There's plenty of oil

[Kolesar]

I registered then hunted the Forbes site to find this article I perused in a waiting room last year.
http://www.forbes.com/energy/free_forbes/2004/1018/090.html

The Big Plunge
Christopher Helman, 10.18.04

High prices at the pump are finally giving oil companies the incentive to make long--and expensive--bets to find new supplies. No one is going deeper than ChevronTexaco.

The bad news for oil consumers is that global demand has been growing at 1.5% a year over the past five years, while production capacity has been inching ahead at 0.2%. That squeeze all but wiped out the industry's spare capacity and caused a spike in prices. The good news is that the zooming prices have gotten the attention of oil producers.

Outside the Middle East, West Africa and parts of Russia, most of the easily accessible reservoirs have been sucked nearly dry. Extraction and development costs in North America have rocketed to $11 per barrel from $5 in 1999, and in Europe to $18 per barrel from $11 over the same period. New reserves are much tougher to find and must be pried loose from wily dictators or from deposits deep under the ocean bed or in sandpits--and that costs big bucks. "The prospects are few and far between," says Louis Gagliardi, an oil analyst with John S. Herold Inc. in Norwalk, Conn. "Oil companies have to run hard and run fast just to stay in place." At $20 a barrel, anyway. The prospects for long bets look a whole lot better at $34, which is where the five-year-out futures contracts are settling. "There's plenty of oil, but the costs of developing major new reserves in hard-to-get-to places are 100% higher than a decade ago," says analyst George Gaspar at Robert W. Baird. "High price is the incentive for these guys to step up to the plate." At the right price, there is a lot of oil. The Department of Energy estimates the amount of fluid hydrocarbons remaining in the Earth's crust is the equivalent of 7.6 trillion barrels of oil. That figure includes natural gas and tar sands. It's enough oil and gas to last 170 years.
.....end excerpt.....
It's four pages. The subject is Chevron-Texaco.

[Massacure]

1. There is four times as much tarsands in Canada as oil in the Middle East

It is about 50 times more expensive though.

[TO Kid]

12. Not all of it is that expensive

The figure on reserves in the tarsands varies with the price. I know a guy who worked for Suncor (the main player on the tarsands), and ten years ago it cost them $13/bbl to convert the tar to synthetic crude. Based on those costs they figured the recoverable oil was roughly equal to the Saudi reserves.

[RC]

2. At what rate of usage?

"...enough oil and gas to last 170 years."

[Kolesar]

3. Not cited

Nor are the other costs cited, like where to dump the spoils from tar sands extraction. It is also sloppy accounting to compare "oil equivalent hydrocarbons" that cost $5/bbl to produce to something that costs ten or more times that to produce. It will be consumed at a different rate. I see a possibility that commercial jet aviation will fail since ticket prices will be too high for consumers to pay.

[havocmom]

4. as costs continue to climb, eventually the US consumers will slow their

ridiculous use. Won't they? Won't they? Someday?

[happyslug]

6. The issue is price

Basically I have said in the past that the price will be about $4-5 dollars a gallon. The reason for this is people on Minimum wage MUST stop buying gasoline at that point. Such workers can NOT pay for their home, their food, the upkeep of their car AND the gasoline for that car at $4.00 a gallon (and this is assuming such worker is living in Public Housing NOT Private rental units).

Now as you go up in income the numbers are not as clear, but as the price of Oil meets your hourly income rate you have to stop buying gasoline. This formula starts to fail at about 4-5 times the minimum wage for the proportion of your income you spend on food declines as your income goes up (thus opening up more money for Gasoline).

If you are interested the Calculation I used to come up with $5.00 a gallon are as follows:

1. Minimum wage is $5.15 per hour.
2. If you work 40 hours a week 52 weeks a hear that is 2080 hours
3. Public Housing requires a tenant to pay 30% of their income as rent.
4. The average car gets 20 miles to the Gallon
5. The average American Driver drives 15,000 miles per year.
6. People eat 3 meals a day for 365 days or a total of 1095 meals a year (I will use 1000 meals a year for ease of Calculation),
7. Social Security Tax is 7%, most local taxes are 2% with various states taxing income at anywhere from 0-5% (My home state of Pennsylvania has a Straight 2.2% income tax, i.e. NOT graduated). Given these taxes we will assume a tax rate of 10% for Minimum wage workers.

Given these facts, you can see that the average drivers uses 750 gallons of gasoline per year (15,000 Miles per year Divided by 20 Miles per gallon average for a car).

These numbers also point out the Minimum wage earner earns about $10,000 a year (Exact figure $10,712 but I will use $10,000 for ease of calculation).

Rent for a minimum wage earner in public housing must be $3000 per year (It will be MUCH more in non-public Housing). If your meals cost $1 a meal (a VERY LOW figure) that comes to $1000 a year. Taxes are another $1000 a year (See paragraph 7 Above). Thus before we ever get into the issue of a car the wage earner has spent HALF of his income just to stay alive (i.e. $5000).

Insurance, oil changes, and other maintenance on a car will run you at least $1000 a year (Most people will pay more). Thus you have $4000 left over for Gasoline.

750 Gallons at $2 a gallon is $1500 a year. At $4 a Gallon the minimum age earner spends $3000 on Gasoline. At $5 a gallon he is Spending $3750. Thus the Minimum wage earner MUST stop Driving to work when gasoline reaches $5.00 a gallon. I suspect it will be closer to $4 for no one can eat on $3 a day (and Notice I ignored clothing, and any child support the wage earner must pay, either in taking care of his or her children or regular child support payments).

I do this exercise to show something has to give WHILE before prices get as high as $4 to $5 a gallon. The numbers are just NOT doable. The above is a BEST CASE SCENARIO for Minimum Wage Earners.

Higher income people will be able to spend about the same on Food as low income people, but have higher housing costs. Thus the numbers do not work as while for people earning $20 an hour (i.e. $40,000 a year of which $15,000 may be housing, $5000 may be automotive, compared to the minimum wage earners numbers of $3000 and $1000. Taxes for the $20 an hour worker will be higher but still about $10,000, which still leaves him or her $15,000 to buy gasoline which at $20 a gallon will be $15,000). Furthermore the person making $20 an hour can buy a new fuel efficient car (which will change these numbers drastically) but low income people generally do not have the Income to do so (Even if such low fuel use cars would be available given higher income people ability to outbid the Minimum wage earner hen buying such cars).

Thus my point is the first big group of people will be mini mun wage earners as the price of Gasoline exceeds their budget to buy gasoline. This will continue till you get what economist call "Equilibrium" where the demand for Gasoline will equal the supply. Please note there will be wide price variation before and after "Equilibrium". The first reason for this will be people will stop buying gasoline as it exceeds their budget. Gasoline price will peak and than decline to a point where someone can afford it again. This will force the price back up do to this increase demand. This up and down will go on and on for the supply of oil will slowly go down making each new peak higher and higher (and each new low, higher and higher). It will be a mess but people will have to give up their use of oil for the price to stabilize at any price people can afford.


For previous threads on this topic see:
http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=114&topic_id=11978
http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=114&topic_id=10763#10771

[Boomer]

7. Other uncounted factors

The real scenario will be even worse because the price of food and other goods will rise as the cost of oil drives up distribution costs. It will also affect the cost for agribusiness, which relies on fuel to run tractors and other farm machinery, not to mention the oil-based fertilizer for those crops.

[happyslug]

9. Those are reasons I lean to $4 a gallon as a tipping price

When the price of Gasoline reaches $4 a gallon you will see radical changes in the economy as people adjust their living habits to reflect $4 a gallon gasoline. If you are low income you will not have much money to play with. IF you are near median income (about $40,000 a year) you will have some flexibility but not much. If you are over $100,000 you still will have to adjust do to having to pay more for gasoline.

AS food goes up and people's life styles changes some retailers will go out of Business, others will DEMAND government action to "help" them. For example to keep their low paid employees retailers will DEMAND increase public Transportation so that those employees can get to work (But with no increase in Taxes). After a few years (It will take a while for the reality of high oil prices to sink in) you will see these businesses demand Public Housing near their Businesses so their employees can live closer to their work (But no where near where people who do not want to see such housing). A few years after that you will see the Employers building the housing themselves for it would be cheaper than the expenses they had incurred when the previous two pleads to the Government Failed. This also will give the Employers some control over who gets into this housing. This Control will provide the Retailers the cover to permit low income housing right exited to their mall.

Other changes will occur, for example a demand for more Nuclear power plants (after it is shown that wind mills and other means of getting power is NOT sufficient to replace oil). You will see more bicycles, mopeds and Scooters on the Road (All get better fuel economy than a Car). We will become more like Europe with its high gasoline prices but ready access to Electrical Power. The price of Electricity will go up, not only do to increase demand given the switch from oil to Nuclear power but as a means to regulate the shortage of power given the inefficiencies of Electricity a a transport fuel (Especially personal transport) compared to oil.

What I mean by inefficiencies is that Electrical Storage devices are all inefficient (Batteries 20% and Fuel cells only 50% Efficient) or expensive (Fly Wheels 90% efficient but Expensive and dangerous if involved in an accident) but weigh more than the power in a gallon of gasoline. Conversion of Electrical Power to Liquid power (Gasoline) is on par with Batteries and Fuel Cells (Through much lighter in Weight in the car). On the other hand direct electrical lines are very efficient, for example I see Railroads all electricity given that direct electric use can be obtained through a pantograph. The above loss of efficient disappears in such direct electric driven devices.
You may see a Bicyclist (Or a horse drawn Wagon) transporting parts from the Train depot to the Electrical Power Plant simply do to the great in-efficiencies of Electrical Storage devices of electric cars and/or cars themselves compared to Horses and Human Power machines (and that includes the food used by horses and people who operate the animal and human powered machines).

The problem is convincing people that change is good AND that the days of cheap oil is long gone and to adapt to oil being highly priced. Once the commitment is made it will be a lot easier but some people will never be convinced and others will want someone else to commit to the change first. It will happen but it will be slow, thankfully the coming oil shortage will be over 100 years in duration (Through this brings with it some additional problems for you may see a slow and steady economic decline over that 100 years but if we play our cards right the decline is more than manageable AND can lead to economic boom in non-oil dependent fields).

[phantom power]

10. I've always thought fly-wheels would be good for large-scale storage

For instance, use banks of fly-wheels as storage for wind-farms. The hi-tech flywheels are expensive, but targeted for weight-limited and/or space limited applications. I figure you could just as easily go low-tech for a large and stationary energy storage site. A big, fat iron cylinder. With lower tech, it might get less than 90% efficiency, but even if we got 50% to 75%, it would be good. Bury a whole bunch in the ground.

[happyslug]

11. Might be cheaper to use the electric Power to convert Carbon Source to oil

Remember Oil is a great energy storage unit. When we burn oil we are releasing energy stored in the oil. That energy was originally solar energy that were converted by Algae to plant molecular that was later converted by the movement of the earth to oil.

Thus using excess electricity to convert a carbon source (Coal or Crops) to gasoline might be a more efficient way to "Store" the electric power than even flywheels. One thing about Gasoline while it can blow up, it does not spin at great speed when fully "charged" (Like a Flywheel). Unlike in the movies Car in accident rarely "Blown Up" (Through Cars often burn do to spilling of gasoline). Furthermore unlike batteries Gasoline does not degrade in cold temperatures. Thus instead of using the excess power to charge fly-wheels, it might be better to just make gasoline.

Now the price of the Gasoline will be much higher than today's gasoline. I keep looking at $20-40 a gallon. This is more the result of the inefficiencies in converting electric power to gasoline (or Flywheel power, or fuel cell power) than the price of the electric power itself (Through the price of Electricity will be a factor).

I just see oil being made this way for it is a superior energy storage means than even a fly wheel (and at a much lower cost to produce than a flywheel). Furthermore the oil produced can be used in planes and other means of transport. Remember we will NOT be facing an electrical shortage but an oil and natural gas shortage (Just like the 1970s). Since oil is used as out primary transport fuel, the shortage of oil will affect transport. Thus the concern when it comes to peak oil is transport more than a pure energy shortage.

[phantom power]

16. That would be excellent.

[TO Kid]

13. US consumers won't drive the price

The biggest growth in demand is coming from China and India where they are going flat-out to upgrade their standard of living to what we have in the west.

[NickB79]

8. Hell, there are OCEANS of hydrocarbons on Saturn's moon Titan

Why not say we have an unlimited supply by including figures from that planet? Both Titan's reserves and most tarsands are impossible to mine successfully, so who give's a rip if there are tarsands at all? You LOSE energy extracting oil from tarsands!

[TO Kid]

14. Wrong

The only enegy-losing fuel sources are ethanol and hydrogen. The Syncrude project operates at an energy profit, producing three to four barrels of synthetic crude for every barrel consumed.

[NickB79]

15. Does that take into account limited water supplies?

You need massive amounts of water to successfully mine tarsands. Unfortunately, most tarsands in the US are in fairly arid areas of the Southwest that are currently experiencing prolonged droughts. To continue oil extraction operations, they would have to either find and drill new wells (which would deplete the already-low ground-water levels) or pipe it in from somewhere else (I've heard suggestions about a pipeline from the Great Lakes to the Southwest being constructed). Both options require large amounts of energy and money.

Syncrude can only operate when they have access to large quantities of cheap water. Since water is rapidly becoming a very valuable resource in the West, I doubt they'll be making a profit when that is factored in.

[TO Kid]

17. Not as much of an issue in Canada

There is lots of water for the process in the Canadian operation. The biggest challenge is disposing of the waste.

[NickB79]

18. I thought even in Canada this was problematic?

The majority of their tarsands are in Alberta, and Alberta isn't exactly known for having massive amounts of water either. Similar to the US Great Plains, only colder. Enough for small-scale extraction, but not enough to replace any conventional oil wells.

[TO Kid]

19. This is northern AB and SK

Southern Alberta and Saskatchewan are drier but they're not exactly deserts either. There is more water in the north.

[happyslug]

20. Yes and using the most oil soaked ands in Alberta

And that is the problem with the Tar sands, like any other source of oil people ALWAYS get the easiest to extract first and than the harder to extract, and so forth. Sooner or later you have to go to tar sands where you will be removing one barrel of oil for every barrel you get out of it. At that point you have an energy sink instead of an energy source.

No one proposal is to build a nuclear reactor in the center of the Tar sands and use that power to remove the oil. In effect you will be "Converting" nuclear power to oil with the base for the oil being the Tar sands. This will probably be done for the next 150 years (Till the tar sands are played out OR it becomes cheaper to use Plants as the base for the oil.

All of this means that the Tar-sands will NOT solve out upcoming oil shortage, it will be a factor but more as a base to be used in converting Nuclear Produced Electricity to some sort of power usable in personal transport.



http://www.peakoil.com/nextopic1019.html

[rman]

23. 7.6trillion / 170 years = 44billion per year usage

-

[rustydad]

5. At some point.........

.......the rising costs of oil extraction along with the competetion among users will lead to a price per barrel that will destroy the fragil economies of the industrialized nations. And of course the wars that are coming will also undermine the economies of the war like nations such as the USA. At the point of crumbling economies then will oil consumption decline bringing price stability. The solution to saving some oil for the future is to destroy todays users. Not a happy picture. Bob

[RafterMan]

21. The last paragraph

"It's preposterous to say that the world is running out of energy. It is only running out of cheap energy. There's plenty of the expensive stuff."

If by energy they mean hydrocarbons, then that's kind of the point, isn't it?

[BlueEyedSon]

22. Nice to know we have an unlimited supply of carbon dioxide to dump

into the atmosphere.

[rman]

24. even when going by those numbers

7.6t barrels over 170 years amounts to an average demand (rate of usage) of some 44billion barrels per year.

Current demand is 30b barrels/y
growing at some 3% per year : doubling every 23 years;
60bb/y in 2028, 120 bb/y in 2051... i need not go on:
no way the average demand for the next 170 years is going to be 44bb/y

7.6tb would last 170 years only if average demand will be 44bb/y and production remains constant untill the very last drop of oil is extracted.
Neither condition is very likely to be met.