Venezuela, while most of Europe's comes from the Arab world, is just because the shipping distances are shorter that way. US consumption still props up the world price,

Clev 12-29-2008 03:29 PM

Quote:

Originally Posted by jamesqf (Post 80610)
Not terrorist, jihadist. Think about the purpose, rather than the tactics - then maybe you start to wonder whether there's all that much difference between so-called "terrorists", and the official military of many oil-exporting countries.

Then you have to remember that oil is oil, and oil's bought and sold in a world market. The fact that much of the oil the US uses actually comes from Canada or Venezuela, while most of Europe's comes from the Arab world, is just because the shipping distances are shorter that way. US consumption still props up the world price,

Good points. I believe the aphorism is "One man's terrorist is another man's freedom fighter."

The guys on Car Talk a couple of weeks ago suggested a 50 cent per gallon federal gas tax. According to them, it would drive people back toward conservation (I've noticed that freeway speeds are back up to where they were before the spike), and would generate $100 billion per year that could be put into alternative energy development and research. I would go even further and say that you could peg gasoline at a minimum of, say, $2.50 per gallon without hurting people too badly (maybe below a certain income level, people could apply for an offsetting tax credit). At the current California price of about $1.75/gallon, that would generate about $150 billion per year.

Just a thought.

Big Dave 12-29-2008 06:46 PM

The wise old head knows the price will go down, and come back up, and go down, and come back up, etc…that’s the boom-and-bust cycle in action.

Obviously it is still of value to minimize fuel usage, so that each oscillation affects one to a minimum,

It is tough when the EPA slaps high-MPG types in the face with Tier II.

Also, any increase in taxation, for any reason is unacceptable. If you want to raise the gas tax, you must reduce income taxation accordingly.

Clev 12-29-2008 07:02 PM

Quote:

Originally Posted by Big Dave (Post 80658)
The wise old head knows the price will go down, and come back up, and go down, and come back up, etc…that’s the boom-and-bust cycle in action.

Obviously it is still of value to minimize fuel usage, so that each oscillation affects one to a minimum,

It is tough when the EPA slaps high-MPG types in the face with Tier II.

Also, any increase in taxation, for any reason is unacceptable. If you want to raise the gas tax, you must reduce income taxation accordingly.

Actually, we should raise gasoline taxes to subsidize solar, wind, nuclear and biofuels for transportation. Make the alternatives cheap enough, and people will use less fossil fuels.

captainslug 12-29-2008 08:47 PM

Subsidies are only good at wasting money better spent for other things, or lining the pockets of a clever few.
Raising the price of one option doesn't make the alternatives "cheaper". That's a very broken argument string. You have to keep in mind that the options are not interchangeable either. To switch from one to the other will always require an investment.

If you want alternatives to become cheaper, demand for those alternatives needs to be encouraged to increase at a consumer level. Income tax incentives, tax incentives for real estate developers and businesses to offer designated charging stations/parking spots, and so on.
Quote:

Originally Posted by Clev (Post 80606)
Regardless of their official "friendliness" status, Saudi Arabia has a large, growing and.. ahem.. active minority animosity towards us, and their government tolerates, if not encourages, terrorist training camps (unlike, say, Iraq.) The Nigerian government certainly is doing no good to its people with the money we send it, and I think we already send enough money and jobs to Mexico.

I don't really see the connection. You can't selectively deny which countries your purchases filter money to.
If you want to enact change in foreign affairs, then you should be writing letters to ambassadors.
Actively working to deny specific countries of an extra two dollars each year won't really affect those people you disagree with. In all likelihood they don't get any money from oil anyways.
I certainly don't get any dividends from the US steel industry.

Clev 12-29-2008 11:22 PM

Quote:

Originally Posted by captainslug (Post 80673)
If you want alternatives to become cheaper, demand for those alternatives needs to be encouraged to increase at a consumer level. Income tax incentives, tax incentives for real estate developers and businesses to offer designated charging stations/parking spots, and so on.

Tax incentives sound like what I was suggesting. Money for those tax incentives has to come from somewhere. A good start would be to make oil pay for itself. Currently oil companies get various subsidies and bonuses, from Cheney's energy plan to our tax dollars going to military action to protect our oil interests abroad. An extra tax on gasoline is one way, but simply cutting the subsidies we already provide to oil is another way to do it.

Quote:

Originally Posted by captainslug (Post 80673)
I don't really see the connection. You can't selectively deny which countries your purchases filter money to.
If you want to enact change in foreign affairs, then you should be writing letters to ambassadors.
Actively working to deny specific countries of an extra two dollars each year won't really affect those people you disagree with. In all likelihood they don't get any money from oil anyways.
I certainly don't get any dividends from the US steel industry.

Setting aside the fact that Alaskans do get dividends from oil, Saudi Arabia isn't like our country. They send money to local and foreign jihadist and rebel groups to further their interests, just as we occasionally meddle in the governing of third-world countries.

I'm happy to see less money leave this country, period. And as was mentioned before, reducing consumption reduces worldwide prices, sending fewer dollars to those countries.

However, today I sent $50 to a Canadian company for an MPGuino kit that will help me send LESS money to Canada in the future. :)

jamesqf 12-30-2008 12:39 PM

Quote:

Originally Posted by Clev (Post 80628)
I believe the aphorism is "One man's terrorist is another man's freedom fighter."

What I meant was just the opposite. Groups of people may have different goals: freedom, world peace, economic hegemony, religious domination, whatever. Then there are various strategies & tactics which the groups may use, according to their resources and inclinations, to achieve their particular goals. In the present world, some jihadist groups have chosen to use the tactic called terrorism. Other groups, with the same basic goal - the spread of Islam and consequent subjugation of the infidels - have chosen to use other tactics: Iran tries to build a strong conventional army & develop nuclear weapons, the Saudis, Kuwaitis, &c invest their oil money so as to increase their economic power, etc.

The point I was trying to make is that I object to all of these. Sure, I don't like seeing my gas money going to fund the jihadists' terrorist training camps, but I also don't want to support the spread of Islam in any way, even if it's something ostensibly peaceful.


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