Peak Oil- what it is and how it will impact your life

Re: Peak Oil; what it is and how it will impact your life

I'm not going to argue with you Big, you have your mind set and nothing I say will ever change it.

But for those out there unfamilliar with this topic let me say once again.
Oil companies don't set the price of oil. Or gasoline either. Oil is a globally traded commodity and the price of it is set by speculators on Wallstreet, not in Houston.
Individual gas station franchise owners set the price that they charge for the gasoline that they sell in thier particular area.

And as far as the threat to our way of life from peak oil, or oil shortages, or whatever you want to call it, it has very little to do with the price of gasoline in our tanks.

How many electric airplanes are in development? How about electric ships to haul all of those cheap goods across the ocean that we buy at Wal-Mart? What about the asphalt that those electric cars are going to run on? And that is not even the things that worry me.
What about the fertilizer that we use to grow our food, the pesticides that we use to keep the insects from destroying our crops?

How about plastic, rubber, medicines? Our electricity comes primarily from natural gas powered generating plants. Another natural resource that is also in decline.

No. I don't waste my time worrying about how much it will cost me to put gas in my car in the future. I worry about how much it will cost to put food in my family's stomachs.
Yes we may well be driving an electric car, but it may be to stores with empty shelves.

 

Re: Peak Oil; what it is and how it will impact your life

Yeah, Venzuela only pays a few cents a gallon for thier state owned gasoline. We should follow thier example. Run all those evil oil companies out of business and nationalise everything. That would make Stalin and Hitler happy huh.
Hey, worked real good for the Soviet Union didn't it?

 

Re: Peak Oil; what it is and how it will impact your life

I don't own and energy or mining stocks, but I wish I did. The ROI is pretty consistent (but NOT excessive, those "billions" are spread pretty thin among LOTS of nasty capitalistic stockholders) and probably will do better over the next few years.

 

Re: Peak Oil; what it is and how it will impact your life

This was part of an article at CNN.com on greenhouse gasses. Thought it was interesting.
The other articles are from various newsletters.

"In the U.S., up to 20 percent of the country's fossil fuel consumption goes into the food chain, according to the UN's Food and Agricultural Organization (FAO), which points out that fossil fuel use by the food systems in the developed world "often rivals that of automobiles".

To feed an average family of four in the developed world uses up the equivalent of 930 gallons of gasoline a year -- just shy of the 1,070 gallons that same family would use up each year to power their cars.

The average developed world diet uses 1,600 liters of fossil fuels each year, according to the U.S. based Organic Consumers Association (OCA). Only 256 of those liters come from transporting the food, says OCA.

By contrast, a whopping 496 liters goes into the chemical fertilizers used during the food growing stage, representing well over one third of the food chain's entire fossil fuel consumption.

Nitrogen fertilizer in particular is extremely fossil fuel-intensive, requiring 1.5 tons of oil equivalents to make 1 ton of fertilizer."




US rate cuts will push oil up to $120

13.03.2008
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<DIR><DIR>The age of triple-digit oil is here to stay
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US rate cuts will push oil up to $120

</DIR></DIR>I’m still a buyer of oil at today’s price of $108 plus. In fact, I’m sticking my neck out and telling you I think that WTI contracts are going to hit $120 – and it’s going to happen soon.

It’s all down to the dollar.

The era of cheap oil is well and truly over; it is never going to return. Even Alistair Darling knows this. That’s why he postponed the scheduled fuel-duty rise in today’s budget statement as fuel inflation bites.
Be in no doubt, the current oil price surge is being driven by one factor alone – the stumbling US dollar.

Investors are not stupid. we all know where the dollar is heading. As the dollar falls and inflation for basic goods rises, investors are looking to protect their assets. This is driving the demand for commodities. This is why the oil price has hit new highs on a daily basis for the last week… this is why it will continue to hit new all-time highs in the next few weeks.

The dollar will fall further. Interest-rate futures show that the market sees a 62% chance the Federal Reserve will cut its benchmark rate by 75 basis points to 2.25% on 18 March. This is a staggeringly inflationary move, but not unsurprising. The only thing Bernanke appears to have learned from his predecessor is how to print money.

That’s bad for the long-term outlook for the US economy, but good for commodity investors like you and I over the next few months. The dollar fall will cause our commodity investments to rise as investors switch to the sector to protect their wealth from the fallout. It is as inevitable as night following day.

I never thought I’d feel sorry for the American middle classes – but I do now. Not only are costs of living rising at a time where their homes, pensions stocks are decreasing in value, but the Federal Reserve is now using their hard-earned cash to bail out bad decisions from the banking industry… to the tune of $200bn. That’s $664 for every man woman and child in the country.

It’s the dollar, stupid

Of course, it is not just the staggering and stumbling dollar that is driving the price, but it is the most significant and relevant today. The other factors that drive the oil price – supply, demand and geopolitical tensions – are almost irrelevant.



Monday, March 17th, 2008

Goldman Sachs Follows Money Morning Prediction That Oil Prices Could Approach $200 a Barrel

By William Patalon III
Executive Editor
Money Morning/The Money Map Report

Just days after Money Morning Investment Director Keith Fitz-Gerald reiterated his prediction that oil prices would reach $187 a barrel within 36 months, Wall Street giant Goldman Sachs Group Inc. (GS) issued a report predicting crude oil prices would reach $175 in the next few years.
Money Morning first mentioned Fitz-Gerald’s belief that the $187 price target was a possibility in an article back in December when oil was trading at $90 a barrel. Fitz-Gerald then reiterated his prediction in an interview with Money Morning two weeks ago. When oil prices took off on their record run, we published the prediction as part of an in-depth analysis of the crude-oil market.

The article ran last Thursday, and the response has been stunning: It’s been picked up by other news services, and posted on Web sites all over the world.

Then, just last Friday, Goldman Sachs followed suit and said that crude oil prices could hit $175 a barrel in the next few years as the commodities sector experiences "explosive rallies" that are spurred by supply constraints. The prediction was contained in an investment research report that concluded that political decisions on money flows, labor and technology were "substantially constraining supply growth" of commodities, Bloomberg News reported.

A significant under-investment in refineries, mines and land was helping fuel the leap in commodity prices.

"This will likely support the ongoing structural bull market in commodities until these policy-driven investment constraints are removed and/or demand is adjusted," Goldman Sachs said.



Doomsday scenario for oil

Michael Hamlyn
Tue, 18 Mar 2008

A gloomy forecast about the future of the oil industry — looking forward to a possible Doomsday within a very few years — was given to the Sub-Saharan oil, gas and petrochemical conference in Cape Town on Tuesday.
Chris Skrebowski, a researcher for the Energy Institute in Britain, told delegates that the oil supply will peak in 2011 or 2012 at around 93 million barrels a day, that oil supply in international trade will peak earlier than the oil production peak, and he forecast: "There will be supply shortfalls in winter before peak."

Skrebowski said that latest BP statistics showed that peak is already happening in some regions. "OECD production peaked in 1997 and has now declined by 2.2 million barrels a day (10.4 percent)," he said.

"Non-Opec, non-former Soviet Union production peaked in 2002, and has now declined by 771 000 barrels a day (2.15 percent). North America/Mexico peaked in 1997. North Sea — UK/Norway/Denmark peaked in 2000 and has now declined by 1.6 million barrels a day (25.4 percent)."

Producers are in decline
The figures show, he said, that around 28 significant producers are in decline, and that about 35 percent of global production comes from the decliners. Once that figure reaches 51 percent "we reach global peak oil", he said.

Peak oil will be earlier than most expect, Skrebowski told delegates. And he explained that global production falls when loss of output from countries in decline exceeds gains in output from those that are expanding.

And he cited eight key pieces of evidence that we are close to peak: a falling discovery rate; few large discoveries; ever more countries in sustained depletion; companies struggling to hold production; non-geologic threats to future oil supply; the current lack of incremental flows; few countries with real growth potential; the age of the largest fields; and sustained high oil prices.

"The oil companies are already struggling to hold production," he said. "In the third quarter of 2007, only Total recorded oil production gains. For the last 12 quarters oil production has drifted down for the five super-majors; has flat-lined for the 10 largest quoted companies and has flat-lined for the 24 largest quoted companies. Quoted companies' share of production is now declining, notably for the super-majors."

Non-geologic threats to oil supply
The non-geologic threats to future oil supply flows include resource nationalism in Russia, Venezuela, Bolivia and Ecuador, with perhaps more to follow; civil insurrection in Nigeria and Sudan; and cost inflation, ageing infrastructure, lack of skilled people, refinery constraints.

"How likely is improvement in any of these?" he asked. And he wondered: "Who will cap or ration production first?"

The world's biggest oilfields are old, tired and fading, he said. Of the 120 largest fields, 50 are in decline, 44 not in decline, 12 unclear and seven are undeveloped. The average age of the giants is 42 years, but the 120 largest fields give 50 percent of total production and contain two-thirds of reserves.

 

Re: Peak Oil; what it is and how it will impact your life


"In the U.S., up to 20 percent of the country's fossil fuel consumption goes into the food chain, according to the UN's Food and Agricultural Organization (FAO), which points out that fossil fuel use by the food systems in the developed world "often rivals that of automobiles".

To feed an average family of four in the developed world uses up the equivalent of 930 gallons of gasoline a year -- just shy of the 1,070 gallons that same family would use up each year to power their cars.

The average developed world diet uses 1,600 liters of fossil fuels each year, according to the U.S. based Organic Consumers Association (OCA). Only 256 of those liters come from transporting the food, says OCA.

By contrast, a whopping 496 liters goes into the chemical fertilizers used during the food growing stage, representing well over one third of the food chain's entire fossil fuel consumption.

Nitrogen fertilizer in particular is extremely fossil fuel-intensive, requiring 1.5 tons of oil equivalents to make 1 ton of fertilizer."

Can't help wondering if that includes all the food we generate and export to feed the rest of the world. It is NOT clear that all the petro materials going into the food chain is prorated to exclude the exports. Nor is it completely clear from that quote that the problem is solely the US. For the sake of argument, I'll assume that is the intent.

Time for Victory gardens and compost fertilizer.

 

This is on the first page of this now lengthy thread.


In the United States, 400 gallons of oil equivalents are expended annually to feed each American (as of data provided in 1994).[7] Agricultural energy consumption is broken down as follows:

· 31% for the manufacture of inorganic fertilizer

· 19% for the operation of field machinery

· 16% for transportation

· 13% for irrigation

· 08% for raising livestock (not including livestock feed)

· 05% for crop drying

· 05% for pesticide production

· 08% miscellaneous[8]

Energy costs for packaging, refrigeration, transportation to retail outlets, and household cooking are not considered in these figures.

To give the reader an idea of the energy intensiveness of modern agriculture, production of one kilogram of nitrogen for fertilizer requires the energy equivalent of from 1.4 to 1.8 liters of diesel fuel. This is not considering the natural gas feedstock.[9] According to The Fertilizer Institute (http://www.tfi.org), in the year from June 30 2001 until June 30 2002 the United States used 12,009,300 short tons of nitrogen fertilizer.[10] Using the low figure of 1.4 liters diesel equivalent per kilogram of nitrogen, this equates to the energy content of 15.3 billion liters of diesel fuel, or 96.2 million barrels.

Of course, this is only a rough comparison to aid comprehension of the energy requirements for modern agriculture.

In a very real sense, we are literally eating fossil fuels. However, due to the laws of thermodynamics, there is not a direct correspondence between energy inflow and outflow in agriculture. Along the way, there is a marked energy loss. Between 1945 and 1994, energy input to agriculture increased 4-fold while crop yields only increased 3-fold.[11] Since then, energy input has continued to increase without a corresponding increase in crop yield. We have reached the point of marginal returns. Yet, due to soil degradation, increased demands of pest management and increasing energy costs for irrigation (all of which is examined below), modern agriculture must continue increasing its energy expenditures simply to maintain current crop yields.
.....................

US Consumption

In the United States, each person consumes an average of 2,175 pounds of food per person per year. This provides the U.S. consumer with an average daily energy intake of 3,600 Calories. The world average is 2,700 Calories per day.[33] Fully 19% of the U.S. caloric intake comes from fast food. Fast food accounts for 34% of the total food consumption for the average U.S. citizen. The average citizen dines out for one meal out of four.[34]

One third of the caloric intake of the average American comes from animal sources (including dairy products), totaling 800 pounds per person per year. This diet means that U.S. citizens derive 40% of their calories from fat-nearly half of their diet. [35]

Americans are also grand consumers of water. As of one decade ago, Americans were consuming 1,450 gallons/day/capita (g/d/c), with the largest amount expended on agriculture. Allowing for projected population increase, consumption by 2050 is projected at 700 g/d/c, which hydrologists consider to be minimal for human needs.[36] This is without taking into consideration declining fossil fuel production.

To provide all of this food requires the application of 0.6 million metric tons of pesticides in North America per year. This is over one fifth of the total annual world pesticide use, estimated at 2.5 million tons.[37] Worldwide, more nitrogen fertilizer is used per year than can be supplied through natural sources. Likewise, water is pumped out of underground aquifers at a much higher rate than it is recharged. And stocks of important minerals, such as phosphorus and potassium, are quickly approaching exhaustion.[38]

Total U.S. energy consumption is more than three times the amount of solar energy harvested as crop and forest products. The United States consumes 40% more energy annually than the total amount of solar energy captured yearly by all U.S. plant biomass. Per capita use of fossil energy in North America is five times the world average.[39]

Our prosperity is built on the principal of exhausting the world's resources as quickly as possible, without any thought to our neighbors, all the other life on this planet, or our children.

Population & Sustainability

Considering a growth rate of 1.1% per year, the U.S. population is projected to double by 2050. As the population expands, an estimated one acre of land will be lost for every person added to the U.S. population. Currently, there are 1.8 acres of farmland available to grow food for each U.S. citizen. By 2050, this will decrease to 0.6 acres. 1.2 acres per person is required in order to maintain current dietary standards.[40]

Presently, only two nations on the planet are major exporters of grain: the United States and Canada.[41] By 2025, it is expected that the U.S. will cease to be a food exporter due to domestic demand. The impact on the U.S. economy could be devastating, as food exports earn $40 billion for the U.S. annually. More importantly, millions of people around the world could starve to death without U.S. food exports.[42]
Domestically, 34.6 million people are living in poverty as of 2002 census data.[43] And this number is continuing to grow at an alarming rate. Too many of these people do not have a sufficient diet. As the situation worsens, this number will increase and the United States will witness growing numbers of starvation fatalities.



And I like this illustration.


To truly grasp how much petroleum impacts our lives, let’s put John D. in his driveway, dressed for work and standing next to his dear Porsche 911 Turbo.

John is wearing a nice suit and tie. Unfortunately, the suit is wool and polyester, the buttons are plastic as well as the zipper in the pants. Remove 25% of the material from his suit, all elastic and plastic stays, the buttons and the zipper. Why? Polyester, dacron, rayon, orlon – these are all petroleum based, man made fibers. All plastic is petroleum based, as is elastic. Better get rid of the waistband on his under shorts too while we are at it. Abruptly, our friend John is rather chilly, as what is left of his suit, pants, shirt and under shorts have fallen around his ankles.

John wears glasses with polycarbonate lenses when he reads, and plastic contacts when he is doing anything active. These also require petroleum for manufacture, and will have to be replaced with real glasses made from glass. Oops – the frames are unbreakable plastic – those will need to go as well. While we are subtracting, let’s toss out his credit cards (plastic), the heels from his shoes (polyethylene-based rubber), and his all-weather watchband (faux-leather that is actually plastic). And we better get rid of that driver’s license too – the lamination is made from petroleum, as is the ink. And let’s not forget the ink that his money is printed with – yes, the ink which most currency is printed with is also a petroleum based product. As John stands with what used to be a suit around his ankles, the only thing he has left that hasn’t disappeared or fallen to the ground is his cotton undershirt, and he is completely broke.

Embarrassed, John spins his nakedness around and reaches for the door of his car…..and now we can do an even more rapid deconstruction. Empty the gas tank of gas, remove all the oil from the crankcase of the engine, remove all the transmission fluid, dump the heavy weight gear oil from the differential, and bleed all the fluid from the brake system. Each of these fluids and lubricants is derived 100% from oil.

Oh! Let’s not forget to remove every smidgeon of grease from every wheel bearing, every U-joint and any other petroleum lubricant from the vehicle. Now we can move forward a bit more, and peel the paint off. Automotive paint uses petroleum (tolulene, xylene, etc.) as base material. We can remove the tires, the rubber bushings from underneath every piece of the car, the steering wheel cover, the dash cover, the seat covers, the carpet, the seat padding and any foam insulation, the dashboard and all the A/C vents, and each and every rubber gasket. The jute-based carpet padding can remain – it is all natural. The safety glass (remember that layer of plastic in safety glass?), the seat padding, all the undercoating, all the CD’s, and the radio can go too. But the radio too, you might ask?

Every single wire in every single electronic device relies on petroleum-based coating as insulation around the wiring. Remove this insulation, and all you have is a mass of silicon and copper wires shorting out in a pile……so not only the radio, but every single wire in the car is coated by a petroleum product!

We are left with a pile of iron and copper, resting on a bed of jute padding. But if we just think a little more, we can reduce these as well. How is steel made? Iron ore is mined in Australia or other countries using massive vehicles BUILT and FUELED by petroleum products. The raw iron ore is then shipped by trains or trucks (BUILT and FUELED by petroleum products) to a ship (BUILT and FUELED by petroleum), which transports them to another country to be made into steel.

Once it arrives, the ore is unloaded by a bulk belt conveyer (BUILT and FUELED by petroleum), shipped from the dock to the ore processing mill by trucks (BUILT and FUELED by petroleum) where it is placed into a very hot furnace (which is fired by natural gas, a petroleum product) and smelted into pig iron. This pig iron is then shipped again by train or truck (BUILT and FUELED by petroleum) to a steel plant. Here, it is again melted in a special electric furnace, (electricity, generated by clean natural gas, a petroleum product) and made into various steel products which are then shipped to various destinations (using petroleum as FUEL).

If we truly want to account for the petroleum factor, steel cannot be made the way it is today. Aluminum is even more energy intensive, and that leaves us with a wad of copper wire sitting in the driveway, resting on our jute ‘rug’. John, now completely discombobulated, runs for the door of his home.

Unfortunately, the steel hinges and doorknobs are missing. When he touches the door it falls inward; his carpeting has disappeared, and the house is really hot and dark. It seems air conditioners are made from aluminum and steel, as are most appliances. Johns’ local Power Company uses clean, non-polluting natural gas to generate their electricity, so let’s kill all the power to the house. He is relieved to see his toilet still sitting there, but everything electronic and electrical has become a tangled mass of copper wires and circuit boards.

Water is spraying out of the ground, because John’s house was plumbed with POLY VINYL CHLORIDE (PVC) pipe, which is a 100% petroleum product. His furniture has turned into skeleton-like wooden frames, as the materials and padding used to make couches and chairs are long lasting, man-made fibers derived from petroleum. Rancid goop is oozing out of every cabinet in the kitchen, and everything that was in his refrigerator is slumped into a pile only a garbologist could be proud of. It seems that 90% of the packaging materials we use today are made from (you guessed it) petroleum.

His fresh vegetables and many of his canned goods are gone. John suddenly remembers reading an article about fertilizer and pesticide shortages. It seems these are also made almost exclusively from petroleum, and without them, modern mass-farming techniques are not viable. Crop yields are down, and the cost of trucking lettuce from California and Washington to other places is just too high.

And if you think this hurts, imagine everything you ever bought from a department store vanishing – because they were ALL IMPORTED from cheap-labor "elsewheres" using petroleum as fuel.

Forget all plastic – it is 100% petroleum.

Toss out computers and electronics as we know them today – we don’t have the insulating materials to build them without petroleum. We don’t have the massive electrical capacity to build anything really high tech – the cost of oil or natural gas to fuel the power grid has become too high.

Space travel? Forget it – the hydrogen used to power the shuttle is derived from petroleum, and it will not fly without the electronics and guidance system. And all the aluminum and titanium and other special alloys each require extremely energy intensive manufacturing processes, which use too much electricity that comes from gas and oil fired power plants.

I hope this makes you think just a little about the true effects of declining petroleum.

 

Re: Peak Oil; what it is and how it will impact your life

Not at all. This is one of the first threads ever started here on the Monkey. It is for information, not debate. You may not agree with the findings of some of the articles linked and quoted but that has nothing to do with the subject matter. I am not out to convince anyone, just saying "hey look here" and this is what I see.

There is no debate about "Peak Oil", anyone knows that it is a finite resource that cannot last forever. The only debate is on the timing and what effects it will have.

Some, like S&P, understand the market forces behind the price rises but have faith that those same market forces will result in increased investments to spur innovations that will offset any dire consequences.

I respect that position. I hope he is right. But I hold a more pessimistic outlook as to the future ramifacations. I don't believe that PO will be the end of the world, TEOTWAWKI event that some people claim, but I do think that it will be one of many factors that COULD lead to a drastic change in the way we live.

So far the only prognostications that I have made have been that the price of oil and fuel would continue to rise and that would effect the price of other staples in our lives. That has proven to be the case. I see it continuing well into the future.

It is only human nature to want to blame someone or something for our misfortunes. A scapegoat gives us a focus to expend our built up rage and frustration. I understand that also. And if that's what it takes for some people to feel better about thier situation then that's fine.

There is too much valuable information contained in this thread, now and I hope to come in the future, to allow it to denigrate into an agree to disagree, or a getting personal flame fest. Won't happen here.

There are no "sides" here. If you don't believe the information posted here, so be it. I am not here to defend a position. I put this out for general FYI. Take it or leave it. Only time will tell which if any of these ramifications of the oil shortages will come to pass. But if a few of you take steps, as I have done, to prepare for the worst case scenarios, then we will be far better off than those who dismiss it all as propaganda.

 

Re: Peak Oil; what it is and how it will impact your life

This comes from one of the many newsletters that I subscribe to. It is from a stock trading company. I don't have any stocks and don't trade them but I like the info contained in these reports. I think S&P called this a "Pump and Dump" letter. Meant to prompt people to buy into the stocks that they are promoting I suppose. I always edit out the part where they get to the sales pitch. But, fyi, thier interest is in Canadian Tar Sands projects so there reporting may be biased in that regard.
But I still find there analysis of the industry accurate and consistent with other sources.


The 16 Billion Barrel Investment Death Trap

By Keith Kohl | Tuesday, March 18th, 2008

At least we can say it was expected.

There's been a huge rush of speculators into the oil market, most of them looking for a hedge against the falling dollar. Yesterday, oil spiked to record $111.80 per barrel.

Soon after the record was hit, however, recession fears took over as oil prices dropped over $5 a barrel. So let me ask you, how can we expect speculators notto take some profits?

Now that $100 oil is a reality, we're told it's just some fluke.
"Don't worry, things will get back to normal." That's the attitude we're supposed to have, right? That's what we're told.

Well, I wouldn't bet on that just yet.

We can nearly assume oil prices won't retreat below $100 a barrel for a sustained period of time, even by drilling for oil in the ANWR, which I'll get to a little later. In fact, I really wouldn't be surprised if we never again pay under that benchmark for WTI (the light, sweet crude known as Western Texas Intermediate).

Let's take a look at how the U.S. is easing our concerns over where oil prices are headed and their proposed solution, drilling for oil in the Artic National Wildlife Refuge (ANWR).

Are Even Tighter Oil Markets Ahead?

The Energy Information Agency (EIA) released its Short-Term Energy Outlook last week. According to the report, we're going to see our petroleum consumption fall by 90,000 barrels per day in 2008.

Furthermore, a production increase outside of OPEC is expected to ease oil prices over the next two years.

On a global scale, the EIA changed their minds again. This time around they're predicting that world consumption will grow by 1.3 million bbl/d in both 2008 and 2009 (lowered from previous estimates). Not surprisingly, they've reported that the largest consumption growth is expected to come from China, India and the Middle East.

Well, at least we agree on something.

Even though the EIA is attempting to alleviate our concerns over $100/bbl oil, they're not doing a very good job. Oil prices have been able to break record after record in spite of oil inventories consistently rising!

Remember, inventories have only dropped once in over eight weeks.
I'm not too sure the U.S. government is too confident in the report.

Drilling for Oil in the ANWR

Although attempts to drill in the Arctic National Wildlife Refuge (ANWR) have failed in the past, another piece of legislation has reached the U.S. Senate to tap its resources. This time, drilling would be permitted if oil prices reach $125 a barrel.

It might not be hard to gather support considering oil almost hit $112 a barrel today, not to mention that we're in for more record gasoline prices once the summer driving season rolls around. Trust me, the problem won't be hitting $125 a barrel. I've already said that oil will hit $120 a barrelby July (if things keep going this way, we'll see them much sooner). There are, however, other things to consider.

Here's my problem with drilling in the Arctic: Are the potential oil reserves in ANWR worth the decade-long development efforts?

Let's assume for a minute that the legislation passes and the environmental protesters (I can only imagine the protests over this legislation) are appeased. I know it's hard to do, but for now we'll just pretend.

We won't see a drop of production for nearly a decade, if not longer. There would have to be a massive amount of investment dollars to tap the Arctic. According to the USGS, a 1.9 million acre area of ANWR may hold up to 16 billion barrels of oil. The amount of oil may be staggering, but it will take years to set up the infrastructure to produce and transport Arctic oil to the U.S.( I have to disagree with this to some degree. I believe we already have the infrastructure in place. At least in the Prudhoe Bay region.It may have to be expanded or upgraded but it is there.) Also, do you really think an extra million barrels per day in 2025 will be enough?

I didn't think so.

I do believe that ANWR is needed and will be opened up soon. But I also believe that it is not the pipe dream of returning us to $1 a gallon gasoline that many people are hoping for. MM

 

I have been working on this for a while now. Thought I'd finish it and get it posted. Forgive the typos.


I believe that a lot of the reason that the big oil boogey man myth survives and is so readily believable by some is due to the public at larges ignorance (lack of knowledge not intelligence) of how the oil business works. I call it the unknown profession. People who haven’t been around it really have no idea how it works.

Even people in oil producing states have a very misconstrued conception of it. There are people everywhere who actually think that when you "strike oil" that it blows over the derrick like in the movies. That is nonsense. Makes for good movie action tho. But it doesn’t happen in real life. Oh it can, but it is the last thing an oilman wants to see. In the early days of the industry it was more common but that was before they learned how to control it.

I thought that I would give a short ( maybe, that’s not easy for me when I get on a roll) primer on how the oil industry operates. And I will start by saying that this review will probably contain errors. I am not privy to all aspects of the business, and the details may not be exactly the same in all instances. But this is in general, the way I understand the business to work.

First of all, it is very surprising to people to learn that the oil companies don’t drill oil wells. In general, oil companies aren’t in the drilling business. They are producers, marketers. They sell the oil, transport the oil, refine the oil, they don’t drill for it. They sell the end product. The wells are drilled by a drilling contractor hired by the oil company.

The majority of the oil business is made up of contractors and independent companies.
The majority of oil industry workers are middle income, blue collar people.
I have been in the oil business for over 30 years and I have only worked for a "Major" oil company once in that time. And that was working for a drilling contractor who was contracted to drill wells for them.

The majority of the oil companies that are operating in the U.S. today are names that most people have never have heard of. Apache, Anadarko, Chesapeake, Devon, Kerr- McGee, XTO too name just a few.

The Drilling contractors who are hired by these companies to drill their wells are names like Noble, Nabors, Helmerich & Payne, Patterson, Pool, Trans-ocean, Pride and a myriad of others.

The service companies outnumber the drilling contractors by I would guess as much as 4 to one. Schlumberger, Baker, FMC, Vetco-Grey, Franks, Basic, Swaco, Martin Decker, of course Halliburton but also tens of thousands of small companies that employ handfuls or thousands.

If you live in an oil producing state, the vast majority of oil field workers are your neighbors down the street. They make on average $50,000-$80,000 a year. Very few break the 6 figure ceiling. And only a handful in the entire world ever see 7.

So an oil company is looking for a new site to drill. They hire a "Land Man" or a land lease company and they go out and secure the lease, work out all the details and do all the legal research. The oil company then hires (sometimes) a seismic company to do testing to see if there is the the potential for oil and where it may be found on the lease.

When a site is determined then the oil company's engineers develop a well plan. A construction company is hired to build a location site.A drilling contractor is hired, and a trucking company is hired to move the drilling rig to the new location.

A Drilling Consultant is hired (my job) to oversee the operation and drill the well to the oil company's specifications. A company is hired to provide and supervise the mixing of the drilling fluid, called "mud". Several companies provide services such as rental housing and offices on location, communications, phone and internet, intercoms, generators, diesel, water, welding services, trash disposal. I have right now on the well I am currently drilling approximately 14 companies providing daily services to this operation. All of them employed by an independent "minor" oil company. One company is a local family owned business with 4 employees and one is a major worldwide company with several thousand.

The well is drilled in stages and several more companies are employed at various times during the process. With all of the millions of dollars of equipment on location, from trailer houses and forklifts to the drilling rig, drill pipe and drill bits, the only thing that the oil company actually owns is the casing that is cemented into the well during each stage and the wellhead that sits atop it.

Once it is drilled all of that equipment is released and moved off. A Production Consultant is hired and different completion companies come in and do the completion work to actually bring the well "on line".

When I drill a well I never know if we have "struck oil" or not. There are several good indicators and if they look promising then we run a final production string of casing and prepare the well for the production department to come in and do the "completion" on it.

The entire process until oil or gas actually starts to flow is several months. The expense here in the U.S. for an average depth land well under 10,000 feet deep is around 3 to 4 million dollars. The deeper the more expensive and offshore is another ballpark entirely.

In the course of drilling one well around 60 different people will be employed in one stage or another. I have on average 15 people on location on a daily basis during the drilling process. There will be another 15 to 20 come and go for specific tasks during the job. Then about the same number involved in the completion.

Of those, the majority are per hour workers. A few are salaried workers getting paid a per day rate and a couple are paid per month. The hourly workers range from ( and I’m guessing here) around $12 per hour up to $30 an hour with the average around $20.
The day workers range from $100 per day to $1,500. With the average around $700.
The monthly salary range runs from $3500 to $10,000. With the average around $7,000.

The vast majority, I’d say around 75 percent of the people employed in the oil business, make less than $75,000 a year. A few, probably 20%, make up to $150,000. I’d say that probably no more than 3% to 5% make up to $500,000 and maybe 1% make a salary over 1 million a year with bonuses and stocks. The percentage of oil men who make a yearly salary in the millions is a handful worldwide. A fraction of 1% of all the millions of oil industry workers around the globe.

It is a good business to be in. There are some really good salaries to be made. And the fortunate few who make it up into the upper levels can make a lot of money. But that is not the norm. And the ones who do make it to those higher levels are the ones who have surivived (it is a dangerous business) and have years of experience. The ones who have left their families and gone to the ends of the earth. From the frozen artic to the burning sands, to the jungles. Who have risked life and limb for years to gain the experience to be able to have the lives of those 60 people in their hands. A bad decision can cost the loss of lives and or millions of dollars of equipment. There are some who make a really good salary but they have paid thier dues, they have earned it.

The two most common factors among all oifield workers are alcoholism and divorce.We leave home and family behind, go to whatever third world shithole they send us to in order to bring oil to the market so that we can fill our tanks, heat and light our homes. They say the hardest job in the oilfield is being a roughnecks wife. I don't know anyone in this business who isn't on thier 2nd, 3rd, or 4th marriage.

You don't make it to the higher levels without paying a price. There aren't many who don't know someone who was killed or maimed on a rig somewhere. Not many who haven’t worked in 30 below zero or 130 above. They aren’t called Roughnecks for nothing. 99% of the people in the oil business work in the field, in the heat and the cold, snowstorms and sandstorms, the mud and the blood. It isn’t until you get into the offices in Houston that you find the people with letters after their names. The engineers and vice presidents and managers that might make 7 figures if you include all of their bonuses and stock options. It isn’t until you get into the highest of those offices that you find the CEO’s whose multi-million dollar salaries so many people complain about and find so offensive. Even tho the truth is that they're salaries are no more extravagant than other CEO's of major corparations. Don't believe that?

Who would you say makes more, the CEO of Exxon, or of Ebay?

Rex W. Tillerson, Chief Executive Officer
Exxon Mobil Corporation
In 2006, Rex W. Tillerson raked in $13,009,495 in total compensation according to the SEC.

Margaret C. Whitman, Chief Executive Officer
eBay Inc.
In 2006, Margaret C. Whitman raked in $15,741,036 in total compensation according to the SEC.

Who makes more, the CEO of Chevron or Capitol One?


David J. O'Reilly, Chief Executive Officer
Chevron Corporation .
In 2006, David J. O'Reilly raked in $31,602,889 in total compensation according to the SEC

Richard D. Fairbank, Chief Executive Officer
Capital One Financial Corporation
In 2006, Richard D. Fairbank raked in $37,438,699 in total compensation according to the SEC.

But surely the CEO of Haliburton is astronomically high right?
Much higher than say the CEO of Home Depot.


David J. Lesar, Chief Executive Officer
Halliburton Company
In 2006, David J. Lesar raked in $15,295,787 in total compensation according to the SEC.

Robert L. Nardelli, Chief Executive Officer
Home Depot Inc. (The)
In 2006, Robert L. Nardelli raked in $13,124,8873 in total compensation according to the SEC.

He makes slightly more than the CEO of Home Depot but not of Pfizer or Pepsi.

Henry A. McKinnell, Chief Executive Officer
Pfizer Inc.
In 2006, Henry A. McKinnell raked in $19,418,446 in total compensation according to the SEC.

Steven S Reinemund, Chief Executive Officer
PepsiCo Inc.
In 2006, Steven S Reinemund raked in $20,243,042 in total compensation according to the SEC.

So this nonsense of oil compnay executives lining thier pockets with billions of our hard earned dollars is simply fantasy. They make some big bucks all right. But so does any CEO of any major American company. I should have stayed in school.

When the oil bust hit in the early 80’s it wasn’t the oil "barons" that were hurting. It was the average blue collar workers that depend on the industry for their livelihoods. There were banks that went under and many other businesses from construction and rental companies to restaurants.

So remember the next time you hear of a new law or tax to punish the "oil barons" it is actually going to hurt your neighbor, the guy behind you in line at Wal-Mart, or in the booth behind you at Outback. The Mom and Pop businesses that cater to the oil industry. Not the million dollar salaried CEO in Houston. Not Halliburton or Exxon. They are international companies and they do not depend on the business they do here in the U.S. to secure their incomes. They will do what they did in the 80’s. They’ll shift their operations to overseas ventures and cut back or comepletely idle down their operations in Texas, Oklahoma, California, Kansas and the other dozen or so states that have oil or natural gas fields. The people who will be hurt are the small companies, the blue collar workers, the local economies, not the evil oil barons. The hard working farmer who leases his land to the oil compnay to drill on and who gets a share of the production of those wells. The welder who saved enough to start his own business. The company who rents generators and trailer houses to the oil companies when they drill thier wells.

The cities ,towns, counties and states that get millions in tax revenue from the companies operating in thier jurisdictions. Those are the ones who will suffer.

Have you ever seen the West Texas bust towns? Bustling local economies until the oil companies moved out and left the area to the tumbleweeds and armadillos.

So back to operation. The well is drilled, it is completed and is ready to flow. The oil is collected into a battery of tanks. A company is hired to transport it from the well site to the refinery. Gas wells are connected to pipelines that flow to processing plants and electrical generating stations around the country.
The tankers, ocean or road, are usually owned by the oil company, sometimes, especially with overland tanker trucking they employ a third party contractor. Either way you have truck drivers, ship captains and deck hands that depend on those jobs. I don't have a clue what they make.

The refineries purchase the oil from the oil company. They may be company owned but they are operated as a seperate entity. Much like the Drilling division and Production in my area. Each are seperate entities with seperate budgets and profit margins.
The 3 to 4 million dollars to drill and complete a well takes years on average to pay for itself and to go on profit. In the Midlle East the time is measured in days.

The refineries sell the fuel to individually owned distributors. The distributor for my area that delivers diesel fuel to my drilling sites is a small family owned business.

They also distribute to individually owned gas station franchises. These gas station owners then set the price for the gas that you and I buy. Thus the range of prices from one station to another. Also from one area to another. The distance that the fuel must be transported and the various local and state taxes all influence the price that the station owner must charge to make a profit. The profit margin for a filling station owner on the gasoline and diesel fuel they sell is very low. Why do you think that you never see stations that only sell gas anymore? They make more money from thier groceries, soda pops, and other "convenience" items than they do on the fuel they sell. That is why "convenience stores" have taken the place of "filling stations".

Now I won't even attempt to explain how Wall Street works. Maybe S&P or another can help out there but the price per barrel of oil is set by trading on the floor of the NYSE not in the boardroom of Exxon. Oil is a publically traded commodity. The speculators and traders bid on future contracts for oil. The price depends on the competition for the contracts, the speculation of disruptions to the supply and the bidding of traders betting on the price rising or falling. The price paid by the refineries is dependent on the bidding wars in New York and other markets around the world.

The only way an oil company could influence the price would be to limit supply. But then thier revenues would fall. The more they sell the more they make. They have investors to answer to. Investors who would rather sell a billion barrels of oil at $50 a barrel than a million barrels at $100 a barrel. So restricting supplies to artificially raise the price is ridiculous.

I heard this argument in the early 90's when oil was first starting to rebound from the big oil bust. people said that "they" had capped wells all across Texas to raise the price and if they uncapped them that the price would go down. That was due to ignorance of the workings of the industry. A "stripper" well results when it takes more money to produce a well than you can make off of it. A lot of people don't realize that the drilling and completion is only the initial phase of a well. They don't just set there and flow oil from now on. They have to be monitored. A "Pumper" is hired to come by and check the well every day to make sure that it is pumping, that the pumping equipment is working, and to monitor the tanks so he can call a tank truck when they start to fill up. The pumping equipment can fail, and the well itself can start to have problems. Periodic maintenance is required on all wells to keep them flowing. Well Service companies are hired to come in and "Workover" the well to get it back to production. No matter what you do a well will eventually start to decline. The flow of oil or gas will slowly taper off. A time will come, usually less than 10 barrels a day production, especially if the price of oil is low, that it will cost more to maintain that well than you can make off of it. So it is capped (sealed shut) in the hope that sometime in the future it will become profitable to produce again. It has nothing to do with manipulating price. The most blatant proof of the oil companies inability to influence the price was in the early 80's. The domestic oil industry went bust. The price of oil dropped to $5 a barrel. Companies went broke. Tens of thousands lost thier jobs, banks went bust. It was comparable to anything happening today in the housing sector. Worse because of the interdependency of the local economies. It was a ripple effect that left no one in an oil producing state untouched. Where were these all powerful, manipulative "oil Barons" then?

The idea of the greedy, mega billionaire oilman is a stereotype, perpetuated by Hollywood and pop fiction. The days of the "Oil Barons" are long gone. No company is controled by one individual anymore. The CEO's are hired to do a job. And they are answerable to thier board of directors and thier investors. They make a huge salary but if they fail to perform they are out the door just like any of us. The competition among the oil companies, majors and independents, is fierce. They couldn't agree on who's buying lunch, much less conspire together to somehow influence the price of oil. Anyone who understands the basics of how this business works knows how impossible that would be.

But alas, the big oil boogeyman is so ingrained in our culture that it has taken on mythical proportions. It is a myth that will prevail for years to come. No attempts at educating people or explaining it to them is going to counter that. Especially to those who don't want to know the truth. But to many they have just never been exposed to it. They only have the Hollywood image to base thier opinions on. To them I hope I have enlightened you some. I would gladly answer any question anyone may have. But like I siad at the start. I am not privy to all aspects of the business. I am not an expert on anything. I am not an MBA, BA, or PHD. I am a high school dropout, blue collar, calloused hands, roughneck. I have worked my way up, after 30+ years of traveling the world, to a position to where I can finally make a good living. A very good living. But I am not (unfortunately) an "Oil Baron" or a mega salaried CEO. I wasn't smart enough to stay in school and get that MBA.

If I had maybe I would be in a Houston office deciding how much to charge for gasoline today!!

 

Re: Peak Oil; what it is and how it will impact your life

The Peak Oil Crisis: The First Shortages
Written by Tom Whipple
Thursday, 10 April 2008

Fuel prices alone are unlikely to bring America to its senses.
It clearly will take outright shortages with lines at the pumps, curtailed deliveries and many other misfortunes before serious measures to deal with declining oil supplies –- speed limits, rationing, mandatory car pools, improved mass transit -- are taken. Thus the question becomes: how soon?

Gasoline and diesel are two different animals in America. Most gasoline is used for personal travel and much of that for convenience and, as we shall find out shortly, is not essential to the economy. Diesel in America is, for the most part, an essential fuel in that it is used to perform money-making work or, in its heating oil form, keep us from freezing. If diesel becomes too expensive, and those expenses cannot be passed on, then the consumption of diesel will be cut back. This in fact is already happening -- the government is reporting that distillate consumption of diesel and heating oil currently is down by 3.1 percent as compared to the same four week period last year. This is undoubtedly due to the price of diesel and heating oil which is now around $4 a gallon, an increase of $1.17 a gallon since last year.

The word "distillates" encompasses both diesel and heating oil which are about the same thing; except that the clean air rules in the U.S. require most of the sulfur be removed before burning it in a motor. Currently there is a world-wide shortage of distillates which is most severe in China where long lines of trucks waiting for fuel are appearing across the country.
Before examining what might lead to shortages in the U.S., it is useful to get some understanding of distillates and the role they play in American life. Few appreciate that diesel is one of the best of the liquid fuels, for it will move your car further than the same quantity of gasoline. As a result, the gasoline-powered car is fast disappearing in Europe and is being replaced by small diesel-powered ones that are delivering 40, 50 and even 60 miles per gallon. In some European countries, diesel-powered cars are now approaching 80 percent of new car sales.

In America, about 77 percent of our daily consumption of about 4 million barrels of distillates is used in diesel engines. Three quarters of this is used in trucks and the rest is used "off highway" on farms or boats or at construction sites, etc. As we only use heating oil for about 6 months in the winter, consumption of distillates in the U.S. is highly seasonal with consumption building to a peak in January and February and then dropping off to the end of April when the heating season is largely over.

Distillate stockpiles in the U.S., therefore, vary by season with a buildup in the late spring, summer and fall followed by a rapid drop from late December to May as oil burners across the northern U.S. are cranked up. The severity of the winter too has lot do to with how much heating oil is consumed each year and there is always a danger unusual cold will deplete stockpiles to the point where shortages exist.

This seasonal pattern suggests that when distillate shortages come to the U.S. they first will arrive during the heating season, either as a result of unusually cold weather or simply insufficient increases in stockpiles during the warmer months. As a 42 gallon barrel of oil will make only abut 10 gallons of diesel and heating oil, the U.S. must import about 6 percent or about 250–350,000 barrels of refined diesel and heating oil each day. Most of this comes from "safe" places like Canada and the Virgin Islands, but some must come from the world market.

It is these imports that may become our Achilles heel, for we are now facing increasingly stiff competition as we purchase distillates abroad. Within the last year China has started to import large quantities of refined diesel. A new source of demand is the power shortage that is developing all over the world. As there is no quick solution to inadequate electricity being available on national grids, the demand for imported diesel to fuel emergency small local generators is already growing rapidly. The bottom line is that world diesel prices have nowhere to go but up.

U.S. imports of diesel appear to be dropping. For most of 2006 we were importing about 350,000 barrels a day. In the first quarter of 2007, we imported an average of 360,000 barrels a day but by last fall this had dropped to 260,000 barrels and was the same for the first quarter of 2008. This could of course turn around, but given growing demand and lack of an increased supply worldwide, it is likely that it will become harder and much more expensive to find diesel and heating oil to import.
In recent years, U.S. stockpiles usually peaked at around 135-145 million barrels in December and then declined to a low of 100-110 million barrels at the end of April.

So far this year seems about normal. Our stockpile at the end of March was 109 million barrels, a little low, but still in the acceptable range.
The two new factors this year, however, are the high prices and slowing economy which already is cutting demand by 3 percent or 130,000 barrels a day and the rapidly increasing demand for imported diesel around the world.

This balance bears close watching. In another two weeks, U.S. stockpiles should start rising again so that we can start accumulating enough heating oil for next winter. If demand continues to stay below normal, we will know that the use of diesel for industry and transport is causing at least some of the drop in demand. If demand returns closer to normal in a couple of months, then it would suggest that drop in the use of costly home heating was behind at least some of the recent decline in demand.

It is a little too early to panic. However, if stockpiles do not start increasing at something approaching normal rates, there could be trouble just ahead. If we should have a mild winter, then we may be able to escape for another year. If, however, we do not build adequate stockpiles this summer or next and winter turns out to be unusually cold, prices will spiral even higher and the first serous U.S. shortages in the last 25 years could easily develop.

 

Re: Peak Oil; what it is and how it will impact your life

Finally I have something positive to post in this thread. Somewhat.
I wanted to jump on this before anyone starts saying "Aha!! This is our salvation. Happy days are here again."

It is good news. it is good for oil drillers, producers, and consumers. But let's don't let the hype get our hopes up too much.

This is a significant discovery and will do a great deal to help lessen our dependance on foriegn oil, BUT, (there's always a BUT) it is being hyped in a lot of the media and being portrayed as something that it is not likely to be.

I'm talking about the Bakken field discovery in South Dakota and Montana. I have been following this for some time and watching to see how it developes. With prices settign records and affecting every sector of our economy people are looking for any hope.

There is a significant amount of recoverable oil in this find but like the much touted Jack wells in th Gulf of Mexico, it is not going to pan out to be the thing that weans us off the Saudi tit or that drives our fuel bills back to 2000 levels.

There have only been a handful of wells drilled and any estimates of reserves is mostly speculation and those vary wildly. Also this is an extension of the Canadian oil sands and is only slightly easier, and cheaper, to extract.

It is much like trying to suck out the water from a potato. it is not a free flowing easily produced field. And the drilling is much more intensive and costly.

So while this is a significant improvement, we are not likely to see any effects from it for many years and then it will most likely be minimal.

Well I guess I have been the doomesayer again. I hate to downplay good news like this but I just don't want to see people thinking that this will bring back $2 a gallon gas. It just isn't going to happen. But it may offset $5 a gallon gas for a while.



April 11, 2008

<NYT_HEADLINE version="1.0" type=" ">Billions of Barrels of Oil May Lie Under Northern Plains </NYT_HEADLINE>

<NYT_BYLINE version="1.0" type=" ">By CATRIN EINHORN
</NYT_BYLINE><NYT_TEXT>An area of shale and other rock in North Dakota and Montana is estimated to hold the largest potential oil resources in the 48 contiguous states, according to an assessment released Thursday by the United States Geological Survey.

The area, known as the Bakken Formation, might contain 3 billion to 4.3 billion barrels of oil that could be extracted using current technology, the survey said.

The United States had an estimated 21 billion barrels of proven oil reserves in 2006, according to the Energy Department. The new assessment by the Geological Survey could raise these reserves once drilling starts.

The survey reinforces what oil companies who have flocked to the region already knew: a boom is afoot. But geologists and industry officials alike cautioned that the number was simply an estimate, easily skewed higher or lower by technological advances or economic changes. If the price of oil drops, companies will not be willing to spend as much to extract it, and the Bakken Formation, which also extends into Canada, requires an expensive technique called horizontal drilling.

“Just because a study says this amount is potentially recoverable doesn’t mean that this is what we’re going to recover,” said Ron Ness, president of the North Dakota Petroleum Council. “The technology might change, and we recover twice as much. The economics might change, and we recover a third as much.”

The new estimate covers undiscovered, technically recoverable oil resources, which it defines as those “producible using currently available technology and industry practices.” That definition is one notch below the “proven” oil reserve category.

Senator Byron L. Dorgan, Democrat of North Dakota and the person who requested the survey, said the oil resources should attract more investment to his state and make the United States “marginally” less dependent on foreign oil.

“The technology always improves and advances,” Mr. Dorgan said, “so there’s probably much more recoverable in the future.”

The United States uses about seven billion barrels of oil a year.
The survey reveals a 25-fold increase from the last United States Geological Survey assessment of the Bakken Formation in 1995, which estimated that 151 million barrels could be extracted. Richard M. Pollastro, a research geologist with the agency who led the assessment, attributed the change to advances in drilling technology and an improved understanding of the formation’s geology.

With oil prices rising above $110 a barrel on the New York Mercantile Exchange this week, unconventional resources like shale rock are becoming more profitable to develop.

The Bakken Formation is the largest oil resource ever assessed by the agency in which the oil is dispersed throughout the rock instead of sitting in separate places. Known as “continuous” oil accumulation, this type of distribution makes the oil harder and more expensive to extract.
Mr. Pollastro estimates that it would take tens of thousands of wells to extract the oil.