Wednesday, March 12, 2008

Want Some Cheap Oil? We've Got Lots in the U.S.

With oil prices hitting record levels above $100 a barrel, the economy in either a slowdown or recession, and with Venezuela threatening to end oil exports to the United States and Nigeria's oil production held hostage to internal strife, the case for tapping more domestic oil is getting stronger every day.

Unfortunately, Congress continues to resist the idea, preferring to hold substantial domestic energy resources on Alaska's North Slope and the U.S. Outer Continental Shelf off-limits to production.

From today's Detroit News

14 Comments:

At 3/12/2008 8:23 AM, Blogger Ken Braun said...

Don't forget that we have oil and gas buried deep under the Great Lakes, and that our fearless leaders in state government voted back in 2001 or 2002 to prohibit pulling any of it out via directional drilling (aka "slant drilling.")

This was despite the fact that the industry made a solid case that it was ecologically safe. And, of course, the industry thought even back then that there was a good economic case for pulling the oil out. That case can only have gotten stronger today -- more than twice as strong -- with oil now going for twice the price.

But, no matter. The politicians have moved on to ethanol subsidies instead.

 
At 3/12/2008 8:58 AM, Anonymous Anonymous said...

The United States has an oil reserve at least three times that of Saudi Arabia locked in oil-shale deposits (aka oil sands) beneath federal land in Colorado, Utah and Wyoming.

Reserves are estimated to be 500 billion to 1.1 trillion recoverable barrels.

 
At 3/12/2008 9:43 AM, Anonymous Machiavelli999 said...

Latest oil report showed that US stockpiles spiked by 6 million barrels, much more than expected. In a previous comment, I said that if stockpiles didn't spike this week then we know that oil suppliers have completely detached themselves from the concept of supply, demand and free market capitalism. Fortunately, stockpiles did rise.

Now, the next question. Will prices fall accordingly? If they don't, then we know the prices have detached themselves from market fundamentals and are in bubble territory.

 
At 3/12/2008 10:09 AM, Blogger Walt G. said...

Aren’t we operating in a speculative market instead of a supply-and-demand market for crude oil? Is so, the real value of oil is being determined by what people think oil will be worth instead of how much we have at the moment. Maybe oil simply looks like a better investment than stocks to those with money to invest.

 
At 3/12/2008 11:10 AM, Anonymous Machiavelli999 said...

walt g.

Your type of thinking is what caused the internet tech bubble.

"Yes, company X might not be making any money right now, but just think what it will accomplish 10 years from now!"

And in addition to that, many long term projections predict oil prices dropping. Here are the latest long term projections from the Department of Energy

http://www.eia.doe.gov/oiaf/aeo/index.html

We are in bubble territory right now and fundamentals will eventually catch up with the market.

 
At 3/12/2008 11:24 AM, Blogger Anon A. Mus said...

Last week, NPR had an interesting interview with an economist who explained about the factors behind the high oil prices.

Based solely on supply-and-demand, we should be about $80 a barrel with $50 of that due to China and India's increased consumption. The rest of the money above $80-85 is due to speculative investors of pension funds, sovereign wealth accounts, and banks across the world. Oil futures, it turns out, are a very safe investment, or so it seems. Well, much safer than, say, investing in a paper towel business and revolving door company. With those, you could be wiped out before you could turn around. In any case, their oil investments weren’t much of an influence back in 2000 when it was about $9 billion. 8 to 9 billion dollars is what we spend on oil each day now, globally. However, now those same investments are at $250 billion — several weeks worth of oil spending — and growing! And why not? If you have $3,000, you can go to the New York Mercantile Exchange (NYMEX) and control almost $70,000 worth of oil.

The economist said that the bubble could go as high as $150 a barrel but, like all bubbles, come down in a big oily splat to $30. All of this happening within a year. I don't know about the timing but the next few months should be interesting. For now, we'll just sit tight and see whether we end up walking more as we go shopping for dog food because the pension firm lost our retirement money.

 
At 3/12/2008 11:24 AM, Anonymous Anonymous said...

A U.S. recession has already started and the downturn is likely to last longer than in the recent past, with the economy recovering only late next year, according to a quarterly survey of corporate finance chiefs released on Wednesday.

Fifty-four percent of the CFOs said the United States is in recession, and another 24 percent said there is a high likelihood of one starting later this year, according to a Duke University/CFO Magazine survey completed on March 7.

Nearly three-quarters of the CFOs said they were more pessimistic this quarter than in the prior quarter about the U.S. economy, reflecting concerns about consumer spending, turmoil in credit and housing markets, and high energy prices.

http://www.reuters.com/article/ousiv/idUSN1220659620080312

Take it from the men on the ground and not the ones in academia.

 
At 3/12/2008 12:17 PM, Anonymous Anonymous said...

If you want some cheap oil all you need to do is hold any currency other then dollars which are being devalued by the US government and it's central bank in order to prop up an insolvent banking system.

http://quotes.ino.com/chart/?s=NYBOT_DX&v=dmax

 
At 3/12/2008 12:36 PM, Anonymous Anonymous said...

Crude oil rose to a record $109.85 a barrel in New York after the dollar weakened to an all-time low verses the euro, prompting investors to purchase commodities.

http://www.bloomberg.com/apps/news?pid=20602013&sid=aKhlOQWt4l08&refer=commodity_futures

It's the dollar stupid.

 
At 3/12/2008 12:54 PM, Anonymous Machiavelli999 said...

The dollar must be the only thing propping up oil because the fundamentals point to lower oil prices.

What's even more shocking are the gasoline stock numbers. Gasoline inventories are at historically high levels, while demand is lower than last year.

So, to recap:

Supply goes up
Demand goes down

Price goes UP!!

 
At 3/12/2008 2:30 PM, Anonymous Machiavelli999 said...

http://www.marketwatch.com/news/story/crude-makes-fresh-gains-surpass/story.aspx?guid=%7B18D676B4%2D1A11%2D419D%2DBE39%2DB54C7FF36AB2%7D&tool=1&dist=bigcharts&

Good article about how oil prices have completely detached themselves from fundamentals.

On the latest oil report:

"Today's report is overwhelmingly bearish," said Chris Lafakis, an analyst at Moody's Economy.com. "There isn't a positive element in today's report for the oil bulls."

The article also states that hedge funds are driving oil prices up. This run is not sustainable and sooner or later oil prices are in for a big crash.

 
At 3/12/2008 3:48 PM, Anonymous Anonymous said...

From Perry's article: The North Slope alone could provide 36 billion barrels of oil... which could help meet U.S. energy needs beyond 2050.

That is 5 years of current US consumption of 7.5 gigs/year or 1.2 years of current world consumption of 30 gigs/year. Over the lifetime of the field (say 50 years),annual production is a drop in the bucket; it wouldn't even offset increased consumption of 19% by 2030 predicted by the Department of Energy nor the decline rates in Prudhoe Bay or the Lower 48.

How is it a long term solution to slaying the OPEC cartel aka American energy and national security?

BTW, the US imports more crude oil and petroleum product from non-OPEC than from OPEC.

 
At 3/13/2008 11:08 AM, Blogger OBloodyHell said...

Emphasis mine:

> > which could help meet U.S. energy needs

> How is it a long term solution to slaying the OPEC cartel aka American energy and national security?

Note the key words. "HELP MEET". It doesn't say "solve". Duh.

This whole shebang is actually smart. We are currently holding in our reserves while oil is cheap, waiting for a time when they are more valuable and there are fewer alternative sources.

The USA/Canada hold, in oil shales and tar sands (Colorado up through Alberta) by far the largest oil reserves in the world, and, as extraction tech improves, they become consistently more worthwhile. Currently, oil prices would have to hit $100 and *stay* there (note other commentaries about what is actually likely to happen for now) for those shales and sands to be worth extracting the oil from.

I do agree, it's really stupid to be promoting ethanol with subsidies since it's driving food prices way up for a doubtful benefit (current indications are that ethanol, surprise surprise, is actually a net increase in CO2 created, even if you buy into MM-A Global Warming and care).

The real solution to global power needs for the next century is nuclear, and has always been that. Standardized plants, standardized tort reform, and standardized disposal are all available, and merely need to be implemented politically. Such things will be possible once the boomers kick off and we can start invoking ration and reason into politics again.

 
At 5/22/2008 1:01 PM, Blogger paul said...

an internet org. should be started to bring as many together as possible...to demand that we drill for domestic oil, and build new refineries

 

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