Re: Cheap oil forever!

royls_at_telus.net
Date: 06/14/04 

Date: Mon, 14 Jun 2004 01:46:36 GMT

On Sun, 13 Jun 2004 08:37:27 GMT, Grinch <oldnasty@mindspring.com>
wrote:

>On Sat, 12 Jun 2004 23:00:32 GMT, royls@telus.net proved himself as
>Mr. Empirical, Master of Data, once and for all, for all of us to
>see...
>
>>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)
>
>Yup, a steady rise from $70/b in 1981 (today's money) to $14/b in
>1998.
>
>Your data is as good as ever, Roy.

This is interesting. As usual, you choose to baldly lie about what I
have written, but in this case the proof that you are lying is right
there in front of your readers' eyes. Look up about 10 lines. Yep.
There it is. I said since the early 1970s, not since 1981, liar. And
I did not say the price rise since then had been steady, liar. And I
did not say the end-point of oil price history had been reached in
1998, liar.

>And you are as in tune with the real world as ever.

Unlike you, for example....?

>If you think oil prices have risen steadily from $70 to $14, I guess
>this explains your curious ideas about returns to real estate.;-)

Right. You have chosen to lie about what I wrote, as usual, and
insert the word, "steadily," which I did not say. "Steadily" would
more accurately be applied to how oil prices declined from about the
1880s to 1972 (though that decline was also by no means monotonic due
to wars, financial panics, etc.). What was _really_ steady was the
price decline between about 1957 and 1972. Prices since then have
been far more volatile, but the trend has certainly been up. Which is
why I did not say they had risen "steadily." And why, as usual, you
had to lie about what I had written in order to have anything to say
about it at all.

>> 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.
>
>So let's see ... after steadily falling for 100+ years -- in spite of
>the cheapest oil being extracted and consumed first all the time at
>steadily increasing rates, of course

Right, because for most of that time, "cheapest" just meant "closest
to the required infrastructure," not "easiest to extract" in any
fundamental geological sense. The distribution of exploratory
drilling activity relative to later proven reserves shows clearly that
some areas with large low-cost reserves were long virtually ignored,
while other areas where extraction costs were already much higher were
nevertheless intensively explored.

>-- we get your "steady rise" ...-

<sigh> You are really trying to outdo yourself in the dishonesty
department, aren't you? To put "steady rise" in quotation marks like
that, and baldly claim that I said it when I did not say it or
anything remotely like it, makes you just a flat-out liar. Of course,
no one reading this could possibly find that in any way surprising or
unexpected.

>consisting of a doubling of price in *one year* in 1973.
>
>Hey, do the words "cartel" and "embargo" mean anything to you, Roy?

Yes. That might even be why I mentioned geopolitical events...

>I mean, you are so sensitive to "rent seeking" in some obscure cases,

??? "Obscure"? Intellectual property is "obscure"? Landowning is
"obscure"? Union monopoly privileges are "obscure"?

>but when an new cartel arises and sends out press releases and hits
>you over the head with a rent-seeking stick, doubling prices
>immediately, *this* is a normal steady rise due to an erosion of
>primary supplies. ;-)

Which of course I never said, nor implied.

):^|

>OK .... then after that price is flat for six years, then there's a
>revolution in a primary supplier and another "steady rise" consisting
>of another doubling-and-a-half in 18 months.
>
>Then comes your next 17-year "steady rise" from $70/b to 14/b, which
>put the price lower even than the 1950s.

For about a minute, anyway...

>So, here is the **real world** scenario:
>
>Prices steadily fall all the way for 130 years to effectively an
>*all-time low* in 1998

Garbage. The all-time low was reached in the early 1930s, not
surprisingly to anyone but you, and the decline from the 1860s to the
1880s, for example, was by no means steady.

>-- the *only* interruption in the price fall
>being two *brief* sharp spikes up do to "geopolitical events".

Ridiculous. Please try to educate yourself, or at least to be a
little more honest and respectful of your readers, and not assume they
will be fooled by such transparent lies.

The long-term world oil price charts at

http://www.wtrg.com/prices.htm

prove that your claims are flat false.

>And at the end this time reserves are at an *all time high*

Reserves by what definition? Are you not even a tiny bit skeptical
about reserve figures showing no increase in reserves from 1970 to
1985, and then a near-50% increase over the next few years, despite
_fewer_ new field discoveries? Are you unaware that OPEC rewards
increases in its members' reported reserves with increases in
production quotas?

>And the cost of finding each new barrel of oil had *declined 75%*
>since 1981.

Which, not coincidentally, is about how much new field discoveries
declined over the same period....

Grinch, the reason per-barrel discovery costs declined so much was
that new technology made it much easier to rule out many exploration
areas as non-prospective, reducing the amount of money spent drilling
where there wasn't, and couldn't be, any oil. What you cite as
evidence that oil is getting easier to discover is in fact evidence
that there is very little of it left to discover: even the tight focus
on the most prospective areas that the new technology made possible
_still_ didn't result in an increase in new field discoveries. Just
in less money wasted on non-discoveries.

>*This* is your evidence of supplies finally running out during all
>those years since 1970. LMAO ;-)

<yawn> I didn't say supplies were running out. I said prices were
rising because the cheapest-to-extract supplies were running out.

>And a few years later the US economy booms, and simultaneously Japan
>(the world's second largest economy) booms for the first time in 13
>years ... China booms ... India booms ... and terrorists strike Saudi
>Arabia ... in response to which price spikes up dramatically again to
>*less than half* of what they were 23 years ago!

But nevertheless far more than they were 33 _or_ 43 _or_ 53, 63 or 73
years ago...

>And this to you is not evidence of a *demand spike* in prices but of a
>gradual long term loss of primary supply -- in spite of the fact that
>reserves have grown *even higher*.

Almost all of which increase in reserves occurred in the late 1980s
for political reasons, and represents upward revisions of the reserves
in known fields, not new field discoveries. The chart at the bottom
of

http://wwwistp.murdoch.edu.au/teaching/N212/n212content/topics/topic5/03worldoilgas.html

is quite revealing on that score.

>>>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?
>
>20 years:
>
>1984: $52 per barrel (2004 dollars)
>2004: $34 per barrel (average through May)
>
>You know, Roy, for a guy with such strong opinions you don't actually
>*know* anything. Eh?

?? Oh, dear...

It seems you slightly misunderstood what I was asking. A starting
price and an ending price do not say what has happened to the price
_over_ the period. Oil peaked a little over 20 years ago, at real
prices it hadn't seen in 100 years, and then fell to a 1988 _low_
about _50%_higher_than_ its average price in the ten years to 1973.
It then rose and fell quite substantially, and at its 1998 minimum
(triggered by the 1997 East Asian financial panic) _briefly_touched_
the levels it had been at for a solid _decade_ up to 1973. Since that
_very_brief_ 1998 minimum, it has of course soared to _sustained_ real
prices far above the _sustained_ prices of the pre-1973 era.

Now, as for the 35-year price history, for which you not so
unexpectedly declined to proved any response at all, you are of course
aware that the price from 1969 to 1973 was _always_ far below the
average price since then, and that the low price attained for about 15
minutes in 1998 has been followed by much more typical -- i.e., much
higher -- post-1973 prices.

>I mean, personally, before I went on and on with all these price
>claims I'd *check them* to make sure I wasn't making an ass of myself.

<snicker> No, you wouldn't. You didn't. And _you_ consequently
_have_ made an ass of yourself.

>BTW,the quality of all your empirical claims re Georgism and land
>values and all that stuff is really being confirmed for us here.

Indeed. Look at the price charts at the url I gave above, especially
the 1867-2003 chart. The general accuracy of my description of how
oil prices have changed over time, and the falsehood and dishonesty of
your description, are perfectly evident.

>>>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?
>
>1970: $16.47 per barrel
>1998: $14.00 per barrel (2004 dollars)
>
>Does "rising" have a different meaning in Canada?

2004: $40/bbl. Does "since then" have a different meaning in what you
are no doubt pleased to call your "brain"?

>>Don't you think 35 years
>>is enough to establish a trend?
>
>I'd say about 140 years through 1998 probably constitutes a trend.

Uh-huh. But only if you ignore what has happened in all the years
since 1973, aside from 1998...

>And looking at things another way...
>
>1981: $70 per barrel

A peak it had not seen for 100 years...

>2003: $21 per barrel
>
>... I'd probably say that 22 years constitutes a trend too.

Oh? What happened to the $16.47/bbl in 1970 that you seemed to be
aware of just a few lines up? Or any of the other
_sustained_low_prices_ before 1973?

>Compared to *that*, do you think a one year price spike constitutes a
>trend?

Look at the chart, Grinch. And you evidently think a one-year price
_dip_ constitutes a trend...

>Roy, it looks to me like your long-term "trends" consist entirely of
>the three years 1973, 1981 and 2004 ...

Look at the chart, liar.

>with all the rest of the last
>140 years being various short-term aberrations off trend. ;-)

Look at the chart, liar. The long-term downtrend ended in 1973. Deal
with it.

>>>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?
>
>Roy, you are *so funny*.

ROTFL!! Grinch, you are _so_stupid_. You ducked and dodged and ran
away whimpering like a frightened little boy when I asked you what oil
prices had done over the last 35 years. Now's your chance to act like
a man for a change, and you blow it again. How sad.

>Really, why didn't you check the price numbers before going on and on
>about them like this?

I have. Look at the price chart, Grinch.

>Now here's a question for you:
>
>Three years ago there was a big milk surplus down here, and a
>recession too, prices fell real low, so a lot of farmers got rid of
>their milk cows and went into something else.
>
>This year there is a *boom* and milk demand is *way up* -- and the
>price of a gallon of milk has risen by *much more* than that of a
>gallon of gasoline! It's true!! And with summer the price of ice
>cream has shot up even more than that!! You can look it up!
>
>Now, reading the "trend" of this one-year price spike and its deeper
>meaning, do you conclude the nation is finally and forever running out
>of cows?

One year does not make a trend -- not even 1998, unfortunately for
you. Contrary to your claims, 1998 was not the last year oil would
ever have a price, and the _momentary_ bottom touched in that year
(which, contrary to your claims, was not the all-time low -- that was
reached in the early 1930s) did not establish the long-term trend in
oil prices. Sorry. You are just making a fool of yourself by
claiming that the brief dip of 1998 defined the permanent, long-term
oil price trend.

>>>>> 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?
>
>Bwaah! ha! ha!
>
>Am I unaware that *whales* couldn't provide more than a few days worth
>of the world's current oil consumption???

Yes. That's what I asked you.

>Are you saying that they *could* provide a few days worth?

No. Why do you feel you always have to lie about what I write? I'm
not sure exactly how much energy there is in all the whale oil
remaining in the world, but it's certainly no more than a few days'
petroleum consumption worth.

The point is, you said the experts who said the world was running out
of whales and could not continue to use them as a source of energy for
very much longer were not looking at the facts. But they were. They
were right.

>Let me just say that it is a very good thing that we do have "markets"
>that operate with much competition which provides incentives for good
>things like continuous innovation and increased productivity and cost
>reduction and efficient substitution ... so that when it *came down to
>it*, we didn't have to -- and weren't even tempted to -- build our
>modern 21st Century economy entirely on whale oil.
>
>We can agree on that, eh?

Yes, because for once, you did not lie about what I wrote.

>Now I leave you with one final question to ponder:
>
>1949: $20.06 per barrel

I note that this was the peak price recorded any time between 1927 and
1973...

>1970: $16.47 per barrel
>1998: $14.00 per barrel (2004 dollars)

And this was of course the _lowest_ price recorded any time since
1973...

>Trend or not?

Certainly these data demonstrate a trend: your unmistakable trend to
dishonestly presenting cherry-picked data, on the few occasions you
present any data at all.

Look, just go to the price charts at http://www.wtrg.com/prices.htm,
Grinch, and tell us what you see. And for once in your life, try to
be honest.

Oh, and I'll leave you with a question:

1932: $9/bbl
1968: $18/bbl
2004: $36/bbl (2004 dollars)

Your cherry-picked data showed a price decline of 30% in 50 years. My
data are not cherry-picked. I just chose the all-time low price, and
the most recent price, and the price at a date midway between those
times. And _those_ data show a price _increase_ of _300%_ over _72_
years.

Trend or not?

-- Roy L

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