The Oilman in the White House
No, I am not talking about George W. Bush. I just finished the chapter on politics for my book, and I created a number of graphics to show the behavior of oil prices, production, imports, and consumption through the last eight presidential administrations. Here is one of the more counter-intuitive graphics that you will ever come across:
Is There More to this Graphic than Meets the Eye?
During the eight years of the Bush Administration, annual domestic oil production fell every year (I have a graphic in the book that makes this even clearer than the one above). During the first three years of the Obama Administration, domestic oil production has gone up every year. In the book I put forward the reasons behind this, but I am curious as to what readers think. Why did domestic oil production increase under Obama when it fell under Bush, and should Obama get credit for this? I think there are two primary reasons behind this, but I will leave it to readers to discuss.
Link to Original Article: The Oilman in the White House
Robert Rapier said:
Good job RR. I can’t wait to see even more surprises in a few months.
-Mark
Here is an article published today about OIL and Prez O. written by someone who has not reviewed your graph above.
America’s Future Is Oil
By Arthur Herman • Published January 05, 2012
http://www.foxnews.com/opinion…..re-is-oil/
Interesting question. I would suggest that the Bush administration believed that external oil resources could be made available to the US through force of arms. The Obama administration realized that such efforts were extremely costly and hence pulled back from Iraq and the Middle East to some extent. However rather than pushing towards greater energy efficiency the supply gap needed to be met from internal resources. It is just another type of short termism.
The reason has nothing to do with politics. The reason is that domestic oil production has learned from the shale gas industry that output can be increased by hydraulic fracturing of the wells. So, suddenly old reservoirs come back to life. No credit to Obama for this.
Lag Time.
I think Lars is probably close to the answer there. It would be interesting to see this data overlayed with the oil price to tease out the role of economics vs. politics.
But in either case we couldn’t use this data to suggest that Obama’s “socialist” takeover is bad for domestic industry.
Jerry and Lars are going in the right direction I believe. The shale gas plays have an oil counter part in the shale oil plays like the Baaken and Eagle Ford. Each of these are on a scale that the US has not seen before. Each is the biggest their state’s have ever seen and the Eagle Ford is in Texas! And the good news is there are other such plays on the way. The current plays have been ramping up for some time but the turn around in US production decline began showing up only a few years ago. Jerry is right when stating that this good fortune has nothing to do with the O’Bama administration, it is in spite of his policies not because of.
Do you have a similary graphic for natural gas production?
Wendell Mercantile said:
The behavior of natural gas is very similar, but the rise started earlier (and it hadn’t been declining as sharply).
RR
Jack Moody said:
But I bet it is is a campaign issue. Obama will say “Look at what my policies have done.”
The reasons have to do with 1). The price of oil; 2). The lag time as Rufus said in getting projects executed. It was similar with Carter. He oversaw an expansion in oil production for the first time in many years after two Republican Administrations, but it was because he was in office when the Alaska Pipeline that they approved opened up. Plus, the price of oil was skyrocketing then too.
RR
Jack said:
Jerry and Lars are going in the right direction I believe. The shale gas plays have an oil counter part in the shale oil plays like the Baaken and Eagle Ford. Each of these are on a scale that the US has not seen before. Each is the biggest their state’s have ever seen and the Eagle Ford is in Texas! And the good news is there are other such plays on the way. The current plays have been ramping up for some time but the turn around in US production decline began showing up only a few years ago. Jerry is right when stating that this good fortune has nothing to do with the O’Bama administration, it is in spite of his policies not because of.
——————————————————————————————————–
I agree wirh Jack and others who think that advances in oil recovery technology and oil at over $100 barrel have more to do with increased U.S. production than Obama’s policies. The Eagle Ford looks very promising. Here in Texas on the local TV news the newscaster said that the formation may hold as much oil as the Bakken with an estimated 11 billion bbl recoverable. Lot’s of natural gas too !! And Schlumberger has perfected a new system of channel fracturing which significantly increases recovery rates. The formation stretches from near Austin through San Antonio and into northern Mexico.
If Obama is an “Oil Man”, then the moon is made of green cheese.
http://oilshalegas.com/eaglefo…..shale.html
Incidentally, the graphic also demonstrates that President Obama does not tolerate hurricanes in the Gulf of Mexico.
RR
a) $100/bbl = increased investment in existing fields;
b) Bakken growth;
c) New Deepwater GoM fields come online (mainly 1990′s discoveries under Clinton; e.g. Thunderhorse, Mad Dog, Atlantis, K2, Tahiti, Perdido).
The Obama admin didn’t do anything to prevent growth of domestic oil industry, and before Macondo they supported opening new offshore areas.
Having your readers do your research for you?
cynic said:
No, I actually know the answer. It is explained in the chapter on politics that I uploaded already to the publisher. I just thought it might be interesting for readers to ponder, as it is definitely not what one might expect.
RR
Agree with earlier comments; no Obama does not get credit for more oil production, or blame for the honking recession. He inherited these situations.
In the next four years, maybe he deserves some blame/credit, especially on the economy.
The simplest thing Obama or any other President could do—begin to tax gasoline—he won’t do. I have long advocated raising federal gasoline tax by 25 cents every three months for three or four years. Eliminate other taxes, such as income taxes under $100k income or what have you.
In terms of energy policy Obama, like Bush, is seriously mediocre.
Energy Policy? What energy policy?
Appointing one Nobel laureate does not make energy policy.
Having an intelligent discussion on energy would be a great start. Instead we get the stupid release from the SPR…
The market’s doing it for you, Bernny. according to AAA, gasoline is selling today for $0.25/gal more than last year, and last year ended up being the highest gas prices of all time.
Rufus said:
The problem with the market doing it is that the money flows right out of the country.
RR
Yeah, but the time for higher gasoline taxes to change behavior is, probably, already past. Higher taxes, now, would probably do nothing more than put us into recession, faster.
They won’t save you anyway. Europe has very high fuel taxes, and they are in recession as we speak. Japan has starting to contract, again, and I believe (?) they also have high fuel taxes.
The only real answer to a shortage of fuel is “more fuel.”
But, since it’s politically incorrect to admit that we have a shortage to start with, we seem to be in a bit of a pickle.
The only real answer to a shortage of fuel is “more fuel.”
No, we could use still less gasoline. U.S. roads and highways are filled with wastrels. And of course, we could pass the Open Fuels Standard Act which you studiously ignore or want to know about because it would compete with corn ethanol.
The OFSA would open the market to methanol and other fuels derived from methanol such as DME for compression engines.
Sure, we could do all those things. We could do many other things, also.
The Problemo is that we have run out of time.
We blew close to A Trillion Dollars “protecting” the Mideast Oil, and the Republicans’ only objection was that we didn’t continue to spend more. We spent $4 Billion for (4/10ths of 1%) that amount to get some old inefficient vehicles off the road (cash for clunkers) and the Republicans has a snit fit.
Over 10 years we spent, maybe, $3 Trillion importing oil, and the Republicans thought that was hunky dory. But, when we spent $16 B (2/1,000 of 1% of $3 T) encouraging the use of home-grown ethanol the Republicans gnashed their teeth, rended their garments, and Howled, and Screamed Without Cease, day, and night, day in, and day out, endlessly.)
Now, here we sit. Dead in the water. Years away from a significantly more efficient fleet, and the growth of any other mitigating strategies deader’n Kelsey’s nuts.
But, at least we have the upcoming war with Iran to look forward to.
Rufus said:
Occasionally I agree with you Rufus. And today is one of those times re: your rant against Republicans and purchase of crude oil imports from the Middle East affecting balance of trade deficits to our great nation.
Where I disagree with you is going back to ‘fermented food for EtOH fuel’ as the near-term answer.
If you are honestly not being paid to broadcast for domestic corn ethanol lobby groups – AND as a retired American insurance agent you really DO want only the best for the Land of the Free and the Home of the Brave – THEN you need to really open your eyes here a little and expand your horizons concerning near-term solutions…
On this blog, we’ve been diligently through the fact that a carbon is a carbon is a carbon as a basic energy building block to create portable, liquid fuels. Carbon and Hydrogen atoms combine to form Hydrocarbons as defined as refined petroleum fuels OR coal and natural gas.
Adding that missing Oxygen atom to the fossilized fuel pool of carbon atoms OR a renewable carbon atom from annually watered, weeded and harvested corn-starch — WILL create Oxycarbons, or water soluble, oil soluble, coal soluble, biodegradable fuel alcohols.
Now then. There is more than one fuel-grade alcohol available to help wean Americans (and others) off of imported petroleum and the resulting blankets of smoggy air which uncombusted emissions of float-on-water hydrocarbons thus produces.
For once, please reflect upon the fact that other alcohols beyond ‘batch fermented corn ethanol’ actually exist – and may work to solve the problems which you espouse — so much quicker, more profitably and more equitably among decentralized stockholders.
The Open Fuels Standard needing more Congressional signatures is the available political KEY to mandating a $35 FFV computer chip under the hood of new autos rolling off domestic (and imported) assembly lines. AND such widespread use of a 30 yr. old Flex Fuel Vehicle chip will THEN allow for soooo much more batch fermented corn ethanol (and other oxycarbon alcohols) to be combusted in either low volume or high volume blends with domestically-produced hydrocarbon gasoline.
Consider writing a letter to President Obama – or to the editor of the NY Times, Washington Post, Huff Post, Tunica Times or some other public media to additionally share your enthusiasm as well as your destain for those elected to Congress. And next election cycle, consider NOT voting for any incumbent.
-Mark
Rufus, if you think we are “out of time” then that implies that no solutions of any sort will work – and I just don;t think that’s the case.
As long as we assume the country (and the world) will still be carrying on in some similar form for the next decade, then there is plenty of time.
In fact, that decade would be enough for a majority changeover of the vehicle fleet. And if the new vehicles were true multi fuel types – medium compression engines (14;1) that could run on any of diesel, propane, ethanol, methanol, DME, CNG – then a real dent would be made in oil consumption.
I could not agree more about the waste of money on miliotary adventures – a fraction of that could have been spent on developing such multi fuel engines (which the military would find *very* useful, I might add) to reduce oil use such that the US didn;t have to get a single drop from the ME.
Look at the what was done in WW2 in a very short time – on the rare occasions that the US politicians, industry and people can put aside their differences and remember they are all on the same team, great things can happen.
Sadly, I don;t see any such effort or great things likely to happen, as everyone is arguiong with evryone else about how their plan is better. Any plan that reduces oil imports is worth pursuing, and any that doesn’t, isn’t.
It’s that simple.
The fact is, we’re dead in the water.
McCain, Inhofe, Coburn, etal have immobilized us. The Republican Right, in concert with the Oil Companies have been successful in a Massive Disinformation Campaign that has left us totally unprepared, in fact ignorant of, the Tsunami of Disaster heading our way.
All of those things enumerated would be steps in the right direction, but NONE of them are even being seriously considered, much less done.
We’re in for some hard times.
Three main reasons for this:
1) Looking at PADD production data, just about all of this increase came from the Gulf Coast and mid-continent regions. A large part of this is probably a direct result of the new shale plays in the Haynesville, Eagle Ford, Barnett Shale, and Bakken Formations in those two areas in the early Obama years.
2) There is a time lag between discovery and first production, especially on offshore projects. Some of the increase coming under the early Obama administration is a direct result of drilling investment made during the Bush administration, particularly in the offshore, which makes up about a half of the early increases. Some of this is in the form of lead time between discovery and first production, and some is from success due to knowledge and experience gained in the early drilling phases of new plays like those mentioned above, much of which started in the Bush administration.
3) Price. Since the years 2004-2008 were years of rising prices, companies were spending pretty heavily and drilling a lot of wells, but the peak came in 2008, just before Obama took office. During 2008, operators were drilling around 1500 wells per month. This declined temporarily after the collapse of 2008, but picked up even more dramatically between 2009 and the present. There are now about 2300 wells being drilled every month in the US, with the new shale plays leading the charge.
None of these reasons, of course, had much to do with who was in office: at the end of the day, the increase is the result of strong prices and innovative thinking.
The largest part of the growth has come oil and natural gas condensate from shale in the Bakken and Eagle Ford (TX). Success came in 2006 and 2008 respectively. Eagle Ford is much closer to the refineries and is causing much more rapid development of piping infrastructure. Oil production from these 2 regions should reach 1 million barrels per day by end of 2012. Eagle Ford looks like it will move into the lead this year.
armchair261 said:
armchair261 beat me to this.
New Regions: James Hamilton provides the research that the increases in production are related to exploring new regions. See Oil Prices, Exhaustible Resources, and Economic Growth
Lag time to turnaround from discovery to production.
Price quadrupled – from $25/bbl to $100/bbl.
But, at least we have the upcoming war with Iran to look forward to.
Rufus~
What are you talking about? Sounds like you are hitting the homemade elderberry wine too hard this afternoon.
I’m sure the Persians release a war would be of no benefit to them and that they will come to their sense. There may be a bit of instability when the Iranian people finally overthrow their whack-job readers, but I predict no war. Iran actually has a well-educated, sophisticated society just waiting to be unleashed into the rest of the world.
Yeah, they stone women that get raped, and hang gays. They’re a real “sophisticated” bunch.
That being said, it’s not Iran that’s embargoing our oil, it’s the “protect the middleeast oil, and Israel” crowd that’s embargoing theirs. They might back off on “nukes,” but whether to war may not be “their’ call.
The price of gasoline will continue to devastate further and further up the food chain, irregardless. We are, essentially, at peak production, give or take a million bpd, or so, and we are several years (up to a decade) from any serious mitigations.
We were starting to make some attempts at a beginning, but the Republicans, and oil boosters stopped us dead. Now, you get to pay more, and more.
If this year’s prices aren’t enough to breach your particular threshold of pain, just give it a couple of years. It’ll get to your level soon enough.
Rufus, a few posts back I recall you stating something along the lines of, improved fuel efficiency on newly purchased vehicles will give us some ‘breathing room’. Now just a few weeks later, we are out of time? Out of time for what?
So, we have entered what Robert likes to call, the long recession. Doesn’t sound fun, but doesn’t sound like game over, either. I could be wrong, but I see no reason to go full-blown pessimistic at the moment.
I’m actually far more concerned, at the moment, about what is being dubbed ‘the year without a winter’ and what that will mean to water levels in the spring/summer.
And that is for “only” ~60% of transportation fuel consumption. The remaining 40% is getting more efficient at a significantly faster rate. There is lots of ‘breathing room’.
I guess I’ve been in a “glass half empty” mood the last couple of days.
That’s the beauty of the free market: @ $200/bbl, things will start to happen.
Not to worry. That can only go on for so long. Eventually reality intervenes.
I’m affraid there’s no other way: you won’t convince any Republican that there is a problem until we start getting close to $200/bbl (‘Whadda mean “drill, baby, drill” is NOT a solution?’). The Democrats will meanwhile be following a familiar script: First, a snug feeling that they were right. That should last up to ~$150/bbl. Next comes the panic: gas tax holiday, strategic release from the SPR, (insert random dumb idea here), etc. Maybe as we close in on $200/bbl there will be some acceptance of reality.
Things will get real entertaining for a while: everybody will blame Big Oil. Some will blame speculators. Bill O’Reilly will go on a witch hunt for “Charlie over there,” the guy who sets gas prices in America. The mainstream media will make fools of themselves. Only to be outdone by the prostitutians, on both sides.
It will take a while before reality sets in. In the end, the problems will be solved. When the problems can’t be denied any longer. It won’t happen before that. And I prefer it that way. I’d rather have us respond to a real crisis, than have some “wise” leader plot out a solution. As recent history shows, that’s a recipe for ethanol boondoggles, and under-the-table subsidies for well-connected districts.
I concede: it’s scary if you’re a disciple of the Church of Peak Oil, and your faith leads you to believe the end of cheap oil = the end of civilization. I guess sometimes it helps to be an Optimist…
This is certainly a popular approach. Given that the government regularly blames them, why don;t they do something about it?
A 1% tax on all futures contracts – for all commodities – would really bite into the thin margins and high trade volumes of the speculators. For the actual producers and buyers of the physical products, 1% will hardly make a difference, and everyone has to do it, so there is no comptetive disadvantage.
But for tjhose that like to buy, sell, buy, sell etc, the “house take” will start to discourage that behaviour fairly quickly.
Otherwise, I agree with Optimist, the reality of really high priced oil is the only thing that will force real change. Government attempts to stop that, like releases from the SPR etc, will be as effective as King Canute was in holding back the tide…
Prostitutians at their worst, and that’s saying something.
In the case of GM bondholders, many of whom were middle class retirees, the president gleefully called them greedy speculators, before making them pay for GM management’s mistakes of several decades. You have to wonder if the president was just being stupid, or calculatingly dishonest…
Your 1% surcharge will indeed reduce speculation. However, as has been illustrated repeatedly, reducing speculation will have absolutely no effect.
Get over it. Speculators help smooth out prices. They cannot create a market where none exists, since they neither add supplies, nor consume it.
You may not like the fact that speculators make a lot of money off seemingly random changes in price, but if you own a 401(k) you criticism has the ring of hypocrisy to it.
Optimist,
I didn;t pass judgement on whether speculation has an effect on physical prices ( I think it is minimal) – I was merely pointing out that if the gov wants to reduce speculation they – and only they – can always tax it out of existence. But they have chosen not to, for reasons we don;t know.
I don;t actually have a problem with speculators making money – they are just betting on price movements, same as a stock market investor, or even a real estate investor.
I do have a problem with the banks that made so much money from the speculative trades getting bailed out
As for the 401(k) – look at my location – only people in the US have those, so there is no hypocrisy here at all.
Ah, yeas, thanks for calling me out on that blatant Americanism. Please substitute the term stock market based retirement fund for 401(k), then let me know if it applies.
I think you may be right about speculators: the prostitutians know they don’t make a difference, but they still like to blame them. I guess it’s easier than to admit that Congress have failed to develop a sensible energy policy for at least three decades. Meanwhile several administrations have spoken about the need for energy independence. Until somebody explained what that would cost…
Absolutely. But that is what politicians (everywhere) do, so we should not really be that surprised…
Yeah, but… Look at the current cost of energy (oil) dependence – the military in middle east etc etc. One wonders what someone like Eisenhower would think of the current situation.
Oil independence will absolutely cost, but at lest the “costs” are internal, as are the jobs (for GTL, electric cars, rail or whatever). Right now the cash flow out of the country is bleeding it dry.
It really coems down to the “safest” path for any government is to just tweak BAU, while talking uo change/vision/hope etc. To actually make real changes requires either a wartime situation, or someone with a lot of guts/vision. And it is far harder to make changes downards (oil use) than upwards (e.g. building the Interstate)
So bau will continue, until it can’t.
Rufus said:
Uncle Sam and ethanol
Small steps toward a genuine market
January 12, 2012
Chicago Tribune Editorial
Example: Back in the boom time of the mid-2000s, technology entrepreneur Vinod Khosla led an investment group that convinced the Feds to put up $46.3 million in grants and $42 million in loan guarantees for a [Range Fuels] factory in Georgia that would turn wood pulp into ethanol.
The plant went bust last year. The shuttered facility has just been sold for $5.1 million … to another Khosla-affiliated group, which pledges to use it for a different alternative fuel operation. No wonder Khosla is a billionaire and Uncle Sam is $15 trillion in debt.
http://www.chicagotribune.com/…..3911.story
That raises the question: would the US military be in the Middle East if there was no oil? Listening to the Republican clowns (aka presidential primary candidates) it sounds like we’ll keep the US military there forever, even if it is just to show those weak kneed Democrats that we stand with our friends… make that allies… make that ____…
If only. You’d certainly see change if that was true. Unfortunately fuel is still too small a part of most budgets to attract serious attention. It only feels bad, because we’ve been spoilt rotten by the $1/gal days.
Not sure I buy that. BAU is a product of the current crop of unleaders, and it is a worldwide problem. Hard to believe the world had Reagan, Thatcher, Kohl not that long ago. The US hasn’t had a serious leader since Bush I, GB and Germany since Thatcher and Kohl.
When you vote for an empty slate, with only a nice market campaign behind it, you shouldn’t expect leadership. That’s when you get BAU.
Indeed. Thanks, Mark. No doubt Rufus will be around soon, to offer a (fact-free) opinion on the fact that cellulosic is just around the corner. He won’t mention that like hydrogen and pixie dust it will remain there for infinity…
Khosla indeed got a hell of a deal. I think the government shoulld have barred any Khosla company from buying the Range remnants unless they pay off the full debt first. The fact that he is allowed to do what he did creates a huge incentive to do just that. Khosla plays the game much better than Uncle Sam, for all we know, driving Range into bankruptcy to then pick up the hradware at cents on the dollar may have been the plan all along.
At a personal/company level this is sort of true, although the declining US oil consumption shows that, collectively, people are cutting back. In terms of cash flow, I was talking about the US economy, not the individual level. At the individual level, it doesn’t matter where it goes, but at the country level, $1bn a day is a huge drain – it would create a lot of jobs if that money stayed at home.
Agreed, and what I meant is that all the current crop are just muddling along – we haven’t seen real leadership since the ’80′s, and I don’t think we’re about to either.
Unless a real war happens…
Not sure I agree. If one extends that logic, you’d argue against any imports. Clearly trade among nations benefits everybody, or else it won’t happen.
Again, I think the main problem is volatility. We can adapt to any price. But we get hurt by unpredictable volatility.
Not impressed by the Mitt and Madmen travelling roadshow? Me neither.
The fun starts the morning after election day, when Republicans realize that unlike what the Faux News echo chamber told them, the country was not really chomping at the bit to send Obama to the unempoyment line.
If you extend that logic, you could argue against any imports, but I am not. Importing computers, industrial equipment, even chinese made clothes/cookware/toys all are useful items. Even the toys, well, kids like them, though I think they could use less than half as many, but anyway…
With oil, so much of it used for wasteful purposes, or in wasteful ways (the 15mpg SUV, for example). Given that Euro countries us half the oil/capita of US, and Australia uses 75%, I’d say that 25% of US consumption produces little or no real benefit – either economic or recreational – it is simply a result of inefficient use. So this 25% (half of all the imports), must be imported every day. It benefits the exporter, but is akin to a tax on the US economy – money out, no productive benefit in return.
I agree this a problem, though I don’t think the main one. Sure, volatility means that many oil efficiency/substitution projects don;t get done becuase people hope the oil price will go down again, and when it does go down it can make life tought for the alt fuels.
If the US gov really wanted to reduce volatility it could do two things – put a tax or import tariff on oil (say $1/gal), so then the relative volatility is reduced. And then put a tax on oil transactions on the commodities and futures markets. This tax would dampen excessive speculative trading. To not hurt the actual buyers and sellers of physical oil, the tax could be rebated on oil where physical delivery is taken. It would be very interesting to see how this changes things. If speculators can operate on a margin of 2%, a 2% tax means they need 4% swings, which means holding positions for longer, and more unsuccessful ones, so it is that much harder to make money in that game.
As for the US elections, well, I am glad that I can simply tune out on all that – wake me up in Nov! The year long campaign exhausts me, and I am not even a voter!
One change I think would make US elections more interesting – and make the politicians sweat a little – would be mandatory voting – like how it is in Australia. With voter participation at around 60% in the US, bringing this other 40% into play would give the pols pause for thought.
If you don’t vote, there is a $50 fine (if you are overseas voting is optional) – not a big deal, but enough to get 97% turnout in Australia.
That way, the result is truly a reflection of the opinion of the country on that day – not just a reflection of who did a better job of hauling people to the polls!
If Obama had started the approval process for oil exploration on January 21, 2009 – When would that production make it onto your little unsourced graph.
Matches Malone said:
The data source is the Energy Information Administration. I don’t think there is any dispute that the data itself is correct. It is the interpretation that I explore in the book, but wanted readers to think about. Some have gotten the answer right.
The answer to your question is 4-6 years. That is the key to understanding presidential decisions and energy policy. Presidents are often credited (or blamed) for things that they really don’t control.
RR
True. But it only proves that crude is still too cheap for people to care. What is the government to do? Mandate 45 mpg? It is trying to do it. But, as always, it carves out all sorts of special provisions (can’t offend the unions in Detroit), until the legislation has no meaning.
The alternative is to tax the @#$%$ out of gasoline. Good luck finding a US politician brave enough to do that.
True, we can save much without too much pain. The fact that we don’t again shows that oil is too cheap for people to bother.
And careful with those consumption numbers. The US uses about 25% of world oil consumption, and produces about 25% of world GDP. Nothing to celebrate, the US should be far more efficient. But not terribly inefficient either.
Clearly the perception that we can afford to do so persists. The fact that no Democrat wants to admit in public (we need higher gasoline prices) is obviously true.
And remember: where would Uncle Hugo’s socialist agenda be without the US addition to oil?
Excuse me? I thought you said:
So, do you blame speculators or not?
If you do, please read my original response, and reply to it, if you care.
Just what we need: mandotary voting by people who couldn’t care less, and probably aren’t informed much. Can only make things worse, not better.
You are implying that speculators can move the price of oil at will, which is totally absurd.
RR – Thank you for your answer. I should point out that whether disputed or not, it is customary to include the source of your information on the chart or graph itself. Your answer tells us that the recent upsurge in oil production has come from wells approved under the last President, no real shocker. Thanks again.
Speculators can increase the (short term) volatility of oil (or any other) prices. They can’t influence long term prices as they are neither producers nor users of the physical stuff.
The 2% tax would reduce speculation for sure, it makes it harder for them to make a profit. It might reduce the price volatility, but it won;t reduce (or increase) the long term price.
Now, I did say, and chose my words carefully;
There is little they can do about (long term) prices and I think they know that.
Well, have you ever lived in a country that has mandatory voting to observe the effects first hand? Having done so myself, I would say that Australians are generally more interested in the political process than Cdns/Americans, and the politicians are certainly aware that they cannot just rely on hard core supporters – they actually have to appeal to a majority of voters, not just more than the other guy does.
There will always be those that don’t care, but I think there are less of them when voting is mandatory.
Ask some politicians what they think of it – if they are all against it – then you know it’s a good idea.
Agreed.
You have proof, or even a working theory? I offer this rebuttal: Gasoline and onions. To quote: Speculators help keep prices stable. When they foresee a future oil shortage — that is, when prices are lower than anticipated in the future — speculators buy lots of it, store it and then sell it when the shortage hits. They know they can charge more when there’s relatively little oil on the market. But their selling during the shortage brings prices down from what they would have been had speculators not acted. (emphasis added)
I have an alternate theory on that. I think productivity gains didn’t happen in a vacuum, and wasn’t for free. The American middle-class (as opposed to the upper-class) is generally overworked, and to busy juggling work and life to pay much attention to what the politicians are doing. The result: the politicians are pleasing the guys still paying attention (the upper-class) who by happy coincidence are also the people with the money to fund campaigns.
I believe that’s still true in America. I suspect the Republicans will find that out the hard way in November.
Working theory? Well, let’s see. When a specualtor buys a whole lot of commodity X, the price is likely to move up, more than it would have if he were not buying. Of course he hopes to sell later for an even higher price, but at the time of buying, his buying – for speculative reasons – puts upwards pressure on the price. What happens if he bets wrong – as sometimes happens, and the price is going down? He decides to unwind his postion, take a loss, and try again later. So when he sells into the down market, he makes it go down even more.
That is increasing volatility.
You will note that I said specualtors *can* increase volatility, not that they always do.
No question that arbitrage opportunities will flatten out market movements.
All up, I agree that sepcualtors are not the bogeymen that gov makes them out to be. But, that doesn’t mean they shouldn’t tax them. After all, we pay tranfser tax on buying and selling real estate, I see no reason not to do the same of commodities.
As for politics, I don’t mean to imply that Australians follow politics all the time, but the general level of awareness is higher, and tolerance for shenanigans is lower. Remember that we are not talking about introducing mandatory voting for the next Aust election – it has always been there so everyone is used to having to vote all the time, if it was introduced in the US, there would be some interesting stuff for the first election or two, but then things would settle down.
Personally, I think being forced to turn up to the polls, and make a conscious decision as to who to vote for, or for none of the above, is not an unbearable burden. I might add, it also reduces the influence of well organised minority groups – they are better at getting their members out to vote than the general public. Mandatory voting eliminates this advantage.
Another thing that could be done, that isn;t – even in Australia – would be to combine the election with a census. It only takes a few extra minutes to fill out a census form, and if you had mandatory voting plus fixed date elections (Australia doesn’t), then you’d have a very efficient census every four years, without the expense of employing census collectors.
I don’t see it. No dealer is an island. If your speculator drives up the price significantly, rational players will sense the price is on the high side. This means that sellers would line up to sell at that price, while buyers take the day off. Increased supply and decreased demand leads to a (downward) correction.
As the article points out: onion prices (no speculation allowed) are as volatile as ever. The idiot prostitutian who proposed getting rid of speculation is meanwhile bragging how he worked hard to protect working families. Makes you sick in the stomach…
So there is an (unneccessary) upward price movement, followed by a downward correction, to end up, in all liklihood, at where the price was in the first place. Flucationas like this, relative to the long term price, are the very definition of volitility, and this one, though stopped by real sellers, was caused by a speculator. So, the speculator did increase volatility in this case.
The fact that onion prices are volatile is does not change the fact that our speculator here did increase volatility in commodity X. Thus, speculators can increase volatility. This does not mean they always do, nor that you can’t have volatility without them. Speculators, as oposed to real buyers and sellers, are more likely to get the herd mentality, and when that happens you get bubbles, and bursts. Be it tulips, real estate, silver or oil, it does happen from time to time.
@Paul N
Neither diesels nor hybrids offer any real solution to our oil demand dilemma. They simply reduce consumption at best. Pure and simple. The only way to escape rhis dilemma is to stop using oil based vehicles. Pure and simple
mac
Nope. What happened was that our speculator lost his shirt, and likely won’t be back for more punishment. Also: note we are assuming one speculator buys enough to affect price. Highly unlikely in a market as large as oil.
That was subtle, but it still was a change of subject: are we talking about speculators or bubbles? It’s not the same thing:
Speculators make money buy sensing where the market is going, and smoothing out the change for everybody, as described by Stossel.
Bubbles happen when there is an irrational belief that prices are now (for the first time in human history, see Economy, The New) immune to the effect of gravity, and you are a fool not to get in right now. You can’t afford to wait! Tomorrow you may not be able to afford the ticket of entry. “Real” buyers and sellers are just as involved as speculators.
You are free to stop using oil-based products with immediate effect, anytime you choose. We look forward to your sharing what that experience was like, and what it taught you.
Until we hear from you in that regard, we will work from the assumption that every gal saved contributes a little, and if everybody contibutes a little a lot can be achieved.
Even purer and simpler.
optimist
“We will discover enough oil to drive ICE vehicles forever.”
I doubt it.
There is nothing pure amd simple abbout it….. just reality.
What is the buyer waiting for? if they need to use the commodity, then they probably can’t wait – even the onion wholesaler has to supply stores. if they can and do wait – meaning buying is optional – then they are engaging in speculation – and even real buyers /sellers do that. In fact, real buyers and sellers are often in a better position to speculate than a pure trader. Gold mines that engage in forward selling their production are speculating that their later production might be sold at lower prices.
Bubbles are generally not caused by mere production and consumption of product, they are caused by speculation – people buy in because they think they can re-sell it to a bigger fool at a higher price – stocks and real estate being the best example, where even homeowners became speculators – often with disastrous results.
Speculation is an activity, not an identity.
Optimist,
The problem is (and I think Robert has gone over this) that everything the West does to conserve will be sucked up by the expanding economies of the Far East, Indonesia, and the rest of the Third World.
Last year China produced 14 million vehicles. The vast majority were standard ICE. Even if all the world’s vehicles were all running on diesel, it wouldn’t make any difference. What is the diesel payoff ? A 20% mileage gain. Even if all the world’s vehicles were converted to diesel, it would be like peeing into a Hurricane because all the so-called savings would be absolutely swamped by invreased world-wide demand for liquid fuels by increased production of vehicles from China, India and others.
If you want to get away from oil based products driving our transportation system, then you are at some point going to have to say “adios” to oil.
You may think our oil dependence is just hunky-dory. That’s fine. If you work for an oil company or have some vested interest in all this, then that’s fine. To each his own……
Please don’t mis-interpret this. I am not against fossil fuels, All I am saying is that if we want to truly get off the oil merry-go-round, we must necessarily power our transportation sector by some other means.
Optimist.
Let’s convert the entire fleet of U.S. vehicles to diesels at a nominal 20-30% gas savings. Unfortunately, the gas we don’t use will go to China and India, Just that simple. The wide-spread adoption of diesels and/or gasoline/electric hybrids is a waste of time.
Could we convert all our vehicles to diesel ? Sure !! The French did it. They converted almost their entire trucking fleet over to diesels. It took them nearly 20 years to do it. It’s certainly possible. For the U.S. to convert to diesel is a futile waste of time and resources, a pointless waste of time and energy.
Who said anything about waiting?
As I was trying to point out, bubbles happen when buyers buy today because they believe they can’t wait for tomorrow.
Thanks for the lecture, prof. To bad you didn’t lecture yourself before you wrote: Speculators, as oposed to real buyers and sellers, are more likely to get the herd mentality, and when that happens you get bubbles, and bursts.
Mac,
You are correct in that anything we save here in N. America will be used by Chindia, but that doesn;t mean we shouldn’t do it.
Yes, the same amount of GHG’s will be burned, but so what.
The real benefit, in my opinion, is for the US to get out of the global bidding war for oil – before it becomes a *real* war.
That does not mean getting off oil altogether, but getting to what I call “continental” self-sufficiency i.e that US + Canada+Mexico can supply everything they use.
Even though the oil price would still be the world price, the cash outflow is stopped, as is the need to have the military all over the place to protect oil interests (though it may remain for other reasons).
All the trucks are already diesels. What needs to be done is get more feight from truck to rail, and convert more cars from gasoline to diesel.
Diesel is currently almost 4mbd, mostly for trucks. Halve that by using more rail, and putting trains and some of the remaining trucks onto LNG/CNG.
Then, replace half the car fleet – the half that does the most miles/year – with diesels and or hybrids and/or CNG. Those vehicles account for 2/3 of the 9mbd of gasoline used, so a 20% saving on the 6mbd would be another 1mbd.
Get rid of the remaining heating oil usage, and oil fired electricity in Hawaii and Florida, and there goes another 0.5mbd
We have now saved 3.5mbd, and that leaves about 4.5mbd of imports. 3 of that is Canada + Mexico, so we only need to eke out another 1.5mbd of savings and/or domestic production increase.
Getting that last 1.5 mbd is harder, but it can be done by all the other means that Benny normally mentions.
Once continental self sufficiency is reached, do we really care, other than for GHG’s, what China or anyone else uses?
Then , with the pressure off, we can move forward, rationally on further oil reduction stuff. Preferably by using the money saved by reduced overseas military spending.
But that’s just my outsiders opinion, sitting here in oil rich Canada. What the US will actually do (or not do) is anyone’s guess. Going on past records, whatever it does, it will likely do it (too) slowly, unless it’s hand is forced.
Let me rephrase that for you: The 1% will always be able to afford fuel for their SUVs. Too bad 17% of Americans think they are the 1%.
That leaves those of us not suffering from the “I am special and rich” delution to innovate. I’m betting there are enough of us.
I guess both you and Robert have difficulties with Economics 101: as prices go up, demand goes down, especially if supply cannot go up.
Allow me to invite you, for the second time, to say adios to oil. Personally, I find such an exercise pointless. But you obviously disagree.
BTW, please don’t make this recommendation again, unless you are willing to set the example.
You are guilty of speculation of a different kind. My carbon footprint is lower than yours, I bet. My car is propelled by a WVO blend. So my oil dependence is probably much less than yours.
That’s a fine idea, mac, if utterly unrealistic. Why switch while oil/ICE is still the cheapest option by a mile? Why say “adios” to oil, if a bit of conservation allows you to reap the benefits of oil/ICE and keep it affordable? Why? Unless you are irrationally against fossil fuels…
Optimist said:
This is not what has taken place in the developing countries. Demand has increased unabated even in the face of rapidly rising oil prices.
RR
Which begs the question: has prices gone up enough?
If the price is right, we ALL pay attention, and start to conserve.
The price just has not been right.
When it comes to short term supply interruptions, Robert, you have always stated that price spikes is an effective way for the market to communicate shortages, and ensure continued availability of product. Indeed, I agree, any political pressure to avoid “price gouging” will only lead to shortages.
If we take the same approach to long term conditions, the same mechanism works, doesn’t it? If not, why not?
Look Optimist.
Just as I said. diesels and gas/elevtric hybrids will not do much (if anything) to alleviate worldwide demand for oil.
What if the West saves 20% of their oil demand with hybrids and diesels and the East gobbles it all up with multplied millions of new vehicles produced every year ?
Any savings or conservation of oil on the part of the West is wiped out by increasing demand from non-Oced countries. and as a consequence oil prices stay high. In the end. the ultimate effect of diesels and hybrids is simply to release more oil to the non-Oced countries. The price of oil in the West therefore will NOT go down because of any widespread adoption of gas/electric hybrids (think Prius) or diesels.
Demand from the East will make sure of that.
Optimist said:
But I think those price points are very different for a country that uses 20 barrels of oil per person per year and a country that uses 2. I will pay a lot if I can only get two barrels of oil, but not so much for that 20th barrel. That’s why it has impacted demand differently.
RR
Mac, you are pretending that East and West exist in separate universes. They obviously don’t. What happens in the West will get copied in the East, if it works. If fact, some would argue that the East is ahead of the West as far as renewable energy is concerned. But if the West can maintain the good life, in spite of $200/bbl, what do you think the East will do? See how much oil they can burn, just because they think it’s their due? Or copy our diesels, HEV, etc. and conserve?
And, as I said before, you keep treating demand from the East as if it is utterly insensitive to price. In spite of the idealogy of some governments, it is not. At the right price, even the East starts to conserve.
True. So far. At a sustained $150/bbl, who knows?
Also: the guy who can only afford 2 bbl a year is more desparate, and has all the more reason to innovate.
You are missing the point – it is not that 2bbl is all he can afford – it may well be all that he needs. If the 2bbl is running a diesel engine to run a cotton gin, or a workshop or milling or sewing machines, or farm tractors, or anything where the livelihood of a person/company/town utterly depends on it, how much do you think they will pay for oil? The cost may 1/100th of the value of whatever they produce, so even a doublign only makes it 1/50th.
They will pay the price, becasue they iterally have no alternative – it is the SUV driving American who will start conserving first. They won’t like driving less, or in a smaller car, but if that’s what they have to do, then they will. they might even make room in their budget by buying – say -cheaper clothers that came from the cotton gin and sewing workshop in the other country.
Oil use in many of those countries is for vital industrial uses, with only a small fraction being personal vehicles or domestic air travel. Here, half of all oil use is personal vehicles, and 1/5th of what remains is air travel. Who will drop their consumption first as prices rise?
For example, oil prices have quadrupled in the last decade – that an increase of 4x. So, just how much did this increase in price affect consumption in China and other “developing” countries?
With thanks to Westexas at The Oil Drum;
Did the price spike of 08 cause a decrease in consumption, did the price drop in 09 cause a sudden increase?
The answer is none of the above – oil consumption just kept on increasing regardless.
People in Kenya were buying diesel engines to power town water supplies or farms or small factories, because their lives depend on it, while people in the US were buying hybrids and Civics to save fuel.
We will see more of this as the price goes up further.
Optimist said:
“And, as I said before, you keep treating demand from the East as if it
is utterly insensitive to price. In spite of the idealogy of some
governments, it is not. At the right price, even the East starts to conserve.”
Sure, I agree. In regard to oil demand savings from diesels, they are significant. There is an interesting article on Edmunds that lists the shortest pay-backs for Green vehicles. Five of them turn out to be diesels and five are hybrids. I have nothing against hybrids or diesels. Bring ‘em on.
All I say about diesels and hybrids is that they will never in themselves deliver us from anything. Any petroleum savings they might represent will be soon gobbled up, not only in the East but in the West as well as world population continues to grow un-abated and the masses of India, China, Africa, etc., aspire to the present day Western lifestyle.
Here’s the link to the Edmund’s statistics.
http://www.edmunds.com/car-rev…..-2011.html
Optimist quoted mac as saying:
Ootimist’s response was :
That’s a fine idea, mac, if utterly unrealistic. Why switch while oil/ICE is still the cheapest option by a mile? Why say “adios” to oil, if a bit of conservation allows you to reap the benefits of oil/ICE and keep it affordable? Why? Unless you are irrationally against fossil fuels…
I just sent you the stats (according to Edmunds) on the payback time for various diesels and hybrids. Apparently, standard ICE vehicles are not “the cheapest option by a mile” as you say. Since the normal life of an automobile is about 10 years, then the so-called premium you might pay for a diesel or hybrid will be repaid in gas savings well before the 10 year estimated average vehicle life ends.. All of Edmunds top-ten list have payback times of less than 3 years. Apparently, you can save money over time by purchasing the right diesel or hybrid .
I am not against fossil fuels, I just believe, as many others, that we will ultimately run out of them. But, long before we actually physically run out of oil or other fossil fuels, it will become economically dis-advantageous to keep using them. That, in my opinion, is what true “Peak Oil” is all about.
mac
Robert responded:
This is not what has taken place in the developing countries. Demand
has increased unabated even in the face of rapidly rising oil prices.
RR
———————————————————————————————————————————————
Going to have to agree with Robert on this one, Optimist.
1. Oil demand is relatively in-elastic.
2. Our balance of payments deficit with China and India, etc., gives them cash for oil and further industrialization.
Like Robert said, demand in developing countries has increased un-abated.
In case you missed it, both the hybrid and the diesel are ICE vehicles. I never used the term “standard ICE”, but the diesel engine has certainly been around long enough to qualify for that description too.
Funny, that’s not what your figure shows: everybody’s consumption at least grew at a slower rate, excluding China. China is, of course, worth dwelling on. I believe the Chinese governement sets gas prices, and were reluctant to pass the higher prices on to the broader population. That may well explain why the broader population showed no need to conserve.
The Chinese government, meanwhile, is playing a dangerous game. At higher crude prices they will either brankrupt their refineries or the refineries would export refined products, leading to shortages in China. That could get ugly fast…
Any reference for that 1% fuel cost number? Sounds suspiciously low. True, if your energy is 1% of your expense you won’t feel the need to conserve. Suffice to say, that’s a miniscule minority, even in the developing world.
Back to the real world, where fuel costs are high enough to take into account. If your livelihood depends on an ICE, and oil prices go up, that’s all the more incentive to conserve. Conservation can take a variety of forms. Increasing efficiency would be the easiest.
Farm tractors, and most ICEs can be rigged to run on carbon monoxide, which in turn can be produced from partial oxidation of anything that burns. Just one example of what can be done when oil prices start to bite.
I stand by what I said: if prices go up enough, and stay high, we all start to conserve. By all, I mean all of Homo sapiens.
Let me see if I got this straight: you believe that when the price of oil starts going into the stratosphere, we are all going to sigh, fold our hands and tell the children nice stories about the good old days? Maybe call your congressman and ask for a bail out? Do you work for a major bank? Big Auto? Where do you get this horse manure?
Don’t know about you, but I’ll find ways to conserve. As will most rational consumers. Everywhere.
And in a related development, alternatives will suddenly make very attractive investments. Even if only Big Oil can afford to make the investment.
Optimist.
Look, let’s go line by line from your last post which was:
“And in a related development, alternatives will suddenly make very
attractive investments. Even if only Big Oil can afford to make the
investment.” Optimist
While it’s true big oil has made some investments in alt. technology, the fact is that Big Oil is drawing back from one of their major “green” investments, namely Solar. Here’s an example:
“BP Solar is suffering a slow death that is hard to watch and
reflects the cutthroat competition that marks an industry that used to
be a lot more Pollyanna. The company is closing down and on Tuesday its
joint venture partner, Tata Power, said it will buy out BP’s share in
their enterprise.
Tata said
it will purchase the 51 percent BP had in their Tata BP Solar joint
venture, which was formed in 1989 and makes silicon solar panels and
offers solar system design services. Tata didn’t disclose the purchase
price. The joint venture is among the top three solar cell and panel
makers in India, according to GTM Research.”
http://www.renewableenergyworl…..e-bp-solar
How about this from Shell Oil:
Selling off solar
Shell “has quietly sold off most of its solar business,” reported
Terry Macalister in December 2007. In 2006, “Shell hived off its solar
module production business. The division, with 600 staff and
manufacturing plants in the US, Canada and Germany, went to Munich-based
SolarWorld.” In late 2007, Singapore’s Environ Energy Global bought
“Shell’s photovoltaic operations in India and Sri Lanka, with more than
260 staff and 28 offices, for an undisclosed sum.” Shell plans to also
sell its solar operations in the Philippines and Indonesia. “Shell has
however formed a manufacturing link, with Saint-Gobain, and promised to
build one plant in Germany,” according to Macalister.
A Shell spokesperson said that solar “was not bringing in any profit
for us there so we transferred it to another operator. The buyer will be
able to take it to the next level.” [9]
Solar was one of the main “Green washing” efforts for Big Oil. The CEO for Royal Dutch Shelll said recently that Shell was going to hold off any further investment in re-newables (including hydrogen research, of all things) and concentrate on their core business.
http://sourcewatch.org/index.p…..itle=Shell
:
Otimist said:
Don’t know about you, but I’ll find ways to conserve. As will most rational consumers. Everywhere.
My response is that I ride a bicycle almost everywhere, I spent more on gas for my lawn mowerand chain saw last year than I did for my truck.
mac
Optimist said:
Let me see if I got this straight: you believe that when the price of
oil starts going into the stratosphere, we are all going to sigh, fold
our hands and tell the children nice stories about the good old days?
Maybe call your congressman and ask for a bail out? Do you work for a
major bank? Big Auto? Where do you get this horse manure?
No, my friend Mr. Optimist,
I am not going to fold my hands and whine for a government, bail-out. There are already too many alternatives out there. For example, we could certainly run our trucking fleet in the U.S. on natural gas.
I did and do not work for a bank or big auto. Let me repeat your question back to you:
“Where do you get this horse manure ?”
True. But solar hardly fits with Big Oil’s core business. So, it’s hardly surprising that they eventually figured that out, and pulled out.
Did they ever think it would be a major opportunity, or was it merely greenwashing? Who knows. Does it matter? Only if you pasionately hate Big Oil, which too many people do. Since we don’t, we can ignore that development for the most part.
Renewable liquid fuels is different: it fits exactly with Big Oil’s core business. Some US refiners are already investing in ethanol. What else is happening out there? Here’s a interesting report from RR himself: In 2007, ConocoPhillips (Full disclosure: This is my former employer) and Tyson Foods announced a partnership in which COP would hydrocrack waste animal fats and oils provided by Tyson to make green diesel. Costs of production were around $40/bbl higher than for producing conventional diesel, but COP was able to take advantage of the $1/gal tax credit that Congress had put in place for renewable diesel to bring the costs down to parity with petroleum. Whereas corn farmers love our ethanol policy, ranchers were happy with this announcement because it afforded them an opportunity to participate in the biofuels market. Tyson Foods was also happy to have another outlet for their oils, as this would take some of the sting out of higher corn prices which had cut into their bottom line. Unfortunately, as RR reports, some of our elected prostitutians were outraged that Big Oil would benefit from a subsidy for renewable fuels. So they rewrote the law for the benefit of everybody, except Big Oil. This is the irrational hate for Big Oil that I’m always referring to in action. Thanks to congress the project died, or at least ConocoPhillips’ participation in it. Why take advantage of Big Oil’s knowledge when executing a renewable fuels project? More generally, is the government going to actively keep Big Oil from participating in renewable fuels? Democracy, and Democrats, at their most stupid.
At least the good news is that the project appears to have been saved by that other boogeyman, the military-industrial complex. Please, don’t tell your congressman, less he does something stupid. Again.
Then there is the case of Shell’s investment in Choren. The summary of Choren’s history as described by RR includes this: Because they had elected to forgo government funding, private investors have borne the development costs over the past few years. Several of those investors — including Shell — have exited at various points due to the time and cost it was taking to work out the technical issues. As RR mentioned, Choren went bankrupt. One has to wonder if the technology would not eventually succeed, once crude is expensive enough. Also: hard to imagine that the technology can be fixed without Big Oil’s expertise.
In the end, there is a simple business reason for Big Oil (America) to get involved in renewable fuels: they control a shrinking portion of the world’s crude. Eventually, high crude prices are going to hurt them more than it helps them, as they buy more and more crude from the nationalized oil companies. They will be looking for alternatives to crude. Solar does not fit the bill. Renewable fuels do.
So here’s my (utterly boring) vision for the future: Big Oil starts to invest in renewable fuels (assuming the government isn’t stupid enough to prevent this – the only part I’m NOT optimistic about). They gradually start introducing refined renewable products into their existing products. The renewbles are completely miscible in the crude-based products (see the Navy’s Green Strike Force for a model of how this will play out). Nobody notices a difference. Renewables slowly grow, depending mainly on the price of crude. Eventually we get off oil and nobody notices.
Twenty years later CNN does a gotcha newsreport on how Big Oil swalllowed up the renewable energy sector. Thanks to the lingering irrational hate of Big Oil the report is a huge success, and the reporters all win national awards. Fortunately the report doesn’t change anything.
Optimist said:
Renewable liquid fuels is different: it fits exactly with Big Oil’s core business.
——————————————————————————————————————-
I agree. I have no great philosophical objection to oil companies buying up ethanol refineries or investing in algae research. Like you say, this is right up their alley.
I have often wondered why oil companies (with perhaps the exception of Chevron in Indonesia) have not become more involved in geo-thermal. In Germany, efforts to drill for georthermal have been hindered by lack oif drilling rigs complicated by the fact that well bores are different for geothermal wells.
The fact is that most major oil companies hire independent drillers on a per foot or per diem basis to driill wells for them. There are something like 9,000 to 13,000 of them in the U.S. (depending on whose statistics you use)
When BP got into solar in the late 80′s, electric cars were virtually non-existent. Automobiles that run on electricity are now in competition with Big Oil. With the resurgence of interest in electric automobiles, BP and Shell perhaps saw the handwriting on the walll. Why subsidise the so-called “enemy” ?
Paul N.
I always thought of Canada as “America’s Attic” Now you have become a big time oil producer. whose oil resouces rank second in the world and now you are in the driver’s seat. Have mercy on your lowly brothers to the south.
mac
True. But electric cars are small enough to be a rounding error in the sales numbers. Will they ever be a force to be reckoned with? I have my doubts. The batteries are still huge and heavy.
If BP and Shell thought electric cars had a sunny future they might have stuck it out. What better way to hedge your bets?
Optimist said,
If BP and Shell thought electric cars had a sunny future they might have stuck it out. What better way to hedge your bets?
——————————————————————————————————————————————–
I think that when Shell and BP originally started investing in solar in the late 80′s they were more interested in solar as an investment. because elecctric cars, at the time were not much more than a wet dream of a few “crackpots”. (prior to the California ZEV mandate)
i do not think BP and Shell got into “solar” for just the greenwashing PR effect. I think they got into it because solar cells are made of the exactly the same stuff as the circuit boards that were fueling the IT, computer. internet, digital revolution that was taking place. Shell invested some significant dollars to help build silicon wafer factories, with the expectation that they would make some money for doing so, of course.
From maybe 2007-8 perhaps until recently there was a scarcity of refined silicon caused by the digital explosion. The situation now is that wafer factories were over-built causing a silicon glut, That is perhaps partly the reason why the price of solar panels has fallen so drastically. The result is that silicon wafer technology is cheap right now. Solyndria was a thin film company. As standard wafer prices fell, Solyndria got squeezed and popped, The DOE loan guarantee was unfortunate and most certainly was mis-managed, but mis-management was not the major issue in Solyndria’s collapse. Thin film had suddenly become expensive in relation to standard crystaline wafers. Besides, Solyndria sold mostly to commercial, industrial and government users, not individuals as their technology worked particularly well on flat roofs such as warehouses, commercial buildings, etc.
I do not know what was in the mind of decision makers at Shell and BP in the 80′s, but I suspect that electric cars had little to do with their decision to get into solar or their apparent decision to exit solar. Perhaps solar had nothing to do with it at all, Maybe, it was the coveted silicon wafers.
Perhaps, we have Shell to thank in part for the somewhat astonishing drop in solar prices. Shelll’s money helped build the wafer factories.
Well, I disagree.
Big Oil got to be big by finding crude oil. The refiners and retailers – some of whom are owned by big oil, but many are not – struggle along to make a profit on the “crack spread”. Look at the dismal profits of pure refiners like Tesoro or Valero to see what I mean. Now, renewable fuels seem like a good fit for the refiners, as it lessens their dependence on crude (supplied by Big Oil) this is why Valero has bought up a bunch of ethanol distilleries.
Meanwhile, Big Oil companies like Exxon and Chevron are concentrating on exploration and production, and less on refining and marketing. So for them, renewables are competition for crude, but in reality, the competition is so small that it is in no way a threat, and probably a blessing as it keeps the oil based economy going longer, rather than switching to an electrified one.
They could choose to invest in renewables, but when they are making record profits on crude production, and biofuel R&D companies (other than corn ethanol) are going broke left right and centre, why would they? Much better to let the R&D guys slog it out, and if any of them are really successful, then buy them up – Big Oil can afford that.
WEll, I’m sure the short answer is that there is no money in it, or much less than there is in oil. Unless they drill into something hot enough to produce real steam, what’s the point? Even the geothermal companies that have steam (like Calpine) are struggling, so why wopuld the oil companies bother.
In fact, given that they flare methane at many well heads – which could easily run ICE’s for electricity, why would they bother with far more expensive geothermal?
They are, after all, OIL companies, and I think most of them have learned, one way or another, that they can do better by putting all their efforts into oil and oil only. If someone else wants to do geothermal on their wells, I’m sure they’d let them try.
Also, the hotter the strata, the more likely the oil has been cracked to methane…
Paul.
In regard to why don’t the Major Oil Companies get into Geothermal Paul said: “WEll, I’m sure the short answer is that there is no money in it, or much less than there is in oil.”
==================================================================
The fact is that most of the wells drilled for major Western oil companies are drilled by Independents, who are sub-contracted by the Majors, just as the oil field services people like Schlumberger or Haliiburton provide other services to the Majors such as well casings, drill bits for drillers, or even hot meals.(think: Halliburton in Iraq)
Since oil is a scarce commodity with an almost infinite near term demand curve, independent drilllers are going to go where the work is —- drilling for oil, and not spend their time chasing after a much less steady source of income like geothermal. In the geo-thermal community, this has given rise ti the complaint that there are no rigs available to drill the geo-wells.
Besides, there are many relatively economical ways to make electricity and Geothermal is just one of the many. (dis-regarding the so-called “Green” aspect of geo-thermal.)
As a consequence geo-thermal exploration is, in a sense, in competition with oil company demand for the drilling rigs. This has been true in Germany and also the U.S.
Besides, the price of oil “floats” unlike other utilities like electricity that are often heavily regulated and often have some actual price protections for the consumer . Oil, on the other hand, is the “Wild, Wild West”, where consumer protections are scarce, even non-existent. Ever hear of an Electric Utilility that made $50 Billion in profit in a year ?
Mac, the geothermal guys could get as many rigs as they want – they just have to pay more for them than the oil guys.
And if they do that, then they will end up at the same conclusions - there is no money in it.
Sure it great to say that IF drill rigs were cheaper/more available, but they aren’t. In fact, anything would be cheaper if only the things needed to produce it were cheaper…
These guys could do their own rigs, or course…
But there still another problem – the decline rate. Most geothermal reservoirs decline, and if you produce so slowly that it doesn’t you never recover your cost of capital.
So, I won’t put geothermal in the “economical” box, as it if it was, it would be being done much more than it is.
A good technical discussion on the limitations of geothermal is here;
Warm and fuzzy on Geothermal?
I’m not so sure that there are not “consumer protections” for oil (nor am I sure what they are to be protected against). Fuel pricing is far better understood than electricity. The price is posted at the gas station, and you decide whether you want to pay that price, or not. It is the same as buying a shovel from Home Depot or a burger at McDonald’s – you decide if you want to pay the price, or not. If the burger is bad or the shovel doesn;t work, you can take it back, and you can do the same with your gasoline too, but when did you ever hear of the gasoline “not working”.
Now, electricity does not have a simple price that everyone understands, it has a multitude of different rates for different people, and where gov’t regulated there are all sorts of “rate riders” and other complications such that the average consumer can;t understand what is going on – how is that better protection than the simple posted price of fuel?
The wholesale price of electricity, just like crude, “floats” – take a look at the FERC charts to see this;
Did you see how elec rates have halved in 2010 compared to 2009 – but did the consumer’s rates go down? not at all, so where is their “protection”
No, but so what? They are, by their nature, mostly regional players. The Big Oil Co’s are worldwide, and can pursue the best prospects around the world – the elec utils can only pursue what is in their area – they are not even in the same ballpark, so what is the point of this comparison?
Paul.
“Regulators
are expected to approve Florida Power & Light’s request to lower
its fuel charge for customers next year because of lower projections for
natural gas prices.
The fuel fee would be $4.53 less than FPL previously projected and it would help lower overall monthly bills for customers who use 1,000 kilowatt-hours by $1.92.
After
its regular meeting today, the state Public Service Commission will
also hear from environmentalists who are challenging regulators’
decision in July to scrap a program that would have allowed FPL to save a lot more energy than it has before.”
Hmmnn…….., sounds to me Paul like FPL………… is lowering utility rates under the watchful eye of “regulators”. My own electric utility Entergy used to give me a fuel charge rebate that was subtracted from my bill in Jan, Feb, and March. One January, after the fuel rebate, my bill was just $19.00.
Onward through the fog…………..
Paul.
I went on up to your link, the”Do the Math” website by Tom Murphy. And I agree with Tom who says in his biographical sketch:
Maybe I’m overreacting. Maybe I’ve “flipped a bit,” as they would say in the world of computer engineering.
So far as I am concerned there is no “maybe” to it. Murphy has indeed “flipped“.
If you go to the SMU (Southern Methodist University) or MIT (Massachusettes Institute of Technology) studies on geothermal potential, you will do a lot better than listening to this crackpot. They are peer reviewed.
Mac
Mac,
People and universities, and the USGS can do all the studies on “potential” that they like,(and they sure like doing that).
But, the fact is, with Geothermal, only fraction of this potential has been realised, and there are few plans for large scale increases.
It’s a bit like the oil reserve numbers game. There is “technically recoverable”, and there is “economically recoverable”.
Geo is large on the former, and small on the latter. If there is money in it, we’ll see it happen, but there isn’t and we aren’t.
Some of the low temp geothermal stuff, such as ORC units like the Electratherm (that SMU has installed) can make lower temp stuff economical, but these have been around, in various incarnations, for over a decade, and haven’t sparked a rush.
I actually think they have a better future in low temp solar thermal…
Geo is a lot of work for what you get…
Paul N. said:
People and universities, and the USGS can do all the studies on “potential” that they like,(and they sure like doing that).
Glad to hear that your hold your often wrong opinions in high regard and consider them beyond criticism.. You remind me of Kit P, although you are are not quite as obnoxious as Kit was. On every blog, there are trolls and spammers and shills and then there is always a self-appointed expert on everything who knows everything. and who’s calling is to mock or correct everything any one else has to say.
I thought we got rid of Kit P, but I guess not.
That’s what I’ve been saying for a while: when you see Big Oil investing, you’ll know somebody’s onto something. I don’t expect them to fund much R&D. I do expect them to be keeping a finger on the pulse and to be ready to pounce. Hopefully we’ll find out soon enough.
And they are sure to keep doing that, as long as it is feasible. But looks to me like there is less out there, as times goes by. Once they pay more for imports than they reap on selling their own crude, the dynamic fundamentally changes.
Of course, it may take decades yet.
Paul N
The Toyota Prius will become one of the best selling cars of all time Hide and watch.
It already is, but you are tooi blind to see that.
C’mon Mac,
I am not even in the same league as Kit P for being obnoxious.
And the Prius is not in the same league as the best selling cars, either…
The top ten, of all time, from 24/7Wall St
1. Toyota Corolla (1966- present) 37.5million
2. Ford F-Series (1948 – present) 35 million
3. Volkswagen Golf (1974 – present) 27.5 million
4. Volkswagen Beetle (1933 – present) 23.5 million (includes New Beetle, though I think it should not)
5. Ford Escort (1968 – 2000)20 million
6. Honda Civic (1972 – present) 18.5 million
7. Honda Accord (1976 – present) 17.5 million
8. Ford Model T (1908 – 1927) Sales: 16.5 million
9. Volkswagen Passat (1973 – present) 15.5 million
10. Chevy Impala (1958 – present) 14 million
So, the Prius is an order of magnitude less than #10. I think it has quite some way to go to earn a spot on the “best selling cars of all time” list.
It is quite amazing that in the *century* since the model T came out, only 7 cars have eclipsed its sales.
[edit to add] If you look at the average annual sales of these cars, the Model T actually holds the record for the highest sales/year of any of them – truly amazing.
Ok Paul,
I am al’ready well aware of the various incarnations of the Toyota Cortolla and its sales. The fact is that the Model T and with it the VW bug (type !) are the best single design vehicles of all time.
Paul N.
There seems tio be no amount of facts that will shut you up,
So, here is my prediction, The Prius will become one of the best selling cars of all time.
Not at all. On this blog we deal in facts – that is one of RR’s dictums – “lets start with the data”
I have no problem with you making that prediction – your opinion and you’re entitled to it, and we can even debate why you think it will or why i think it won’t.
Where I have a problem is with you saying things like “it already is”, when clearly, it isn’t.
I am a big beliver in keeping a clear distinction between what is fact, and what is opinion.
We see a LOT of stuff in the energy debate where we have opinions and hype masquerading as facts, so if I see an opinion presented as a fact, I will call it out. If we can get the facts straight, we can have a much better debate about what they mean (of course, half the battle is often finding out what the *real* facts are…)
I don;t think that is unreasonable approach, though sometimes it may come across as pedantic.
Paul N.
The Tesla Roadster is not a “concept car” It is for sale and has sold appx. 2.100 copies world wide
Volkswagen sold 21.5 million Type 1 Beetles and the Corolla (if you include all its many (sifnificant) changes, re-badging under other marques and varioius re- incarnations) has sold 32 million.
Big deal !!! 67 mllion motor vehicles were sold last year, more than the combined total of Toyota Corolllas or VW Bugs ever sold.
Your “peoples car” that’s going to save the planet is facing an up-hill battle.
Good Luck,
C’mon, Paul! All true, but relevant?
I would suggest a look at the Jan 2012 US sales (agreed worldwide would be better, but good luck finding those):
Note that #1 is way ahead of the pack. Also note, out of top 10, 3 are trucks, out of top 3, 2 are.
Corolla at #7, waiting to pounce as gas prices go up.
Prius is still down the list at #18, but it did beat out VW Jetta, Ford Exploder… I mean Explorer, etc.
Prius is certainly not a great yet, but it is way ahead of the green pack.
Optimist.
Here’s something from a guy responding to the WSJ top 50- cars of all time:
===================================================
Quoting Noel Ward:
Noel Ward
Only the air-cooled VW Beetle and the Model T remained largely the same
(at least in outward appearance) throughout their production runs. The
rest have changed virtually everything on the model except the badge,
often every few years.
The writer needs to refine his research
skills. The rear-engined, air-cooled VW Beetle hasn’t been produced
since 2003. In an air-cooled, rear-engined, rear-wheel drive
configuration, the Beetle is the longest-running and most-manufactured
car of a single design platform anywhere in the world–21 million cars.
The current Beetle is front drive, front engine and water cooled. The
Chevy Impala is a front drive 4-door sedan. There hasn’t been a 2-door
Impala in 30 years. There have been 2-door variants on the Impala
platform, but they weren’t badged as Impalas.”
The license plate on this U.S.-spec 1951
Volkswagen Beetle refers to its “split,” two-section rear window.
1995 VW Beetle and 1943 Beetle
Mac, I think we can all agree those numbers are bit skewed from model changes over the years. In the case of Corolla and Civic, it would be more accurate to say “the smallest Toyota and Honda”, respectively.
Optimist, thankls for the list, a good indication of today;s market. I especially like that it includes the sales growth/decline. here is the list in order of sales growth;
Now we see that most of the vehicles showing strong growth are cars, and the smaller ones at that.
In fact, if we group the vehicles into ”cars” and “PU/SUV”, then we can make some inferences about where things are going.
The “cars” sold 240,00 for the period, 41,000 more than previous, for an increase of 20% on previous.
The PU’s+SUV’s sold 131,000 for the period, 12,800 more than previous, for an 11% increase.
(Also interesting is the absence of minivans from this list)
In the last decade, PU’s/SUV’s/Minivans have had about half the market, but now they are at 35%
So, I would say the momentum is shifting away from PU’s/SUV towards cars, and within the car category, towards the smaller end.
I would also say that as fuel prices go up, I expect the shift towards cars, and smaller ones to continue…
This is good news.
The task then becomes for the EV’s and hybrids to convince the cars buyers, and the small to medium ones at that, that they are a better proposition. In this contest, I think the ordindary s/m cars are winning, and will continue to do so for a while yet, though higher fuel prices will narrow the gap.
Paul,
I wouldn’t group EVs and hybrids together. Hybrids have proven themselves and have the sales to show for it. EVs are still working on that.
Personally I think hybrids give you the best of both worlds. The one factor that nobody seems to mention is that the hybrid’s strength is stop-go traffic. In freeway driving (with light traffic) a hybrid’s advantage over ICE is slight.
Looks like $5/gal may debut later this year – it would be interesting to see how hybrids and EVs do if it does.
For those interested, here’s a couple of auto sites that offer real time auto sales statistics:
Best Selling Cars – Matt’s Blog Matt and his contributors have amassed auto sales statistics for 160 nations. The nations list is on the right side of the home page.
http://bestsellingcarsblog.com/
Here is an example: (Auto sales – France 2011):
http://bestsellingcarsblog.com…..more-13319
——————————————————————————————————————————————————————–
Good Car – Bad Car This site covers North American auto sales only (U.S. and Canada)
http://www.goodcarbadcar.net/
Click on the make and model selection boxes on the home page
Example: (Nissan LEAF sales 2011)
http://www.goodcarbadcar.net/2…..gures.html
You can follow your favorite diesels, hybrids, electrics or standard ICE.
Optimist,
I didn’t mean to put EV’s and hybrids together in one category, just that each of them have to convince motorists that they are worth buying over a small, efficient, ICE car/ If those Euro diesels were available here, that job wold be even harder.
Both the hybrids and ev’s excel at stop -start driving, that is why the taxi drivers (in vancouver) love the prius.
Furl going up to $5 will certainly be interesting – I think we will see a lot less driving being done, and fewer new cars being sold.
Regarding alternative auto sales statistics:
We might also include the Hybrid Cars web-site (that only records US sales of alternative or “Green” vehicles) includiing clean diesel sales that are growing in relation to hybrid sales.
This web-site is not particularly “intuitive friendly” , so here is a link to their archives for hybrids, diesels and EVs
http://www.hybridcars.com/mark…..board.html
Statistics are a “snapshot” of the recent past but not an infaliible guide to the future
As Mark Twain once said:
“There are lies, damned lies, and statistics“i
production needs to rise because the investments in renewables and sustainables is reducing those prices. the petro industry needs more supply to keep prices below alternatives. increased refining capacity is part of their solution as well.