[Doly]

My naive and uneducated thought about the economic consequences of peak oil was that oil prices will continue to rise (with lots of volatility and ocassional lows due to demand destruction) until either a viable alternative to oil as a fuel is discovered, or demand destruction and high prices reach the point that one of the current alternatives becomes viable. Then the global oil price peak will be reached, and oil prices will go down again.

Is this view correct, or am I oversimplifying here?

[SuperNova]

Sounds about right Doly... increased volatility is here to stay in the medium term for sure I think

[MrBill]

I wish I knew? At some point you have less oil than you need to be a viable fuel on a mass scale. However, oil has alternative uses, as a manufacturing feed stock for example. Somewhere between non-economical to burn as a transport fuel and before all oil becomes uneconomical to explore for and extract it finds new applications and therefore it's price stabilizes at where it's new fundamentals dictate based on supply & demand. Is that price $300? I don't know.

Maybe an irrelavent example are old growth oak trees. It is hard to imagine that they were cut down for use as fuel or to make room for farmland, but they were. We would no longer use massive, solid oak beams for structural architecture, as a matter of fact, we have developed the technology to slice it up as thin at 1/8th of an inch to be used as a veneer over cheaper materials in plywood, and even then it is very, very expensive. I am guessing $100 for a 8' x 4' sheet of plywood, but even that might be too low? It is no longer burnt in any case.

I am sure before oil reaches that price tipping point that 'uneconomical' fuels like ethanol and hydrogen will become more attractive, even if certain inefficiencies in their production have yet to be worked out and the ratio of energy of input is not as attractive relative to output as gasoline, but those are technical issues. Certainly, on a private basis, I have a Model A at the farm that runs fine on ethanol, and if I have firewood and wood chips or potatoes I can make ethanol. I can't power a major US city, but I won't have to walk to town in winter either. At that point, I won't likely be commuting to work anymore, so back to either a lower standard of living or basic survival, but my grandparents did it on the farm during the Depression and we can, too.

[SuperNova]

Well my dad's got potato farms in the UK so between us we can sort something out. Just need an Ethanol powered cargo ship to get them to you now.

[MrBill]

Just float them across?


I didn't realise how fuel inefficient shipping was in absolute terms? I guess it makes sense as water is 400% denser than air, so it takes a lot of energy to push a ship through it. Gotta think there has to be room to improve the fuel efficiency of ships or not? Just a thought.

[MrBill]

sorry 800% that is.

[SuperNova]

$this->bbcode_second_pass_quote('MrBill', 'J')ust float them across?
.

[JoeW]

The oil price has dropped for a very simple reason:
Less refineries to process it means less demand for it.

The market has apparently determined that the loss of refinery capacity is greater than the lost oil production, which is why we still have a divergence between the cost of oil & the cost of refined products.

As refinery capacity comes back online, you should therefore expect two things:
1) Crude oil price stops its decline or begins to rise.
2) Refined product prices stabilize at a pricepoint more closely resembling the cost of the crude oil input to make it.

Currently, nymex.com has CL (light sweet crude) at 61.40/barrel and HU (gasoline) at 1.80/gal (or 75.60/barrel). HO (Heating Oil) is at 1.945, or 81.69/barrel. This price divergence tells the whole story: Not Enough Refining Capacity At The Moment. This divergence has already begun to narrow, and barring any unforeseen circumstances, should continue to do so.

[SuperNova]

$this->bbcode_second_pass_quote('JoeW', 'T')he oil price has dropped for a very simple reason:
Less refineries to process it means less demand for it.

The market has apparently determined that the loss of refinery capacity is greater than the lost oil production, which is why we still have a divergence between the cost of oil & the cost of refined products.

As refinery capacity comes back online, you should therefore expect two things:
1) Crude oil price stops its decline or begins to rise.
2) Refined product prices stabilize at a pricepoint more closely resembling the cost of the crude oil input to make it.

Currently, nymex.com has CL (light sweet crude) at 61.40/barrel and HU (gasoline) at 1.80/gal (or 75.60/barrel). HO (Heating Oil) is at 1.945, or 81.69/barrel. This price divergence tells the whole story: Not Enough Refining Capacity At The Moment. This divergence has already begun to narrow, and barring any unforeseen circumstances, should continue to do so.

[SuperNova]

Sorry about the size/quality... too busy to f**k about

[SuperNova]

Sorry... first image is DEC HEAT CRACK.... (december heat price in $bbl- december WTI price in $/bbl)

second image is NOV Gasoline Crack

[rkerver]

MrBill wrote
$this->bbcode_second_pass_quote('', 'P')eople like to deride traders, but try it sometime. You think the products are in short supply and there is adequate crude due to reduced refining capacity, but then demand falls and all of a sudden you have ample spare capacity, record high imports and the gov't s intention to release SPR capacity at will and the market falls 20-25% in a little over a week. Laugh all you want, but those are real losses. So unless you have a small, piddly position, it hurts... Hindsight is 20/20, but it looks a lot different when I have to decide this morning whether at $62.00 we are in a Friday afternoon correction higher or looking to test channel support at $60?

[shakespear1]

This is just "We are doing something" legislation. It appears that the Legislators lack the backbone to do serious analysis and recommend serious steps that are needed to tackle the Energy Issues of the Century.

Guess they need an emabrgo magnitude event to wake them up that a patchup job will not do it.

Perhaps a Cindy Sheehan of energy is needed