Re: Cheap oil forever!

royls_at_telus.net
Date: 06/12/04 

Date: Sat, 12 Jun 2004 23:00:32 GMT

On Sat, 12 Jun 2004 04:50:05 GMT, Grinch <oldnasty@mindspring.com>
wrote:

>On Thu, 20 May 2004 14:01:39 -0700, "Darren" <reply.to@news.group>
>wrote:
>>
>><royls@telus.net> wrote in message news:40abbe59.11937049@news.telus.net...
>>
>>> What is going to happen is that the price of oil will
>>> continue to rise.
>
>For exactly the same reason that increasing scarcity has steadily
>driven up the cost of all other finite resources that have been
>steadily consumed by humanity at an ever increasing rate.

Not really. In the case of oil, a small fraction of the total
resource is under enough pressure that it can be extracted just by
drilling a hole and letting it flow. This extreme ease of extraction
meant that for over 100 years up until the early 1970s, real oil
prices fell pretty consistently as technology improved and reserves
that could be tapped in that way were discovered.

However, since the early 1970s, real oil prices have risen (as I said,
and you denied) in part because of geopolitical events but primarily
because the fraction of current oil supply that can be extracted at
such very low cost has been declining. Almost all oil extracted must
now be pumped, at some cost in energy. It is this energy cost of oil
that will be rising.

>I mean, it's *extremely powerful logic*: A natural resource that is
>finite in amount is consumed at an ever-increasing rate by humanity,
>with the lowest cost supplies consumed first -- that commodity *must*
>become more scarce and rise in price. QED. Res ipsa loquitur. Who
>could argue?
>
>The logic is every bit as compelling as that of the geocentric solar
>system and flat earth.
>
>Although admittedly the geocentric solar system agreed much better
>with empirical observations of reality.

What has happened to the real price of oil over the last 35 years,
Grinch? How about over the last 20 years?

>Meanwhile, we're all still waiting for our first observation of a
>mineral resource rising in price perpetually (much less running out)
>due to scarcity as a result of humanity's consumption of it.

Do you or do you not understand that the real price of oil fell until
about 1970, and has been rising since then? Don't you think 35 years
is enough to establish a trend?

>But as long as one ignores the total lack of all empirical evidence
>needed to confirm it, the theory looks great!

The real oil prices over the last 35 years are a total lack of
empirical evidence?

Well, considering your record on the empirical evidence about land
rent as a fraction of GDP....

>>> When its price exceeds the price of equivalent
>>> energy produced by other means, it will no longer pay to just burn it
>>> for its energy content, and oil consumption will stop growing and
>>> perhaps decline.
>
>Indeed. Exactly as happened with whale oil in the 1850s and coal in
>Britain at the turn of the last two centuries, **as experts had
>predicted**!
>
>Of course, what was wrong with those predictions was that the experts
>had predicted it all was going to happen because of the whales beingl
>killed off and Britain running out of coal bringing the Industrial
>Revolution to a grinding halt. Coal was a finite resource being
>consumed at an ever increasing rate with the cheapest supplies
>consumed first, which irrefutably = ever-rising prices, you know.
>
>Res ipsa loquitur. Who could argue?
>
>(As long as one didn't look at facts.)

?? Are you unaware that consumption of whale oil _did_ decline
dramatically, and that all the remaining whales in the world would not
be enough to supply more than a few _days'_ worth of current world oil
consumption?

>Clarification: How much oil do we want? Today the world is consuming
>80m b/day. For ease of computation let's up it to 100m barrels.
>
>Now we can restate the question with some specificity:
>
>Can the world produce an average 100m barrels of oil a day for the
>next 100 to 120 years at a price of no more than $55 to $70/b tops?

?? Oil consumption has been rising at an average 2%-3%/yr for
decades, and was rising faster than that before real oil prices
started climbing in the early 70s. Absent a good substitute, and
given the likely pattern of consumption growth emerging in China,
India, etc., global oil consumption is likely to double over the next
30 years, and double again in the following 30. How long do your
calculations say _that_ can go on?

-- Roy L

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