Re: Runaway Global Warming Possible!

From: Joshua Halpern (vze23qvd_at_verizon.net)
Date: 03/08/05 

Date: Tue, 08 Mar 2005 03:57:19 GMT

Paul F. Dietz wrote:
> Ian St. John wrote:
>
>> Well, in a way, it is. Titan is now known to be a major find... It could
>> probably supply our needs for many generations.. but good luck finding
>> 'economically recoverable' hydrocarbon reserves. Petroleum isn't really
>> about finding crude oil, but the economics of recovery. The current
>> system
>> runs on CHEAP and PLENTIFUL oil. i.e. Quantity matters too. The Tar
>> Sands
>> of Alberta are cheap enough but they provide a trickle in return for huge
>> investments. And the pace that we are consuming it is just too high to
>> sustain for more than a couple more decades.
>
>
> The current price of oil is unsustainable.
>
> It's unsustainably *high*.
>
> There are substitutes for oil that will be developed on a large
> scale if prices are perceived as staying permanently high. Fischer-Tropsch
> liquids (from natural gas or coal) become competitive when oil stays
> above $20-25/barrel. Alberta tar sands (which contain more extractable oil
> than Saudi Arabia) become competitive above $15-25/barrel (unless
> Kyoto causes the Canadian government to stop expansion). Biomass-
> derived liquids are also very competitive at around these levels.

While I don't disagree with you that the price is high, I am not nearly
as sanguine about the high price leading to the development of
substitutes. There are two reasons. The first is that the marginal
cost of production is well below $50, so OPEC and Russia can cut the
knees off anyone who tries to produce from other sources (invest your
money, we drop the price for a few months and your investment goes up in
smoke). The second is that a large part of the rise in the price of oil
is really a fall in the value of the dollar. The cost in Euro and yen
has not moved nearly as much, if at all. The dollar is, if anything, in
worse shape today than a year ago.

josh halpern

>
> What's retarding (if not preventing) investment in these areas
> is the perception that the price of oil will soon decline again,
> reducing the rate of return and making the investments more risky.
> I understand that the price of oil company stocks is consistent
> with the expectation that oil will decline to about $30/barrel by
> 2007. If this expectation is wrong and prices stay high, the
> preceived risk in the alternatives will be reduced and they will
> go forward more aggressively.
>
> Paul

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