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Energy price differences

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Energy price differences

Unread postby JohnDenver » Thu 09 Jun 2005, 10:48:12

Here are some energy prices per million-btu (MMbtu), cheapest energy first:

Coal (Powder River Basin) = $0.45/MMbtu
Coal (Central Appalachia) = $2.60/MMbtu
Natural gas = $6.97/MMbtu
Oil = $9.14/MMbtu

We can form various diffences from these prices, like Oil - Coal, or Oil - Natural gas. Those differences can either grow or shrink as time goes on, and Greenspan's view is that those differences will narrow over time.

These differentials may be a good indicator of energy stress. For example, if oil grows scarce, and causes the price difference to widen between coal and oil, then we can expect coal and natural gas to be converted to oil. It's a form of arbitrage, and exploitation of the difference will cause it to shrink in size. That is Greenspan's idea.

The first sign of energy stress is when the differences between Oil - Coal and Oil - Gas begin to narrow. This is the period we are about to enter where coal liquefaction and gas-to-liquids are the stopgap solution. The difference narrows because we are propping up an oil plateau by doing a massive raid on coal and gas supplies. At the same time, a related trend is companies and people stepping down the energy ladder to flee high prices, gradually switching to cheaper, more inconvenient, dirtier fuels. The ladder looks like this:

Electricity
Gasoline
LPG
Distillate fuel oil
Other (asphalt and road oil, aviation gasoline, kerosene, lubricants, petrochemical feedstocks, petroleum coke, special naphthas, waxes, and miscellaneous petroleum products)
Jet fuel
Natural gas
Residual fuel oil
Wood and waste
Coal
Nuclear process heat (?)

These phenomena should narrow the differences, just like Greenspan says.

D-Day is the day when the differences shrink too much, and per btu prices of all forms of energy are too close together. If this ever happens, EROEI will become a very real and useful concept. All EROEI<1 oil production activities will cease because the equation money=energy will be true. Coal liquefaction and gas-to-liquids will stop. This is interesting because it's a plausible reason why oil production might drop off a cliff one day for economic reasons.

There are reasons for optimism, though. The table referenced above shows that the difference between coal and oil has been steadily widening since 1970. This means we aren't really stressed yet. We're still leaving the coal alone.
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Unread postby aahala » Thu 09 Jun 2005, 12:33:48

Here's link that includes the real price of electricity.

http://www.eia.doe.gov/emeu/aer/pdf/pages/sec8_39.pdf
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Unread postby nero » Thu 09 Jun 2005, 13:18:45

$this->bbcode_second_pass_quote('JohnDenver', 'T')hese differentials may be a good indicator of energy stress. For example, if oil grows scarce, and causes the price difference to widen between coal and oil, then we can expect coal and natural gas to be converted to oil. It's a form of arbitrage, and exploitation of the difference will cause it to shrink in size. That is Greenspan's idea.

The first sign of energy stress is when the differences between Oil - Coal and Oil - Gas begin to narrow. This is the period we are about to enter where coal liquefaction and gas-to-liquids are the stopgap solution. The difference narrows because we are propping up an oil plateau by doing a massive raid on coal and gas supplies. At the same time, a related trend is companies and people stepping down the energy ladder to flee high prices, gradually switching to cheaper, more inconvenient, dirtier fuels. The ladder looks like this:


I'm not sure I follow you. As I understand it the first sign of stress will be when the differences begin to widen not narrow. The increased difference in price is what makes the arbitrage possible. The cost of the arbitrage may then eventually start to come down but it will never narrow to the point where it is inconsequential and where you could say "money=energy".

The arbitrage possibilities and the substitution possibilities means the price differences cannot get too extreme, but I don't see the evidence that the cost of arbitrage or substitution is coming down and therefore forcing the price differentials down.
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Unread postby nero » Thu 09 Jun 2005, 13:25:51

To add to your scale of energy costs you should put wind and solar right at the bottom. Of course if you want to convert them to electricity the cost of the energy conversion is such that the arbitrage is not economic.
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Unread postby JohnDenver » Thu 09 Jun 2005, 21:01:35

$this->bbcode_second_pass_quote('nero', 'I')'m not sure I follow you. As I understand it the first sign of stress will be when the differences begin to widen not narrow.


Yes, you're right. The first stage is marked (for example) by a gradually increasing Oil - Coal gap, which occurs because oil is getting more scarce relative to demand, but not so scarce that we must turn to coal to compensate. (Arguably, we have been in a mild version of that stage since the late 1970s.) A second stage of more serious stress is marked by decreasing differentials between coal/oil and gas/oil, indicating conversion arbitrage and movement down the energy ladder to flee high oil prices.

$this->bbcode_second_pass_quote('', 'T')he cost of the arbitrage may then eventually start to come down but it will never narrow to the point where it is inconsequential and where you could say "money=energy".


I don't see any reason why a differential cannot drop to zero. In fact, it has happened historically. Look at Fig. 3.1 (under "Financial Indicators") in the Annual Energy Review 2003. The per MMbtu real prices of coal and gas crossed around 1978. Prior to 1978, gas was cheaper than coal; after 1978, coal became cheaper. Although crude and natural gas have never crossed, they have nearly touched at a number of points: 1998, 2001 and 2003.

$this->bbcode_second_pass_quote('', 'T')he arbitrage possibilities and the substitution possibilities means the price differences cannot get too extreme, but I don't see the evidence that the cost of arbitrage or substitution is coming down and therefore forcing the price differentials down.


FWIW, here's Greenspan speaking last month on the subject:

" In the decades ahead, natural gas and oil will compete in the United States with coal, nuclear power, and renewable sources of energy. As the manner in which energy is produced and consumed evolves, it is not unreasonable to expect that, in the long run, the prices per unit of energy from various sources would tend to converge."
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Unread postby JohnDenver » Thu 09 Jun 2005, 21:14:02

$this->bbcode_second_pass_quote('nero', 'T')o add to your scale of energy costs you should put wind and solar right at the bottom. Of course if you want to convert them to electricity the cost of the energy conversion is such that the arbitrage is not economic.


I take it that you mean direct wind and solar have a lower price per unit energy than coal, and that would seem right in some cases. For instance, the solar inputs to agriculture (or solar drying, hot water heating etc.) are definitely toward the bottom because sunlight costs $0/MMbtu. Wind would have to be a little higher, because even direct applications (like milling grain, pumping or propelling ships) require a capital investment.

On the other hand, the last thing we would expect to see in a period of energy stress is a move to solar generated electricity. If you are running an operation which is being pressured by high energy input costs, the last thing you want to do is switch to a source with a higher price per btu. So I would regard any substantial shift to (say) PV generation as a sign indicating lack of energy stress.
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Unread postby nero » Thu 09 Jun 2005, 22:19:12

$this->bbcode_second_pass_quote('', 'A') second stage of more serious stress is marked by decreasing differentials between coal/oil and gas/oil, indicating conversion arbitrage and movement down the energy ladder to flee high oil prices.


Why exactly are you expect the differentials to decrease? I might expect that with improvements in technology the price differential will decrease but leaving aside improvements in the technology why should you expect the differentials to decrease once the differential is large enough to make the arbitrage profitable.

$this->bbcode_second_pass_quote('', 'I') don't see any reason why a differential cannot drop to zero. In fact, it has happened historically. Look at Fig. 3.1 (under "Financial Indicators") in the Annual Energy Review 2003. The per MMbtu real prices of coal and gas crossed around 1978. Prior to 1978, gas was cheaper than coal; after 1978, coal became cheaper. Although crude and natural gas have never crossed, they have nearly touched at a number of points: 1998, 2001 and 2003.


The differential between coal and gas changed as we developed a market for gas. It eventually crossed over because we found gas to be a more convenient fuel. I don't think that that is a generally applicable example. We are not likely to suddenly discover that we like coal better than oil after all. If the price differential between coal and oil gets large enough that coal become the most profitable source from which to produce diesel it does not necessarily imply that the price differential will then decrease. It might be that the price differential must be maintained to induce the construction of the CTL plants. Why do you assume the price differential will then start to decrease?

$this->bbcode_second_pass_quote('', 'F')WIW, here's Greenspan speaking last month on the subject:

" In the decades ahead, natural gas and oil will compete in the United States with coal, nuclear power, and renewable sources of energy. As the manner in which energy is produced and consumed evolves, it is not unreasonable to expect that, in the long run, the prices per unit of energy from various sources would tend to converge."


If there has been a past trend towards convergence I would be much more impressed with this statement. Oil and gas have been competing with coal nuclear and renewables for several decades already.

The only reason why I might expect them to converge is improvements in the arbitrage technology. The necessary innovations may come and they may not, it isn't written in stone that the arbitrage innovations will occur more quickly than we experience differential depletion.
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Unread postby nero » Thu 09 Jun 2005, 22:30:51

$this->bbcode_second_pass_quote('', 'O')n the other hand, the last thing we would expect to see in a period of energy stress is a move to solar generated electricity. If you are running an operation which is being pressured by high energy input costs, the last thing you want to do is switch to a source with a higher price per btu. So I would regard any substantial shift to (say) PV generation as a sign indicating lack of energy stress.


Electricity is more expensive than oil right now, but if oil becomes scarce (energy stress) it will increase in price and may become more expensive than solar generated electricity. Just as coal and gas switched places the relative ranking isn't set in stone. At that point it would make sense to start switching from oil to solar generated electricity.
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Unread postby JohnDenver » Fri 10 Jun 2005, 05:54:55

$this->bbcode_second_pass_quote('nero', 'W')hy exactly are you expect the differentials to decrease? I might expect that with improvements in technology the price differential will decrease but leaving aside improvements in the technology why should you expect the differentials to decrease once the differential is large enough to make the arbitrage profitable.


I'm assuming the arbitrage would work like it does in other markets. It seems that, in financial arbitrage, there is no need for the arbitrage process itself to become more efficient in order for the arbitrage to reduce the differential. It reduces the differential by increasing demand for the low priced good, while increasing the supply of the high priced good.

On the other hand, the narrowing is probably limited if the only factor is arbitrage (particularly if conversion capacity is constrained -- do you have reason to believe it will be?). The conversion process will regulate itself (you would think), and not overshoot by producing too much of the high priced good. On the other hand, price crashes due to excess capacity building are a chronic feature of the petroleum industry, so it's hard to rule that out.

$this->bbcode_second_pass_quote('', 'T')he differential between coal and gas changed as we developed a market for gas. It eventually crossed over because we found gas to be a more convenient fuel. I don't think that that is a generally applicable example. We are not likely to suddenly discover that we like coal better than oil after all.


I wonder about that. Coal has one outstanding feature that oil does not: it's much cheaper, and that might turn a lot of people's thinking around, especially if times are hard. Perhaps there are laws against it now, but it would make a lot of sense, for home heating, to switch from fuel oil to heating with coal or wood. You can shave your bills a lot that way, and that's a powerful incentive. It's a dirtier and messier, but that's why it's cheap.

I could see the same phenomenon happening in third world countries. If oil costs too much, people will switch to wood. Price becomes the overriding factor in selecting fuel, not cleanliness or convenience. If people aren't making steps down the ladder, they're not experiencing hard energy stress.

$this->bbcode_second_pass_quote('', 'I')f the price differential between coal and oil gets large enough that coal become the most profitable source from which to produce diesel it does not necessarily imply that the price differential will then decrease.


You're right. It doesn't have to decrease. Oil may outpace coal even while the price of coal increases. (Although it would seem that that can't go on forever either.) One scenario where I could see the difference narrowing is this: CTL and GTL perform well enough to satisfy demand growth for a while, despite the oil peak. Another scenario: oil gets so high that serious demand destruction occurs, and people retool their equipment to burn gas or coal. We know coal and gas are going to go up, but if oil stays too high, for too long, people will lose faith in it, and retool. In fact, doesn't that have to happen at some point because we will eventually run out of oil? Someday, something must cross over oil. If that happens to be coal (or even clean coal), then we will decide that we do like coal better than oil because we have to. All the oil ran out.

$this->bbcode_second_pass_quote('', 'I')t might be that the price differential must be maintained to induce the construction of the CTL plants.


That's the scary thing. How do you maintain the diffential? A cartel?

In the case of GTL, we already have a differential which is too small in North America. As noted earlier, gas and oil have almost crossed a number of times in the last few years, so it's definitely not a good location to build a GTL plant. Apparently it's impossible in the U.S. to keep the differential wide enough. Does this have something to do with the fact that the U.S. is highly stressed in terms of oil and gas? I don't know. Maybe it supports my thinking; or maybe it's just a coincidence. Why do you think the gas/oil differential is so narrow in the U.S.?
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Unread postby nero » Fri 10 Jun 2005, 11:14:07

$this->bbcode_second_pass_quote('JohnDenver', '
')$this->bbcode_second_pass_quote('nero', 'W')hy exactly are you expect the differentials to decrease? I might expect that with improvements in technology the price differential will decrease but leaving aside improvements in the technology why should you expect the differentials to decrease once the differential is large enough to make the arbitrage profitable.



I'm assuming the arbitrage would work like it does in other markets. It seems that, in financial arbitrage, there is no need for the arbitrage process itself to become more efficient in order for the arbitrage to reduce the differential. It reduces the differential by increasing demand for the low priced good, while increasing the supply of the high priced good.

On the other hand, the narrowing is probably limited if the only factor is arbitrage (particularly if conversion capacity is constrained -- do you have reason to believe it will be?). The conversion process will regulate itself (you would think), and not overshoot by producing too much of the high priced good. On the other hand, price crashes due to excess capacity building are a chronic feature of the petroleum industry, so it's hard to rule that out.


Financial arbitrage effectively removes price differences because the cost of the arbitrage is very small. In comparison the cost of fuel substitution or fuel conversion is large. The cost of these activities will naturally require a price differential, or how are you going to fund the construction ofyour CTL plants. There is the potential for arbitrage between coal and oil right now. Why doesn't the price for the two commodities converge? The obvious answer is that the cost of the arbitrage is too large for it to be profitable, but even if it was economic at some point, the arbitrage would only work to narrow the gap up to a point. Once the price differential was too low to run your CTL plants there would be no profit in the arbitrage opportunity and the gap would remain.


$this->bbcode_second_pass_quote('', 'I') wonder about that. Coal has one outstanding feature that oil does not: it's much cheaper, and that might turn a lot of people's thinking around, especially if times are hard. Perhaps there are laws against it now, but it would make a lot of sense, for home heating, to switch from fuel oil to heating with coal or wood. You can shave your bills a lot that way, and that's a powerful incentive. It's a dirtier and messier, but that's why it's cheap.


The prices are an indication of our preferences for the products. Yes our preferences are based on values and technology that may change, but to say that we will start to prefer coal to oil because coal is cheaper seems to be conflating our preferences for the product with our preferences for the price. In an ideal world (if the two products were easily substitutable) when you take into account the price we should not care which energy source we use.

$this->bbcode_second_pass_quote('', 'Y')ou're right. It doesn't have to decrease. Oil may outpace coal even while the price of coal increases. (Although it would seem that that can't go on forever either.) One scenario where I could see the difference narrowing is this: CTL and GTL perform well enough to satisfy demand growth for a while, despite the oil peak. Another scenario: oil gets so high that serious demand destruction occurs, and people retool their equipment to burn gas or coal. We know coal and gas are going to go up, but if oil stays too high, for too long, people will lose faith in it, and retool. In fact, doesn't that have to happen at some point because we will eventually run out of oil? Someday, something must cross over oil. If that happens to be coal (or even clean coal), then we will decide that we do like coal better than oil because we have to. All the oil ran out.


If some day in the far distant future oil became cheaper than coal that again would create a potential arbitrage opportunity. It is quite unlikely that the oil consuming infrastructure will ever disappear so completely (unless mandated) that the price of oil will be able to go below that of coal. If the worst came to the worst you could simply pour the oil onto the coal to add it's calorific value to that of the coal.

$this->bbcode_second_pass_quote('', '')$this->bbcode_second_pass_quote('', 'I')t might be that the price differential must be maintained to induce the construction of the CTL plants.


That's the scary thing. How do you maintain the diffential? A cartel?

No it would be maintained by Adam Smith's invisible hand. The differential in price being equal to the cost to perform the arbitrage transaction.


$this->bbcode_second_pass_quote('', 'I')n the case of GTL, we already have a differential which is too small in North America. As noted earlier, gas and oil have almost crossed a number of times in the last few years, so it's definitely not a good location to build a GTL plant. Apparently it's impossible in the U.S. to keep the differential wide enough. Does this have something to do with the fact that the U.S. is highly stressed in terms of oil and gas? I don't know. Maybe it supports my thinking; or maybe it's just a coincidence. Why do you think the gas/oil differential is so narrow in the U.S.?

I think that the oil gas differential is low for a number of (obvious) reasons, such as the relative depleted state of NA gas reserves + the high demand for the clean burning fuel. But another reason the differential between oil and gas is less than what would support a GTL plant is because substitution is a less costly form of arbitrage than is direct conversion.
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Unread postby JohnDenver » Fri 10 Jun 2005, 23:41:53

Nero, you've convinced me that arbitrage by fuel conversion (GTL or CTL) cannot narrow the differential beyond a certain point (which depends on the conversion cost).

However, it is clear that a differential can narrow to zero, or even reverse, due to substition. For example, the narrowing and crossing of natural gas and coal happened irrespective of any coal-to-gas conversion at all.

Therefore I don't think we can say that the minimum differential needed for conversion will necessarily be maintained by market mechanisms.

So let's set aside arbitrage for moment, and look at the factor (substitution) which caused gas to cross over coal in 1978. How do you see substitution affecting price differentials through the entire course of peak oil -- from where we are now, to (say) a future point where global conventional oil production is only 10% of its peak value?
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Unread postby nero » Sat 11 Jun 2005, 03:42:33

Substitution will occur, fundamentally I don't see it as any different from conversion arbitrage. A CTL plant is really a substitution of coal for oil as the raw material to produce diesel.

First let me reiterate that the relative cost of energy sources is set by the supply and demand for the fuel. If a fuel is in high demand it's not becasuse it is cheap, the price is set by the demand not the other way around. If a fuel is expensive it is because it is in high demand relative to the available supply. The reason why one fuel is prefered to another fuel is usually due to it's secondary characteristics, such as its environmental cost, its energy density, or its flexibility.

In the case of natural gas and coal the substitution was partly driven by a change in our fuel preferences. That is why natural gas was able to switch places with coal. The interesting question is how well natural gas will compete with oil in the future for our hearts. If natural gas becomes the prefered fuel source for environmental reasons then the increase in demand for natural gas may counter the increasing scarcity for oil leading to a narrowing of the price differential. I don't think this is likely though and expect the price differnetial to increase to the point where substitution of oil with natural gas is profitable. The substitution will limit the ability of the price differential to continue to expand but it won't shrink the difference to zero unless it is combined with a change in our fuel preferences in favour of natural gas.

At some point on the down curve for oil we will begin biting into our chemical feedstock requirements, at which point, unless we have developed successful alternative sources (TD?) we will see the price differential between oil and gas skyrocket.
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Unread postby JohnDenver » Sat 11 Jun 2005, 11:13:54

Is demand for the product of a CTL plant demand for oil, or demand for coal? I would tend to say coal. It looks like oil, and pours like oil, but it's actually a synthetic product made entirely of coal.

Suppose that we have the usual crude oil peak, and over it, we draw the graph of projected future demand. Between the forecast and the downslope is the amount of oil which must be produced to keep price constant, assuming the demand forecast is correct.

Gas and coal also have their own forecast demand growth (according to pre-peak use patterns), but since they are not facing peaks, they can keep growing at the usual pace, and keep price roughly constant.

But now suppose we try to fill the gap in crude by turning to CTL and GTL products. This is demand destruction of conventional crude oil. The people burning synthetic diesel are not burning oil anymore. They are burning coal. True, it's a highly processed oil-like, liquid form of coal, but it's still 100% coal. The situation is the same as if a certain percentage of vehicles had been converted to coal burning engines. It's just that they did the conversion upstream instead of downstream.

If we can fill the gap with coal/gas synthetics, the price of oil will stay constant. However, to do this, coal and gas will have to grow at a super-normal rate (i.e. they must produce for conventional uses like power plants, as well as for new CTL and GTL to plug the gap). If this super-normal growth of coal and gas can be sustained, then the price differentials should remain about where they are.

If, however, it can't be sustained, then someone has to eat the difference. I believe priority will be placed on liquids, so conventional uses of coal and gas (like power generation) will have to be cut in order to provide enough liquid fuel. That too is unacceptable, so power generation demand for coal and gas will have to be shifted to nuclear. This will free up enough coal and gas to meet liquid needs. This would seem to be a viable long-term strategy, if we can manage it. The end result would be a world where all electrical demand is met with nuclear, and most coal and gas are liquefied.

Just for fun, though, what happens if the nuclear safety net is not there to take the pressure off coal and gas? Then it's like musical chairs, and we really have to choose. Do we split the shortfall evenly between liquid, gas and coal users? Do we choose liquid fuel over power generation? It seems there is no way out, but there is: Synthetic liquid users who are squeezed out and in a position to do so can economize by cutting out the middle man and directly using the feedstock (coal or gas) from which the synthetic is made. If total energy is not enough to satisfy demand, one way of increasing the available energy is to cut out the conversion processes, which inevitably wastes energy. Monte has mentioned this idea. I believe it's a good argument if we assume nuclear is not available as a safety valve.
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Unread postby nero » Sat 11 Jun 2005, 13:26:50

$this->bbcode_second_pass_quote('', 'B')ut now suppose we try to fill the gap in crude by turning to CTL and GTL products. This is demand destruction of conventional crude oil. The people burning synthetic diesel are not burning oil anymore. They are burning coal. True, it's a highly processed oil-like, liquid form of coal, but it's still 100% coal. The situation is the same as if a certain percentage of vehicles had been converted to coal burning engines. It's just that they did the conversion upstream instead of downstream.


I think that is a good way of looking at it.

$this->bbcode_second_pass_quote('', 'J')ust for fun, though, what happens if the nuclear safety net is not there to take the pressure off coal and gas? Then it's like musical chairs, and we really have to choose. Do we split the shortfall evenly between liquid, gas and coal users? Do we choose liquid fuel over power generation? It seems there is no way out, but there is: Synthetic liquid users who are squeezed out and in a position to do so can economize by cutting out the middle man and directly using the feedstock (coal or gas) from which the synthetic is made. If total energy is not enough to satisfy demand, one way of increasing the available energy is to cut out the conversion processes, which inevitably wastes energy. Monte has mentioned this idea. I believe it's a good argument if we assume nuclear is not available as a safety valve.


Cutting out the middleman involves a cost as well. If there wasn't a cost then it would already be done. The same point can be made about all efficiency improvements, they all involve a cost. The only way that these costs are going to be justified is by higher energy prices. The higher energy prices however are not only going to induce higher efficiency they will also cause demand destruction.

With regard to nuclear being able to fill the gap, I think eventually we will be using alot more nuclear but that we're going to have some major energy price increases before the new nuclear capacity starts to be built. I wouldn't ignore the renewables on this time scale either. Nuclear energy is in practice quite expensive and I am convinced that one day, biodiesel, solar and wind will beat the pants off of nuclear.
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Unread postby JohnDenver » Sun 12 Jun 2005, 10:04:27

I wonder about how you calculate the "price of oil" when you have syncrudes selling for the price of oil. Under those circumstances, the price of natural oil would be artificially suppressed by the synthetics. So the actual price of what we call oil today could be skyrocketing, but nobody notices it because the price of the natural/synthetic blend is constant.

And how do you handle the bookkeeping for syncrude made from coal? Does that tally up under "oil" production? According to peak oil theory, oil must peak and deplete, but what if synthetics plug the gap after the peak, and people are still going about their business as usual after the peak because their's no shortage of "oil". Does Campbell classify CTL and GTL synthetics as "oil"? If he doesn't I wonder how that will be explained if people in general decide to keep things simple and call syncrude "oil".

I imagine there will also be a gradual decoupling of motor fuels from the price of oil. The price will depend on a basket (oil, coal, gas), so that rising coal prices could cause price rises at the pump. Its weird that coal would affect pump prices when the product is coming from the "oil" market.

It seems more like a process of "intertwining" or "conceptual confusion" than Greenspan's "convergence". If the fuels start masquerading as each other, how do you sort it out, and tell who is who?
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Unread postby nero » Sun 12 Jun 2005, 15:24:05

$this->bbcode_second_pass_quote('', 'I') wonder about how you calculate the "price of oil" when you have syncrudes selling for the price of oil. Under those circumstances, the price of natural oil would be artificially suppressed by the synthetics. So the actual price of what we call oil today could be skyrocketing, but nobody notices it because the price of the natural/synthetic blend is constant.


I strongly disagree with this way of looking at things. The price of oil is the net result of a multitude of supply and demand decisions, including syncrude. It's a waste of time to try and extract what the price of "natural oil" alone would be. There is nothing "artificial" about the synthetics supressing the price. It's about as natural as imported oil supressing the price of domestic oil.

$this->bbcode_second_pass_quote('', 'A')nd how do you handle the bookkeeping for syncrude made from coal? Does that tally up under "oil" production? According to peak oil theory, oil must peak and deplete, but what if synthetics plug the gap after the peak, and people are still going about their business as usual after the peak because their's no shortage of "oil". Does Campbell classify CTL and GTL synthetics as "oil"? If he doesn't I wonder how that will be explained if people in general decide to keep things simple and call syncrude "oil".


Whoever does the bookkeeping for oil should be shot. :) Who decided to do it on a volumetric basis anyway? Campbell will probably just change his definition again.

$this->bbcode_second_pass_quote('', 'I')t seems more like a process of "intertwining" or "conceptual confusion" than Greenspan's "convergence". If the fuels start masquerading as each other, how do you sort it out, and tell who is who?


Hey we still talk in terms of horsepower even though nobody uses horses for power anymore. Perhaps one day BOE will be as much of an anachronism as HPWR.
Biofuels: The "What else we got to burn?" answer to peak oil.
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