Why you may soon pay $10 a gallon for gasoline

lrymal · October 29, 2004

At the risk of sounding as an ''alarmist'', here are some lovely news ditties that were dated this week (October 27, 2004 and upwards).

One of the worriers is David Goodstein, a physics professor at the California Institute of Technology. In his book, "Out of Gas: The End of the Age of Oil," Goodstein writes that once production peaks, people will have to switch to alternative fuels in time to meet rising energy demand.

...traders once again worry over supply fears...

In the United States, the world's largest energy consumer, distillate supplies are lagging about 12 percent below last year and have been slow to build due to strong fuel demand from the trucking industry and disruptions to energy operations in the Gulf of Mexico after Hurricane Ivan.

OPEC asks U.S. to tap oil reserves

The Organization of Petroleum Exporting Countries has called on the United States to dip into its strategic petroleum reserve to help deflate oil prices, the cartel's president said Wednesday.
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"We had communication with them," OPEC's president, Purnomo Yusgiantoro, told reporters, referring to U.S. policy makers. "I asked them to use their reserves."

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ManiacLS1 · October 31, 2004

We just discussed this in my sociology class and here's the jist of it.

There is no shortage of fossil fuels. The oil companies make up all sorts of crap to have excuses to jack oil prices. No one stops them and they always get away with it which is why they continue to do it, it's a monopoly. Gas prices are upwards of $2 right now because they can get away with it, not because there's any shortage of oil.

GMSUB20 · October 31, 2004

Here is more information from the story of OPEC asking the US to use some of it's oil reserves!

http://news.yahoo.com/news?tmpl=story&u=/n...rgy_opec_usa_dc

"In the past, OPEC has regarded government stockpiles as a threat to its market influence."

"Before the U.S.-led invasion of Iraq (news - web sites) last year, leading producer Saudi Arabia raised output to prevent a supply shock and convinced the United States and other consumer countries there was no need for a release of their strategic stocks."

"But now the cartel, which controls around half world oil exports, worries sustained higher prices could blunt demand growth by hurting the world economy and spurring investment in alternative fuels".

DMAX Daddy · October 31, 2004

Actually one reason there actually is a shortage is China has increased fuel imports by 40% over the last 18 months.

1 Billion people can use lots of go juice.

vhato · October 31, 2004

Actually one reason there actually is a shortage is China has increased fuel imports by 40% over the last 18 months.

1 Billion people can use lots of go juice.

<{POST_SNAPBACK}>

According to the previously listed articles, the problem is the Oil Producers will not invest the money to increase refinement and increase transportation to supply enough oil.

According to the local refiners they did not have enough money to do this until 1999 when Oil began to increase in price. The end of year report for Chevron/Phillips in 2000 showed a 400% profit margin gain over 1999. They are earning the money now to make the huge investments in production/refining and transportation to meet the expected demand of the future. Oil prices will come down, but our wallets will need to be tapped a little while longer.

I feel if we were to tap our reserves right now it will take the oil producers longer to react in infrastructure upgrades. IMO if we can allow them to rob us for a tad longer prices will fall to point that will be FAR less than that of tapping the reserves.

I know what I know because I work closely with 7 local refineries from Chevron, Texaco, etc. I work in local government with the Dept of Homeland Security and Emergency Preparedness and this is what we are told during our weekly meetings/briefs with them.

lrymal · October 31, 2004

Actually one reason there actually is a shortage is China has increased fuel imports by 40% over the last 18 months.

1 Billion people can use lots of go juice.

<{POST_SNAPBACK}>

BINGO! SUDDENLY, China has discovered western-styled transportation and the automotive growth market is EXPLODING over there, like everywhere. Nearly any road contractor in the world is bidding on the infrastructure market in China.

Guys my age (mid 50s) has gone through at least two oil embargos against the U.S. causing gas rationing. The Arabs put the rationing on us due to our Middle East policy. Well, ok, that is sort of old news and we still are going through the after-effects of it.

But, China! Definitely China! That is a totally new wrinkle. They could easily be the major consumer of fossile fuels.

lrymal · October 31, 2004

Oh yeah, further comment. Of course the OPEC wants us to tap into our reserves! Of course they do, especially the Arab cartel. Lower the reserves, then throw an embargo on us, thus causing us to start rationing fuel during the winter and spring season.

Kiddos, I have seen this before and what is occuring now is like deja vue. It'll hit you when you see that the only reason a gasoline station's pumps have no customers is because that station is out of gas for selling. You then drive around, looking for the station with block-long lines. This might even be in addition to the feds clamping down on sells, allowing only odd-numbered license plates can get gasoline on MWF, and even-numbered license plates can get fuel on TThS. No gasoline sales allowed on Sundays.

This is the way it was back then, all because of OPEC.

tryn2lrn · October 31, 2004

Maybe we can make our bed covers with solar panels

hvac1000 · October 31, 2004

Here is how it works. Americans want things cheap. The businesses find that China and others can make products cheap. We send a lot of our business to China to get the cheap products. China keeps a bunch of our money as profit for making cheap producta for the USA. China becomes more wealthy and the people of China want what we have in our country. China starts to expand there economy and uses more natural recources causing a shortfall in oil availability for the rest of the world. The USA pays a HUGE price in fuel price increases and jobs lost by lack of manufacturing and support services. Eventually the high fuel prices OIL/Propane/Natural Gas also causes a hardship on our food production because all of our fertilizer ETC comes from oil. Then our food prices go higher and this has a effect on all our wallets.

We started this problem as a consumer wanting cheaper more affordable goods and now this is going to bite us in the A$$ big time. What we are seeing now is the tip of the iceberg of things to come. We have passed peak oil production in the world. The middle east is pumping water into there oil fields to raise the level of oil so it can be sucked out of the ground with out the fear of a cave in of the oil fields. With all the new demand for oil in the world our supplies will cost more and more because the cheap and easy oil is gone and now it will cost more to pump it.

These are facts and like most Americans we do not want to here about it because it is a threat to our way of life. Sorry about the ramble but we really need to get our act together before it is to late in the game.

RyanZ71 · October 31, 2004

Its all about people being greedy, wanting to have more $$$ to buy more things they really don't need but feel they must have to keep up with the girl/guy/family next door. People want more things so they demand more pay raises, the cost of living goes up as people buy more things, GREED GREED GREED! Mwaaahaaahaahaa!

lrymal · October 31, 2004

And, of course, the rest of the world is starting to catch up and model the so-called "American greed". China is an excellent case. Ok, we know it is greed. And we like our fast trucks, and we love driving 1/2 a mile to the corner store rather than walk.

Sooooo, with that established, and knowing that with the rest of the world demanding more and more petroleum products, what do we do in the meantime? Are we going to end up like some formerly prosperous 3rd world countries that have photos of six lane freeways with folks walking on them since automobiles are too expensive to drive?

Are we just going to let the "end of the age of petroleum" bite us? Eventually it really is going to happen. The world's appetite for fossil fuels will certainly pass up the United States' appetite and refineable crude will be in short supply.

Why aren't we NOW pushing for extremely aggressive development of alternative fuel programs? We can't just say, "hydrogen is the answer". So, who is going to develop the infrastructure for hydrogen cake fill up stations? First, the infrastructure will have to be developed for distribution, then the product.

If development began NOW, rather than when the long lines for gasoline occur, then I'd fill a little bit better.

And remember, Kerry sez he will develop this, and Bush claims.... oh heck, I don't know what either claim any more.

But y'all just remember these message exchanges, when you are in the gasoline rationing lines, and that we had a discussion on this. It has happened before in the beautiful age of flower power, Nixon, Ford, Carter, and aquarius, and I so don't want it to happen again.

XTOAK · October 31, 2004

"There is no shortage of oil" Sociology class? You need an economics class to get this one straight

Do you work in the oilfield or know anything about the term "natural decline" or about the econmics involved in running a business? First of all, there is only a finite amount of oil in the ground in any one field...those are known as reserves. Every oilfield has a decline curve in which it may have produced 20,000 barrels in the beginning and after several years is now producing only 10,000 barrels. There is less and less as time goes on and it gets harder for the oil companies to find this stuff as they got the "low hanging fruit", the easiest to find oil in the beginning...this is a fact that no one can change. Look at Saudi Arabia, the North Slope, the Gulf of Mexico, Russia, Mexico, any of the oil producing areas and you'll see their natural decline...some fields are from 4% up to 22% depending upon what the company is doing to help arrest or slow decline...they don't produce as much today as when they first went on line.

Secondly, at $54 per barrel, any businessman or businesswoman would be producing that stuff as fast as they could so as to maximize profits. What, you think their dragging their feet on production waiting for the price to go to $100 per barrel...not quite, all the producers know that they could eventually see the prices back down to early 1999 levels when it was $6 per barrel so they're doing all they can to produce.

Compound natural decline with increased consumption by China and OUR gas guzzling trucks, and you'll see that economic forces combine to drive the price higher. This doesn't even take into account the stricker rules for cleaner fuel as required by the EPA as this costs the refiners more money thus being passed on to you and me.

I'll predict that within two years we'll be well over $3 per gallon for fuel and oil will be over $65 per barrel. Just wait and keep hammering the throttle....

robsawatsky · November 1, 2004

If you take a look at the chart of "proven reserves" after the last few years, you'll see that if no more reserves were found and the US was cut off from imports, there would be no crude in but a handful of years. Of course, the proven reserves that are depleted are replaced by new sources over time. Some, because of new discoveries, but a lot because as prices rise previously discovered petroleum deposits become profitable to explore further, extract and transport to market. The oil sands in Alberta are a good example, as it is claimed that they contain more oil than all of Saudi Arabia's reserves. But oil sands petroleum is more expensive to extract and refine into the traditional products.

So, it could be claimed there is no shortage, at least not immediately. However, the sources of cheap to extract and high grade crude are becoming depleted. So, the price of crude goes up.

The other side is refinery capacity. I understand that very little new North American refinery capacity has been added in the last few years, particularly in comparison to demand. This could ultimately be a greater short-term problem than crude supply.