Oil hit nearly $140 a barrel today. Was it really only a few years ago that I was writing articles for The Economist questioning whether oil could stay above $40 a barrel for any length of time?
Unsurprisingly, the Dow did not like this news; it closed down nearly 400 points today, thanks to the combined oil/jobs whammy. Tonight we're going to party like it's 1979 . . .
Someone just emailed "If I had even an ounce of spine, I'd be shorting oil like crazy now." My reply: "The market can stay irrational longer than you can stay solvent." At these prices, though, we should be seeing broader exploitation of new sources like shale oil, the Alberta tar sands, and Venezuela's ample supply of oil-like sludge. They are not nearly as energy efficient as Saudi crude--the ratio of energy expended to energy produced is something like 1:2 or 1:3 on these types of projects. But at $140 a barrel, the finances look pretty appealing.
MM,
This post is perfect example of your Vacuity.
http://www.thefreedictionary.com/vacuity
On one hand, you play the Role of Pro-Carbon Tax, presumably, to save the Environment, Cheerleader, and, on the other hand, you limit your POV, on 'new' energy (re-)sources, to proven Environment destroying options like, Alberta Tar Sands, and Rocky Mountain 'Oil Shale'.
If you have no clue as to the amount of water defiled, on an ongoing basis, in Alberta, or the immense amounts of Sulfur created in 'refining' that product, you should leverage, whatever assets you may retain, and, at least, rent a Clue..
It'd be the best possible way for you, to greet a New Season, if you'd, again, Free your Mind, and let the Rest follow..
According to this graph, blood costs about $55,646 per barrel.
Of course, HP black ink is even more expensive.
Where can you trade blood for oil? Right here.
People, over a hundred thousand have died in the Iraq War, in part for oil. Tasteless, but witty. Good for you.
the immense amounts of Sulfur created
What's wrong with sulfur? It's the raw material for sulfuric acid, the #1 industrial chemical, with a bazillion valuable uses. Sulfuric acid used to be largely made from mined pure sulfur, but nowadays much of it is manufactured via the Claus process from the H2S that contaminates many natural gas wells. It would be a mite surprising if any sulfur byproduct of oil shale or tar sands isn't in fact a pretty valuable byproduct.
All of which suggests to me you have no idea what the f*** you're talking about. Cheers.
There are many domestic conventional oil targets of opportunity currently off limits to exploration and production. The US Congress and the coastal state Legislatures could change that situation, if they chose to do so. So far, they have not so chosen. It will be interesting to see how long they persist in their folly.
Carl,
take a, related, suggestion, and Rent-A-Clu:
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=sulfur+problems+with+Alberta+Tar+Sands
past that: res ipsa loquitur
further, you might as well be saying: Water is a beautiful resource, while it is you're 500 feet beneath the surface of such..
Hmm, I was going to explain how worthless sulfur is, but apparently the price of sulfur has spiked in the last year. It spent two decades trading between $10 and $50 a metric ton (generally worth more than crushed stone but less than iron ore), but the Chinese started buying lots of it in late 2006, and the price has spiked into the $600 range.
Mark,
All your nifty links seem to prove is that sulfur concentrations in the tar sands et al will have the same problem as with sour crude: some way or another, you have to get it out during the refining process. Or at least, you do in the US, because we have fairly stringent low-sulfur emissions requirements (which IIRC are largely responsible for diesel prices having risen faster than gasoline in recent years).
Unless spot prices for oil and long-term demand from China and India take a dive in the near future -- the same high prices and demand that are making tar sands and oil shale look viable in the first place -- I expect folks will, of necessity, be able to afford that extra step.
The "the markets can stay irrational longer..." quote deserved attribution; Thanks to J.M. Keynes.
a-Non-Mouse,
try: On the tour of Syncrude, the guide pointed out Syncrude's sulfur pile. They strip the sulfur from the crude oil during the refining process. Sulfuric crude oil is called sour crude. After they remove the sulfur, they call it sweet crude. Sweet crude sells for about $5 a barrel more than sour crude in international markets.
The oil companies have no use for this sulfur after they extract it. And they can't sell it... The market pays $50 a ton, but it costs Syncrude $75 just to transport it to market. So they stack it up in neat piles behind the refinery and ignore it. Currently, the sulfur pile is the size of an airport hanger, it's bright yellow, and anyone who wants it can have it.
Find a use for sulfur... or a way to transport it to market for less than $50 a ton... and you'll get rich.
http://www.dailywealth.com/archive/2007/aug/2007_aug_14.asp
and, then, try again..
while you're at it, try considering, why it is, that peep are, rightly, concerned about strip-mining Coal..
Better get those tar sands used before the next Ice Age covers them over. The younger of your readers might get to see that.
Mark,
How does being that much of a pedantic asshole work out for you in daily life? I'm just curious.
"Where can I trade my blood for oil?"
Classic! My hearty congratulations for that one.
Mark, didn't you read my comment?
That 2007 article is out of date. Sulfur was selling for $50/ton in 2007, yes. It's now selling for $650/ton according to the Vancouver Sun and $500 a ton according to the Times of London.
If shale oil only has 2:1 or 3:1 return, that make is even less efficient than ethanol.
Would someone please explain why the "efficiency" of an energy source (as described) is important? I should think that the important criterion when evaluating any source of energy is cost per unit of net energy output. Who cares about how much energy is "consumed", if the net energy out is cheap?
Make the following analogy: extracting fresh water from the sea. Two processes are compared, one of which expensively extracts 99% of the H2O from a given amount of sea water, the other cheaply extracts only 1%. Isn't the latter vastly preferrable to the former, even though its "water efficiency" is abysmal?
I'm prepared to believe that energy consumed extracting other energy carries with it externalities such as air pollution. But this depends on the source of the energy consumed and is certainly a criterion all by itself, not needing to hitch a ride on another criterion that seems to make no economic sense on its own.
Enlightenment, please?
Ken
Lately, the environmentalists have added global warming fanatics and gotten even more extreme on blocking the energy production that America, Canada, and the rest of the world need. The latest spin is that making synthoil from huge oil sand, coal, oil shale, and Venezuelan bitumin deposits would be far cheaper than ME oil and not expose are troops to so much danger in getting it - all those sources are "unthinkable" because in addition to using lots of water "the deer and rabbits need", they require more CO2 production to get a barrel of oil than regular oil deposits. Thus must be opposed, since they would all make global warming "worse". And nuclear, which makes no CO2, must still be opposed because it is evil, evil, evil. As is ethanol, apparantly, because evil Westerners driving do so only by starving innocent 3rd Worlders who can barely feed their family of 14 people as is..
One solution I like is from recognizing that most hysterical opposition blocking energy exploration and development not only in their states but other peoples states is by The West Coast, New York, New England, DC Metro Area, and Florida. And reps from larger cities. All, with the exception of Washington and California, have no energy production and what capacity exists in WA and CA was there 50 years ago before the extremists dominated the courts and legislatures.
Some, especially like in New England, are so fanatical against any energy infrastructure that they also oppose any solar plants "despoiling" their pristine countryside, want no wind turbines despoiling Teddy Kennedy's ocean vistas or wealthy Vermonter's Green Mountain veiws...And of course they are the most vehement that America shed no blood ever to ensure a secure oil import supply, or import any LNG to "ports near us that could then be terrorist targets".
So make them last in line. I understand the last energy crisis, people from West Virginia to Arizona had signs saying "New Englanders? Let the Environmentalist Bastards Freeze in the Dark."
Last in line. Meaning that Utah, Montana, Alaska, Louisiana, and Texas and Kentucky residents making a surplus of energy get 1st claim to it. If oil or gas is made there, they get all they can use and states like Connecticut and Oregon can figure out how to ration what's left in a crisis. In addition, if windfall profits hits, those states that deliver the goods should have all the excess profits ploughed back into their states, while the parasitic states of the Coasts and anti-energy development cities pay full market price and not bitch because they say they only want "solar, wind, renewables".
As a sign how idiotic the Opposition States are, Seattle is thinking of a "no campfire" ordinance because toasting marshmallows and singing songs "contributes to global warming" while singing in the dark except what a battery charged by a "beautiful exciting alternative energy source like tidal power" can illuminate the campers with a sensible 20 Watt Algore Bulb. And marshmallows can be toasted in daylight by a solar furnace 1/4th of the days in Seattle area. Which has the same people considering limits on "CO2-spewing barbecues" - charcoal is bad, natural gas is far better for grilling to stop global warming, since gas can be turned on and off while wood and charcoal have "huge excess burning given most barbecue system requirements for food prep."
Kenneth,
The short answer is that the efficiency of the energy source has a lot to do with the cost per unit.
There are problems with your water analogy (and this all aside from externalities), starting with the fact that the inefficient process is preferable only with the caveat that the amount of seawater consumed is trivial compared to the supply. It doesn't matter if we're wasting 99% of the seawater if there's effectively an infinite supply. That's not the case with energy, where the higher efficiency sources are gone and we're driven to consume lower efficiency sources because that's all that's left. We're far along the energy efficiency curve, looking directly at the breakeven point where the production of energy is more energy intensive than can be retrieved. Alberta tar sands oil has an efficiency of, at best, 3 to 1; currently it's closer to 2 to 1.
There's a secondary effect that also is not present in your water analogy, namely that lower efficiency accelerates the consumption of the resource. It's not just that we're consuming more energy to produce net energy, but that production cost increases overall consumption. In other words, as we consume the high efficiency sources of energy and move to lower efficiency sources, we necessarily increase the rate of consumption.
It's like a metabolic disorder where we have to eat more and more to keep a constant weight so we can continue to hunt for food; but the hunting for food accelerates the disorder, increasing the amount we need to eat. It's something of a vicious circle that lots of us are praying for fusion power to deliver us from.
From Seattle PI -
"But Seattle Parks and Recreation might do what even this week's chilly weather couldn't -- douse the long tradition of beach bonfires at Alki and at Golden Gardens.
Park department staff is recommending reducing bonfires at the two beaches this summer and possibly banning them altogether next year.
The park board will hear the recommendation Thursday, and the city plans to run public-service announcements and hand out brochures later this month about the effects of bonfires on global warming.
According to a memo to the park board from the staff released Thursday, "The overall policy question for the Board is whether it is good policy for Seattle Parks to continue public beach fires when the carbon ... emissions produced by thousands of beach fires per year contributes to global warming."
Ken:
Catastrophists use EROEI to argue that we're headed for disaster. The claim is that we're approaching the point where Earth will be without any sources of energy where the energy can be extracted for less than the energy invested, and the result will be a forced end to the industrial economy.
The problem is that the catastrophists make a lot of noise, and the stuff they talk about leaks into the general discussion, and people answering the question, "How do we run automobiles cheaply?" are faced with counterarguments that are rooted in "But that won't keep the sky from falling!"
At $140 per barrel, the cost of imported oil will approach roughly one third of the combined net profits of U.S. corporations at their peak in the last couple of years. The proportion may go higher in a consequential recession. The prospect is not merely pain or discomfort, it is critical economic injury. The discussion should consider how to improve our trade balance. I remember that during the last energy crisis, a proposal was floated in Congress to place a tariff on imported oil, with the proceeds to be used to invest in alternative energy projects in the U.S. Economists said that half the cost of the tariff would be born by consumers and half would be absorbed by oil exporting nations in lower profits. More money would stay in the U.S. creating jobs, and the tariff would help to wean the U.S. of our appetite for foreign oil. Perhaps such a strategy would also bolster the dollar by signaling that we will do what is necessary to break our dependence on such high amounts of imported oil.
And at just that moment, the Israelis miss yet another golden opportunity to keep their mouths shut. Honestly, there are people.....
Yes tar sands and other hard to get sources look very attractive now but, as The Economist points out, these are very capital and sticky (literally and economically) sources, and since there's little guarantee prices will still be this high, say, 10 years from now, at least from the oil companies point of view (not very many "peak oil" people there), it's not that likely that we'll see massive investment in these just yet.
It's funny that industries like say nuclear or solar are doing massive investments on the faith of high oil prices but the oil industry, which also stands to gain a lot, isn't really taking it into account, all because they got burned in the Eighties and Nineties.
SEE, peak oil catastrophists scare me a lot more than global warming catastrophists. I have no expertise to drill (chuckle) down into either but there is a nice mathematical elegance to a spun out Tainter meets Hubbert point of view that in concert with things like $140 oil can keep one up at night.
"The market can stay irrational longer than you can stay solvent."
I think you just explained why I'm not a free-market fundamentalist.
RE: shorting oil, a lot of money seems to have flown already into bets on a correction of some kind.
I've been watching with interest DUG, an ultra-short oil & gas etf (seeks double the inverse of the dow jones oil and gas index). It has been behaving unexpectedly: once or twice recently it has closed up on days oil was up, too. And yesterday it did so strongly--DUG closed up almost 2.5% while oil did its media-frenzied 7 or 8%.
For an etf that is supposed to provide returns twice the inverse of an oil index, this is a huge deal. If investment inflows into the etf were normal, it should have seen a decline of something like 15%, no?--instead it goes UP almost 3%. The trading volume bears this out... the three month avg: a little under 14 million; yesterday's volume was just under 40 million.
Hold off on the blood trade...
themightypuck --
Mostly, I don't dismiss fast nuclear reactors as lightly as the catastrophists do. The problem with them is not EROEI, but traditional monetary ROI given how cheap uranium has been. When energy prices go up, countries are going to haul all those actinides that are currently called nuclear waste out and use them as fuel for power plants.
Similarly, hot dry rock geothermal has potential in the zetajoules of net energy extracted per year; the question is basically ROI, not EROEI. It just plain won't run out on less than geologic time scales, provides baseload power, and all the rest.
Even assuming very conservative numbers for the ability of coal and nuclear to fill the gap after peak oil, and very conservative advances in HDR geothermal efficiency, future generations will be just fine.
SEE, I'm pretty optimistic that there's plenty of energy out there. I'm not quite as optimistic that there won't be some nasty economic conditions while we get that energy online.
Re: oil shale and tar sands.
As someone just finishing a dissertation on the US's first really big attempt to do synthetic fuels (back in the late 40's and early 50's)--which included oil shale and mentioned tar sands, but was also focused on coal--I want to note that the same problems that existed back then exist now in terms of time lags.
It's all well and good to go invest in these "untapped" sources and try to solve the technical problems that exist to their transformation into hydrocarbon fuels--especially since high oil prices are likely to make this profitable--but any solutions here aren't going to make a major impact on the market for liquid fuels for nearly a decade.
These are novel technological systems--not well-worked out ones that have already been through development and improvement for decades.. there are going to be major kinks still in the processes and you just cannot expand such things quickly.
Thus... while it might not be a bad idea to start investing in these sources--if you're into the whole hydrocarbon economy (which is a debate for another time..)--so that you do have something down the road--(an argument that was made back in the late 1940's also, as the US became a net importer of oil and the West became dependent upon mideast oil 500 miles from their gravest enemy's doorstep!)--but such investments, while profitable in the long run, are not going to be any solution to $140/bbl oil.
Improved efficiencies in usage are going to be the main thing to reduce price in the short term...
Justin JJ,
Thank you for taking up the gauntlet.
I believe that your arguments, both long and short, tend to confirm my view rather than correct it. We seem to agree that EROEI is a contributor to total cost per unit of net energy (your short argument) because it reflects yield (long).
I would then say that if low-yield energy resources are abundant even after consideration of yield, and if they are cheap in comparison to current alternatives, then they are abundant and cheap, EROEI notwithstanding. This is before consideration of externalities, which neither ROI nor EROEI addresses.
Ken
SEE,
HDR is well, and good, though, simple Geo-Exchange heat pumps for HVAC have a much broader range of utilization..
The U.S. could cut an, easy, quarter of its energy demands by implementing G-E HPs..
see: http://www.eere.energy.gov/consumer/your_home/space_heating_cooling/index.cfm/mytopic=12640
for a simple intro..
Also, thanks for the Sulfur pricing links, but I'd still reiterate my earlier point(s) about the Environmental degradation caused by "Tar Sands" and "Oil Shale" development..
There are far too many, easily recoverable, energy assets to be put in play to make those types, Tar Sands, et al., of plays worth any serious Economic consideration..
In regards to Alberta's tarsands, according to Wikipedia, it costs $27 to produce a barrel of oil.
link
According to Wikipedia, the tarsands in Alberta are producing 6-7 times as much energy as it takes to produce it.
link
There is the problem of depleting natural gas reserves, but I heard that Husky was considering construction of a nuclear power plant for this purpose.
link
Given that Saskatchewan has uranium reserves, getting fuel for a reactor wouldn't be a problem.
And given the cost of $25/tonne to ship the sulfur waste out (timesonline story sited above), the environment won't suffer as much either.
So the tarsands will be profitable as long as oil stays above $30/barrel. Does anyone foresee demand dropping to a point where oil becomes this cheap?
Dead ducks dent Alberta reputation
Not just an ecological disaster, but a PR one, too
Calgary Herald
Published: Friday, May 02, 2008
A dead duck with oil oozing from its tiny carcass is as far from a Disney mascot as the province could ask for; especially now, when it's launching a massive public relations campaign to sell the world on Alberta's oilsands.
But it's a potent symbol of the public relations problems facing northern Alberta and the rampant oilsands development, expected to triple by 2015. Perhaps 500 dead waterfowl will be the catalyst the province needs to finally make environmental protection a higher priority.
The ecological disaster is devastating for everyone concerned, including the oil industry, about to face off with U.S. legislators over the acceptance of non-conventional crude. The ducks, migrating over the oilsands, landed on a Syncrude tailings pond...
...The "tragedy" -- and that's how Prime Minister Stephen Harper described the event -- could well be the tipping point in the court of public opinion regarding the province's environmental record and its tarnished, dirty-oil image...
...Alberta's massive oilsands development is under attack internationally because of the carbon dioxide emissions burned in order to separate the sticky bitumen from the soil. Now this...
http://www.canada.com/calgaryherald/...45052a5&k=5287
Sulfur isn't the whole of it, by a long-shot..
tricstmr - As someone just finishing a dissertation on the US's first really big attempt to do synthetic fuels (back in the late 40's and early 50's)--which included oil shale and mentioned tar sands, but was also focused on coal--I want to note that the same problems that existed back then exist now in terms of time lags.
Unless you are a petroleum or chemical engineer or a trained economist with existing expertise in the energy field, I doubt your thesis has much relevance for extrapolating to today because American efforts in the 40s and 50s to explore the successful German processes were made against a backdrop of an abundance of USA oil. We were still a net oil exporter in the 40s and early 50s.
It's all well and good to go invest in these "untapped" sources and try to solve the technical problems that exist to their transformation into hydrocarbon fuels--especially since high oil prices are likely to make this profitable--but any solutions here aren't going to make a major impact on the market for liquid fuels for nearly a decade.
Not true. In WWII several nations ran on synthfuel and developed that capacity with a crash program in under 2 years time. There simply are no "technical problems" the Germans, S Africans did not address before running their countries on the stuff. Only drawbacks - like using lots of water in the process, having unwanted byproducts...
It is true there are lag times, but radical environmentalists have seized on that and the idea that no one energy development iitiative will give self-sufficiency to help land the USA in it's present awful predicament.
1. For 35 years people have argued that it is stupid to drill in ANWAR or off the Coasts because it will take 6-8 years for production to exploit oil field finds. But if they had lost that argument in 1975 or 1980??
2. People claiming that it is "worthless" to go after oil shale, or ANWAR oil, or build new clean nukes because each onto themselves "won't get us to 100% energy independence" are the same people that love any new solar or wind project (except near them) and say each little bit of either of those two sources "helps". A position they also took for years on food into "glorious, renewable ethanol" legislation. (they are also, as conservationists determined to lower per capita energy use, generally the biggest backers of Open Boarders and eploding American net energy use as immigration grows US population to 366 million in 2030 and 435 million in 2050.)
These are novel technological systems--not well-worked out ones that have already been through development and improvement for decades.. there are going to be major kinks still in the processes and you just cannot expand such things quickly.
Again, we are not talking fusion or energy from bioengineered bacteria here, but existing extraction processes on coal, NG, oil bitumen, shale, tar sands tested on small and large scale by nations and firms like BP, Bechtel, Mitsubishi, Daewoo, Combustion Engineering, Duke Energy, GE, Bayer - decades ago. Given capital, those projects, like the Aberta Oil sands, or Prudeau Bay, or the huge Brazilian oil finds off their coast - are capable of rapid expansion to full production.
The biggest barriers in the US are not technical or in capital availability, but the legislative clout of lobbyists and the ease with which the US legal system can be used to stall energy initiatives and drive off developers and capital investment.
Hoffer appears to be a scare tactician against the Alberta energy production in particular. First he railed on "all the sulphur waste" now he is calling 500 dead ducks "an ecological disaster".
500 dead ducks is a nice days hunting in one country in Kentucky during duck hunting season.
Of course, he then adds that international anti-global warming activists who would be the 1st to scream in outrage if a CO2-free nuke plant was used to provide the steam to separate out oil from the sands - are shocked and angry that the present steam comes from burning CO2 generating fossil energy to make the steam to extract the oil.
Of course, getting oil from ANWAR or off the N American coasts would involve less CO2 generation per barrel of oil assuming environmentalists block nuclear steam plants - but drilling for oil has been blocked for 35 years by hysterics that warn of ecological disasters like "500 dead ducks!!!" or vexed caribou failing to reproduce (the Prudeau Bay herd has quintupled in size as Native Americans got jobs and had better things to do than kill caribou all the time).
c ford,
see:
"There are far too many, easily recoverable, energy assets to be put in play to make those types, Tar Sands, et al., of plays worth any serious Economic consideration.."- myself, above.
also: http://www.prudhoebay.com/
and, note, I never said anything contra to this: "getting oil from ANWAR or off the N American coasts" plan of advance..
Tar Sands extraction are an Economic folly, even if they're Financially profitable..
calling me a 'scare tactician' and, subsequently, miscontruing my position is, quite, curious..really, as curious as the idea of a CO2-free 'nuke' plant..
But at $140 a barrel, the finances look pretty appealing.
Why should we regard $140 a barrel oil as being any more permanent than the $40 a barrel oil of "a few years ago"?
What would happen to Iraq's oil production, for example, if its government managed to secure control over the southern oilfields?
At these prices, though, we should be seeing broader exploitation of new sources like shale oil, the Alberta tar sands, and Venezuela's ample supply of oil-like sludge.
Except the current democratic controlled congress will not allow that research.
MEH: "Tar Sands extraction are an Economic folly, even if they're Financially profitable.."
I'm not clear what this means.
Bill,
see: Economics is the branch of social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Greek for oikos (house) and nomos (custom or law), hence "rules of the house(hold)."[1]
A definition that captures much of modern economics is that of Lionel Robbins in a 1932 essay: "the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses."[2] Scarcity means that available resources are insufficient to satisfy all wants and needs. Absent scarcity and alternative uses of available resources, there is no economic problem. The subject thus defined involves the study of choices as they are affected by incentives and resources.
from: wikipedia.org/wiki/Economics
and: fi·nance (f-nns, f-, fnns)
n.
1. The science of the management of money and other assets.
2. The management of money, banking, investments, and credit.
3. finances Monetary resources; funds, especially those of a government or corporate body.
4. The supplying of funds or capital.
tr.v. fi·nanced, fi·nanc·ing, fi·nanc·es
1. To provide or raise the funds or capital for: financed a new car.
2. To supply funds to: financing a daughter through law school.
3. To furnish credit to.
[Middle English finaunce, settlement, money supply, from Old French finance, payment, from finer, to pay ransom, from fin, end, from Latin fnis.]
fi·nancea·ble adj.
The American Heritage® Dictionary of the English Language, Fourth Edition copyright ©2000 by Houghton Mifflin Company. Updated in 2003. Published by Houghton Mifflin Company. All rights reserved.
http://www.thefreedictionary.com/finance
the popular conflation, of the definitions, of Economics and Finance, short-circuits most, deeper, understanding of what's going on..
those two definitions, above, are workable, and should help you see the point of what I was saying..
The "the markets can stay irrational longer..." quote deserved attribution; Thanks to J.M. Keynes.
Except Keynes probably never said that. It's a misattribution.
I want to note that the same problems that existed back then exist now in terms of time lags.
Fookin right. Suncor is by far the best in the business and yet again it reported a disappointing production number. These guys (and Syncrude, and CNQ) have every reason to be getting it right but they just can't do it.
For an etf that is supposed to provide returns twice the inverse of an oil index, this is a huge deal. If investment inflows into the etf were normal, it should have seen a decline of something like 15%, no?--instead it goes UP almost 3%.
That's a PhD thesis asking to be written, there. Is there nothing that the ETF can deliver to make an arbitrage possible.
Re: DUG, it's even more extreme. It opened at 26.75 and closed at 28.23, a move of about 5.5%. I would guess that it had to do with people closing out both sides of their oil position, long oil/gas with a DUG hedge and people looking at a $18 run in oil over two days and wanting to get in on that downside bet. Depending on the time horizon of the people buying on Friday, there could be a similar decoupling on the next big down day in oil.
Where can I trade my blood for oil?
Offhand I'd see this as an accusation against our present foreign policy. After all, though not about exppropriating oil from someone else, our current adventure in Iraq, a la Greenspan?, might be seen as in part keeping the Wealth of Nations ownership philosphy as the way things work. Thus we are trading our blood, though I think you have kept to your privacy rights on yours, for oil. And it hasn't got any cheaper has it? Are you prepared to outline for us how, under your preferred policy, it would have?
OTOH, Senator Obama is confirmed as the Democratic nominee and Rasmussen has him ahead of McCain and oil goes up over $10 a barrel in the week. Irrational or an Obama risk premium?
Chris Ford...
Unless you are a petroleum or chemical engineer or a trained economist with existing expertise in the energy field, I doubt your thesis has much relevance for extrapolating to today because American efforts in the 40s and 50s to explore the successful German processes were made against a backdrop of an abundance of USA oil. We were still a net oil exporter in the 40s and early 50s.
I'm not trying to extrapolate the existing technology--obviously a lot of work has gone into various kinds of synthetic fuel technologies since then.. but the same general rules about time lags do apply...
First.. some facts--You are wrong about the US being a net exporter into the 1950's. In 1948 we became a net importer (greater imports than exports) and we have been ever since. We did still export petroleum products, but were importing far more.
It's all well and good to go invest in these "untapped" sources and try to solve the technical problems that exist to their transformation into hydrocarbon fuels--especially since high oil prices are likely to make this profitable--but any solutions here aren't going to make a major impact on the market for liquid fuels for nearly a decade.
Not true. In WWII several nations ran on synthfuel and developed that capacity with a crash program in under 2 years time. There simply are no "technical problems" the Germans, S Africans did not address before running their countries on the stuff. Only drawbacks - like using lots of water in the process, having unwanted byproducts...
It is true there are lag times, but radical environmentalists have seized on that and the idea that no one energy development iitiative will give self-sufficiency to help land the USA in it's present awful predicament.
Which countries ran serious synth fuel processes that were successful? Japan started work in 1937 and never got a working coal hydrogenation system going or Fischer Tropsch system and their oil shale work in Manchuria was using technologies that were ancient. The Germans did have a working synth fuel system going--but Bergius's discovery took place int he teens, was developed continuously until 1926 by him, when IG Farben bought it from him, and didn't actually get embodied in a large plant and work successfully until 1933. Even then, it wasn't expanded to multiple plants until the late 1930's. Fischer Tropsch plants also didn't come online until 1938 after being first discovered in 1922-23. In each of these, there were decades of development time--and this was just to get very inefficient processes (in terms of recovered energy from the coal) up and going.
Finally--Germany ran its entire war operation on less than 100,000 bbls/day. That was just 5% of what Americans used for their war efforts alone (~2million bbl/day) and around 2% of the entire American oil production (4.5million bbl/day) during the early 1940's.
German tech took decades to develop and was limited in scope.
1. For 35 years people have argued that it is stupid to drill in ANWAR or off the Coasts because it will take 6-8 years for production to exploit oil field finds. But if they had lost that argument in 1975 or 1980??
What does this have to do with synthetic fuels or my arguments? Drilling in Anwar will produce oil--but not all that much. High estimates were that there was something like a 10% chance of their being 10 billion barrels--which is about 1.25 "years" of american demand.. Yes.. such petroleum would find a market, but it would not come online for years and top production rates would only have been around 500k bbl/day while we consume over 20million bbl/day.
2. People claiming that it is "worthless" to go after oil shale, or ANWAR oil, or build new clean nukes because each onto themselves "won't get us to 100% energy independence" are the same people that love any new solar or wind project (except near them) and say each little bit of either of those two sources "helps". A position they also took for years on food into "glorious, renewable ethanol" legislation. (they are also, as conservationists determined to lower per capita energy use, generally the biggest backers of Open Boarders and eploding American net energy use as immigration grows US population to 366 million in 2030 and 435 million in 2050.)
Who is this directed at? I'm not talking about any of these other topics. I was just making a specific point about time lags for novel technological systems. The point I'm making isn't anything novel in itself--it is a common fact for anyone studying the history of technology..
Again, we are not talking fusion or energy from bioengineered bacteria here, but existing extraction processes on coal, NG, oil bitumen, shale, tar sands tested on small and large scale by nations and firms like BP, Bechtel, Mitsubishi, Daewoo, Combustion Engineering, Duke Energy, GE, Bayer - decades ago. Given capital, those projects, like the Aberta Oil sands, or Prudeau Bay, or the huge Brazilian oil finds off their coast - are capable of rapid expansion to full production.
It is true that some of these processes have been tested for decades--SASOL's F-T processes are the best example--and they nearly built a plant in Pennsylvania in the late 1990's... but the expansion of these kinds of technologies into large scale commercial plants will still take significant time to make any difference.
Last time I looked--Sasol's F-T plants still used around 3 tons of coal for every ton of liquid product--so to expand them to a significant level, you would need to expand coal mining significantly.. Colorado's oil shale still has the issue of getting enough water and finding space for spent shale--problems that were never adequately solved in the 1950's or early 1980's when oil exec's were about to start it up.
The biggest barriers in the US are not technical or in capital availability, but the legislative clout of lobbyists and the ease with which the US legal system can be used to stall energy initiatives and drive off developers and capital investment.
I think you are partially correct here--but you still underestimate all the technical problems that can crop up, especially with having enough skilled operators who are technically proficient in these systems.
In any case.. you have oversimplified the history of synthetic fuels development. It was not something that ever was implemented in 2 years time. it took decades--and many of the more "improved" processes that have developed since the 1950's have never been implemented on the huge scales that would be needed to make them economically competitive--which means that often there would still be problems in commercial sized plants due to "scale factors" that would slow down production for a number of years.
If you want sources for my points--I can give them to you.. a good one on the German developments is Wolfgang Birkenfeld, Der Synthetische Treibstoff--it gives a pretty good history of the German developments..
On more recent American developments--there are edited volumes by Yanarella and many others that I can point you to.
@tricstmr
The demonstration projects on Colorado oil shale, carried out by Shell and others, are "in situ," that us, the oil is cooked out of the shale below ground, so there is no need to find "a place for spent shale." The energy to run the process comes from natural gas produced during operation, water is used primarily to form an ice dam to isolate the operation from the surrounding environment, it should be financially feasible at any oil price above $30-$40 a barrel, and Colorado has an estimated 1 trillion recoverable barrels.
Yes, it will take some time. But Congressional Democrats just voted to prohibit further research and development. At that rate, it will take forever.
"Tar Sands extraction are an Economic folly, even if they're Financially profitable.."
Given tat Tar Sands produce more energy than they consume, are competitive with other sources of oil, how are they an economic folly?
Some say that they are an ecological folly, but that's an entirely different subject.
Linda,
Oh.. I know. I've read a bunch about more current oil shale tech--and the in situ idea was something that wasn't around in a serious fashion in the late 1940's.. (although I think it I came across it in the mid 1950's.. ).
In any case.. Do you have a source for the prohibition of further research and development? is it because the shale reserves are still naval property? I remember that Exxon started a big shale operation in 1980 before ditching it with the oil glut... Or is it due to environmental stuff?
Also.. what are the capital costs like? For Oil shale, they never seemed to be that bad--in comparison to other processes like Coal hydrogenation or Fischer-Tropsch--but then again, shale oil did seem to require--at least back in the 1950's--a bit more refining tech than ordinary crude--mainly it's high sulfur and nitrogen content seemed to push a mild hydrogenation in order to turn it into higher value fuels.
In any case.. I'm not particularly invested in the situation one way or the other. Personally, i do think that it wouldn't have been a bad thing for the gov't to push through three prototype plants back in the early 1950's--so that there would have been more direct process development back then. As it was, when Eisenhower came in, synthetic fuels were summarily dropped because they were "too expensive" (around 10-20% more expensive than petroleum based fuels).. Of course.. By 1958, Eisenhower instituted mandatory import controls to stem the flow of imported oil--and this basically created artificially high prices for oil--to the extent that Americans were paying 70% higher prices than the rest of the world.
Yay for free markets. Ha. ha.
Yes tar sands and other hard to get sources look very attractive now but, as The Economist points out, these are very capital and sticky (literally and economically) sources, and since there's little guarantee prices will still be this high, say, 10 years from now, at least from the oil companies point of view (not very many "peak oil" people there), it's not that likely that we'll see massive investment in these just yet.
If only someone had a 10 year oil future. Problem solved.
Note that nobody ever mentions the energy efficiency of coal liquification. Because that is obviously less than 1.0. This would just point out the entire uselessness of energy efficiency. Who CARES how much energy you use, energy is CHEAP. It is LIQUID FUEL that is expensive.
(Of course if you use too much energy, then your liquid fuel is going to be expensive, but that is given by your price. Adding energy efficiency is just a red herring that includes no useful extra information.)