Oil: Looking at $100

While a broader conflict with Iran isn't likely soon, one more big event could push crude prices into the triple digits.

By Steve Hargreaves, CNNMoney.com staff writer
July 14 2006: 3:30 PM EDT

NEW YORK (CNNMoney.com) -- As bombs fall in Beirut, pipelines explode in Nigeria and Iran shakes its fist at the West, energy traders and motorists alike are wondering one thing: How high can oil prices go?

"If another major event takes place, it's not at all unrealistic for oil to spike to $100," said Bruce Lanni, an oil analyst at A.G. Edwards. "And there's no fundamental reason in this current climate to see oil prices retreat below $70 in the next few months."

The debate, or speculation, focuses on the type and likelihood of another "major event" in the next few months.

Oil jumped to record highs Thursday and Friday, breaking the $78 mark, on fears that fighting between Israel and Lebanon will spread to the broader Middle East, which accounts for 30 percent of the world's oil output and holds 60 percent of its proven reserves.

http://money.cnn.com/2006/07/14/news/economy/oil_lookahead/index.htm?cnn=yes

Gas is only the half of it!

I filled my car, cost me thirty bucks and the thing was near E. I can remember when a tenner would more than fill the old wreck!

rise with oil prices.

going up by 35% in jan 2007

we'd "shop" around for another utility company - but there's only 1 that will service our area.. so much for "competition"

we heat with oil and supplement heating with a wood stove - we've already contacted our cord wood suppliers - we are getting 9-10 cords delivered over the next 3 months. heating oil is going to be a killer this winter too - we ordered 150 gallons this week - $2.20 a gallon

last winter we had about 6 cords, fairly mild winter - wood lasted us until mid-march.

going to do some major insulating in the basement and anywhere else we can.

meanwhile - gas station down the road from us was at $2.79 yesterday morning, yesterday afternoon it was up to $2.89, this morning it's $2.99

other stations in the area went from $2.70 to $2.89 in a day. gas gouging going on? sure smells like it

...drugs means you rethink your addiction. America sure as shit didn't spend much time looking at alternative fuels when oil was expensive, it damn-well has to now. Sure it's going to hurt, but it's better for us in the long run to kick this fucked-up habit.

PB

maybe even death if you are really, really addicted.

...to all fold as a country if oil hits $100 a barrel.

PB

at first, anyway. Now when gasoline costs $40.00 a gallon, or whatever the real-cost equivalent is, in 20 or 30 years...that's gonna be a real piss-cutter.

PB

It may well happen, but they've predicted $100 oil, what...a half a dozen times now?

It's these vultures that are driving the speculative price of oil up, not the actual situation.

...just as long as we realize that it's things like Bush railing about Iran and "financial" reporters predicting doom that are responsible for the price increases...

They're due to speculation.

for the most part, although the geopolitical issues are not helping. Why can't our Saudi friends flood the market and make everything better?
http://www.theoildrum.com/storyonly/2006/3/1/3402/63420
http://www.simmonsco-intl.com/files/Energy%20Conversation.pdf

http://www.intertanko.com/templates/Page.aspx?id=25611

Production isn't the issue.

price?
In case of the latter, what happened to the market forces of supply and demand?

Of course a shortage would drive up prices, but that's not what we're experiencing. Oil supplies are as high as they've been in decades. The recent price (past 2-3 years) hikes are more the result of speculation than anything else.

I think by "supplies" you mean "stored quantities", or perhaps proven reserves. I know by "supply" i do mean "supply rate".

Fact of the matter is even if one does not believe we're at or very near "peak oil", there's no denying that "peak discovery" was some 40 years ago - in spite of ever improving discovery technology.
There's also no denying that most if no all of the large fields are now past their production peak.









http://www.hubbertpeak.com/de/lecture.html

What evidence do you have that the above is not true or not relevant and that high prices are entirely due to speculation?

1) It's based on predictions of future oil production from existing sites,

2) it doesn't take into account the real possibility of new deposits being discovered, and

3) it doesn't take into account alternative sources of petroleum (like oil sands).


Regardless, oil reserves are currently at a 20-year high, which means supply is the highest it's been in 20 years. I don't believe it's "supply and demand" that's fueling the recent price increases, but speculation based on the perceived possibility of a reduction of oil production based on unrest in the Middle East.

raised by the Peak Oil theory? You're right that it's not just "supply and demand", there are many factors that contribute to the price of oil, unrest (not to mention open warfare) in the Middle East being paramount among them.

At any rate, it's not that the world is ever going to "run out of oil"...it's just that the cost of extraction is likely to increase drastically, thereby driving the price of crude up into the stratosphere.

Most of the predictions you speak of are well-founded on past experience, and the cost of extracting petroleum from oil sands is already prohibitively high. So unless there is some miraculous new oil extraction technology, or new deposits are discovered--and lots of them--I just feel like it's pure denial to act like Peak Oil is nothing to worry about.

Supply may indeed be at a 20-year high, but demand, especially from Asian nations, is set to out-pace it entirely.

Anyway, it's not about the actual current supply per se, but about the price, regardless of exactly what combination of factors drives it up. Just look at Zimbabwe:

http://www.4qf.org/_CurrentAffairs/index.php?p=346&more=1&c=1&tb=1&pb=1#more346

Alberta alone has over 1.6 trillion barrels of oil in sand...over 300 billion barrels which are recoverable with today's technology. Yes, it currently costs about $15/bbl to extract, but that cost has been steadily decreasing for decades.

Discoveries of new oil deposits are hardly a rare thing. Deep-well drilling has the probability of opening up huge new reserves that "Peak Oil" hasn't factored into its model.

Obviously, the best solution is conservation of fossil fuels and alternative energy production. As new advances are made, these become more cost-effective...further easing the demand for oil.

I don't deny that known oil reserves are slowly being depleted. I simply don't buy into the "doom and gloom" outlook of the Peak Oil crowd.

And it's a lot more useful to look at things and say, "OK, well what can we do to deal with this?" rather than saying "OH MY GOD WE'RE ALL GONNA DIE THERE'S NO HOPE AAAAAAAGH!!!", so I take your point. I just hope more people start doing more to deal with it now, instead of waiting until things do get really bad.

1) Existing sites are well explored and mapped; there's a know quantity of oil in them, and it's know how much has been extracted already. So it's know how much is still there. It's also known that the production rate of any field starts to decline once it's half empty. Of course there's a margin of error but there's no reason to think the margin is significant to the point that the field will yield surprisingly much more oil than expected.

2) The point about new deposits isn't just that it's new - the important question is "how much?" - how much oil is there, how much will it cost to extract and how much can be extracted per unit of time (what's the production rate).

3) tar sand and oil shale have the same problems as mentioned in point 2; both are exceedingly costly to extract and have a low production rate.


The whole point about Peak Oil is not that it means we're out of oil. The point is that unlike for the past 70 years or so, production is declining rather than keeping up with growing demand.

In the face of historic facts - mainly peak discovery and the accurately predicted peaking of "Lower 48" in the early 70's - it is no more than wishful thinking to expect significant amounts of cheap oil to be discovered in the future.

Still you have not provided evidence for your "belief" regarding speculation being the cause of increased oil prices.

Does anyone expect prices ever to return to pre-2001 levels?

And no, I'm not surprised. Spin is a mighty thing when applied to a few billion sheep.

....close down their oil pipelines in response of Israeli attacks in Lebanon. First off, I think the Iranians have learned much about Saddam's monthly lock-up of his Oil production in support of Palestinian causes, and second, they are now fuel demand nation to China and Japan. I think Iranians know have much advantage that they have in the world market, and darn proud of it. Of course, Iranians reducing 20 % of their crude oil production is pressure tactic, and may or may not work at the end, but it can boost pressure for peaceful settlement once oil prices reach close to $100

I think Iran has legitimate reason to lower their production of oil anytime they are threatened by the us…but how they use their threat is matter of unto them.

you're going to see shortages of pitchforks and flares at Home Depot. If it goes to five dollars, you're going to see them being used in million strong marches on Washington

Remember what some people said would happen if gas hit $3/gallon? Did you see any widespread protests?

"The debate, or speculation, focuses on the type and likelihood of another "major event" in the next few months."

With the events of the past week alone, I'm thinking major-event likelihood is great in the next three weeks...

gee -- perhaps that was the plan.

Let Israel start the fight -- so everyone will be pissed at Israel and not at bush and the GOP who really really want to beat up on Syria, Iran and North Korea.

It is all about the November election -- I'm betting on this as a motive for bush's inaction.

:banghead:

:(

August and September look-out. NOAA has predicted a very active storm season.

and see the benefits of our policy in the middle east.

Thanks AIPAC

bottom line, the oil is going to run out sooner or later. Better if people figure that out ASAP.

...The rise in gas prices we are seeing today are not related to interruption in supply, but rather the market factoring in the "possibility" that oil supply will be interrupted. Just wait until a major oil refinery is hit, or a few oil tankers sink in the Straits of Hormuz, and oil exports actually are affected --there may be no limit on how high the price of crude will go. ... and the effects will be felt here in the US immediately, not over months or weeks as we work through inventory.

(which i think is entirely valid) - how likely is it that Big Oil is factoring in decline of oil production due to depletion? They know it is inevitable, the discussion is not about "if" but about "when".
They know sooner or later they will have to start extracting unattractive sources of oil such as heavy crude, tar sand and oil shale, all slow and expensive to extract, requiring investments in new extraction and refinery technology. They are going to need extra money to do that, so they are building financial reserves now.

$ The economy stops. Deliveries will add a significant cost factor to virtually every product - from a point where the delivery cost was insignificant.
$ Food at the supermarket - already creating sticker shock - will go through the roof.
$ Enormous wage pressure by the workforce, who up until now, have been somewhat complacent about their daily crumb ration.
$ Stocks tank, erasing billions in retirement savings for the largest group of eligible retirees this country has ever seen.
$ Stagflation rules! A numbing cocktail of hyper-inflation mixed with a dead economy.

What did we really expect? Did we really think this country would survive a reckless fool like * with just an illegal war to show for it?