by Tyler_JC » Sun 08 Jul 2007, 18:21:48
$this->bbcode_second_pass_quote('funzone36', 'T')here comes a point when it's so expensive that demand drops. That's when profits drop. The question is whether there are enough oil left to divert it to the natural gas industry if they do need oil to operate.
The world has X units of oil. Who will be more willing to pay Y dollars for those units?
Average Joe's RV or the natural gas producer?
My guess is that the RV-owner will lose the bidding war because his demand is significantly more price sensitive.
It's basic economics. The strength of demand from the various groups will determine who gets what. Therefore, as prices increase, only the most profitable uses for oil will remain.
The extraction of natural gas is extremely profitable whereas the other uses for oil are generally less profitable.
The only situation that I could imagine in which we wouldn't have enough oil for natural gas production is a scenario in which oil prices shoot through the roof (without destroying demand...somehow) and natural gas prices collapse.
But natural gas prices would only collapse if we had an overabundance of supply...and in that scenario, we clearly have enough oil to produce natural gas.
I apologize in advance if my logic is hard to follow.