"High gas price amnesia" is setting in again

[user removed]

In any position you read about, it's important to read things like "KNOWN" to really understand the true contentof the in formation provided. Unbiased sources are rare today but that (agenda driven sources) has been around many thousands of years before my time. The eastern US is much cleaner than it was in my childhood. Maybe I'll be able to dig clams in Back River again.

regards
mech

[niky]

Originally Posted by redneck

We were told that the reason for high prices during the last decade was because we had reached "peak oil" and that all known oil reserves were in decline.

Well, firstly, we had high prices not because of peak oil. We had high prices because of investor speculation, fueled by economic instability.

And secondly, all known oil reserves are in decline. US shale oil is a known reserve, has been for decades. The difference now is that Middle East oil is so expensive that it's viable. A few decades ago, you could only sell US Shale oil at a loss. Now, with more aggressive techniques like fracking, and with Brent oil consistently over the $80 a barrel mark (and flirting with $100 from time to time), setting up new wells in the US finally makes economic sense.

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Saudi Arabia is trying to squeeze WTI to gain more sales in America, given that sales are flat around the rest of the world...



It's a squeeze you can make if you still have the biggest proven reserves in the world. And it's a tactical squeeze:

Oil Slump Means Canceled Projects as Investment Declines - Bloomberg

Things look rosy because the price at the pumps is low. But the price at the pumps is low because demand still hasn't recovered. And if not enough people are willing to pay for $100 a barrel oil, then we won't have new wells. If we don't have new wells, then we'll have another boom and bust cycle as the old ones dry up, before the new ones come online.

We've not so much hit peak oil as hit peak demand... and economic contraction is hurting the oil industry. Unless the WTI goes back up to around $90, the current boom will peter out as the wells dry up. And shale wells dry up much faster than Arabian wells! This is the Saudi game. It hurts them to sell low, but not as much as it hurts the new guys. Still, you have some breathing room. It's when you go below $80 that things start getting dicey.

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Peak oil ain't simply us using up all the oil there is. That's impossible. We will simply edge closer and closer to peak oil before it becomes too expensive for anyone to want to dig up more of it.

[MetroMPG]

I haven't seen numbers yet to back this up, but...

Small cars took it on the chin last month. There were some exceptions, like the Honda Fit, Mitsubishi Mirage and Nissan Versa, but double-digit deficits were reported by a number of models.

Source: Cheap petrol fuels US October light vehicle sales

[freebeard]

Small cars took it on the chin last month...
Source: Cheap petrol fuels US October light vehicle sales

Another case where the headline negates the content of the story

[darcane]

Originally Posted by freebeard

Another case where the headline negates the content of the story

Eh?

Headline: US: Cheap petrol fuels October light vehicle sales

Content: light vehicle sales up 6.1% over last October, 2.8% up over September.

They seem to be in agreement...

[Vman455]

Originally Posted by redneck

.



Can't be...

We were told that the reason for high prices during the last decade was because we had reached "peak oil" and that all known oil reserves were in decline.

Told by whom?

[basjoos]

The nice thing about current gas prices ($2.58/gal) is that at 70 mpg, my cost per mile (3.6 cents/mile) is equal to that of driving a Nissan Leaf and is cheaper than the 3.8 cent per mile figure given as the cost of operating a Chevy Volt in EV mode. And since I'm getting better than 70mpg, my cents per mile is lower than that of driving an EV. Before the recent drop is gas prices, I had to better 80mpg to match EV cost per mile rates.

[Cobb]

Thanks basjoos, you see its trying to undermine sales of evs. Its really a unhanded ploy to keep the new EVs down like the Volt, Tesla, Leaf, next gen prius, etc that other auto manufactures may have in the works including the Elio. I bet we will see cheap gas til 2017, then it rockets up to almost 10 bucks a gallon and stays there for some time.

[basjoos]

I don't expect gas to stay down where it currently is for more than a year or two. At the current low oil rate, hydraulic fracturing and tar sand oil aren't very cost effective. So there'll be a big slowdown in starting new fracked wells and in extending current fracked wells until the price goes back up. Unlike conventional drill oil wells which, once drilled, can produce a steady volume of oil for years, the oil production rate of fracked wells tapers off within months unless they are extended and/or additional fracturing takes place. So supply will drop off until the price rises back up to where fracking and tar sands are again price competitive. Of course if the continued expansion of the sunni ISIS sets off a war with the Shia Iran and shuts down Persian Gulf oil exports, all bets are off and the price could shoot back up much sooner.

[darcane]

Originally Posted by basjoos

I don't expect gas to stay down where it currently is for more than a year or two. At the current low oil rate, hydraulic fracturing and tar sand oil aren't very cost effective. So there'll be a big slowdown in starting new fracked wells and in extending current fracked wells until the price goes back up. Unlike conventional drill oil wells which, once drilled, can produce a steady volume of oil for years, the oil production rate of fracked wells tapers off within months unless they are extended and/or additional fracturing takes place. So supply will drop off until the price rises back up to where fracking and tar sands are again price competitive. Of course if the continued expansion of the sunni ISIS sets off a war with the Shia Iran and shuts down Persian Gulf oil exports, all bets are off and the price could shoot back up much sooner.

The proverbial nail has been hit on the head here.

Saudi Arabia ramps up production and cuts prices. Tar sand and shale oil fields have to cut back or lose money since they aren't profitable with low oil prices. Overall production is still about the same, but Saudi Arabia gets a much larger market share and is still profitable at those prices.

If they can keep it up long enough, they may be able to bankrupt competitors that have invested heavily into these alternative oil fields, then they can constrict production and command high prices again. It is strictly illegal in the US, but that's not a concern for the Saudis as they don't have to abide by our laws.