Boom And Bust

[Big Dave]

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]

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

[The Atomic Ass]

Originally Posted by Big Dave

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, 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.

[dremd]

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]

It all depends on whether alternatives will run your car.

[jamesqf]

Originally Posted by Big Dave

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]

Originally Posted by jamesqf

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]

Great point Clev.

[captainslug]

Originally Posted by Clev

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]

Originally Posted by captainslug

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?