Right now we obviously have a stability problem in the Middle East that drives speculators to bet that oil prices will go higher. The speculators create a spike or bubble and that is why gas is now $4 a gallon. If we can get the Middle East to settle down (fat chance) and get our government to start developing our own huge oil reserves, oil could soon fall to $50 a barrel. That would mean that in most states gas would be under $2 a gallon.
I know about the Hubbert peak oil theory. It is not entirely wrong but it is based on conventional oil and he had no way of knowing the advances that would come in the technology. For example, oil developers are now able to extract about one-third more oil out of a well than they could just a decade or so ago. They also are drilling in places offshore to depths that were unheard of.
Let me talk some about the world oil supply and demand. There is still some spare oil production capacity in the world today and there is little reason for these high oil prices other than some production disruption in Libya and the oil speculators that are always willing to run up prices whenever they can cash in on any possibility of further turmoil.
Current production of producers is 89 mb/d and demand is about 89 mb/d but OPEC nations alone could pump an additional 4 mb/d anytime they wanted to lower oil prices. If you consider that the total cost of getting their oil to market is only about 5 dollars a barrel, they are making a killing by purposely holding back on full production. This cartel really is illegal. They are price fixing. They should get sued before the World Court and the WTO should deal with them.
Keeping oil prices too high for too long does have dangers for OPEC . Saudi Arabia knows the danger and eventually increases production and I suppose they will again. But lessor producers in OPEC get deliberately short-sighted because their governments continual overspend. If oil prices stay too high for too long, nations will start developing alternatives and they will be importing less oil. Also, high oil prices could put the world back into a recession and that would mean oil demand and prices would dramatically fall. Oil went from $147 a barrel to $50 during the last world recession. Only the OPEC production cut-backs started the rise of oil prices again.
Further, with the high unemployment in Europe and the United States and the conservation efforts that are ongoing, the more advanced nations are not going to be importing more oil anytime soon. Japan was in no growth territory before the earthquake, now they also will be using less oil. The main countries keeping demand strong are China and India but China has way overbuilt their manufacturing capacity and India lacks basic infrastructure to support much increased oil use. So although there could be a few more years of increasing demand from these two nations it is not going to last long enough to take up all the spare oil production capacity in the world that will be available.
Also, keep in mind that production in Iraq, Canada and Brazil will be increasing rather dramatically in fairly short order. The U.S. could also increase conventional on-shore and off-shore production fairly quickly and significantly if government and lawsuit crazy environmentalists would ever get out-of-the-way. It’s not the cost of the lawsuits that is the main problem, it is the 5 year delays that the lawsuits cause before anyone can even drill a new well.
Iraq alone will increase oil production over the next decade between 3 to 9 mb/d (what Iraq may actually be able to achieve depends on who you ask). The Iraq government goal is 12 mb/d. They now produce less than 3 mb/d. The Iraqi reserves are probably greater than that of Saudi Arabia and they can get it out of the ground almost for nothing.
World proven conventional oil reserves are about 1.4 trillion barrels of oil or enough for about 40 years even with some increase in demand. That figure does not include unproven reserves and undiscovered conventional oil. So, even as old fields fall off, new fields and modern methods that almost double the amount of oil extracted from a field should be able to keep conventional production high enough to meet world demand for at least another decade or two. Of course, if there is war in the Middle East or if OPEC holds back production for political reasons the equation will change temporary.
At prices between $50 to $70 a barrel unconventional oil could be developed. In time, it could make the U.S. an oil exporter and the profit could be used to pay off our national debt.
(the following figures are a judgment call of mine since various sources vary tremendously in their estimates.)
Oil shale reserves in just the Green River Formation in Utah, Colorado, and Wyoming have about 1.5 trillion barrels of oil – that is equal to six Saudi Arabia’s.
Known oil shale reserves in the rest of the US and the world could easily could add another 1.5 trillion barrels – or 6 Saudi Arabia’s
Oil sands reserves in Canada and Venezuela total 3.6 trillion barrels – or 14 Saudi Arabia’s
Other oil sand reserves around the world would add another 1 trillion barrels – or 4 Saudi Arabia’s
If you add that up there is about 7.6 trillion barrels of shale and sand oil and 1.4 trillion barrels of conventional oil. Therefore, the world has at least 9 trillion barrels of oil waiting for someone to come and get it. Some think there is way more oil on earth than that. We have hardly explored the oceans and some good minds think oil is abiotic and is not even a fossil fuel. They believe the earth may continually be producing more oil. let’s just be conservative and say the earth has 10 trillion barrels of recoverable oil and let’s say world demand will peak at about 100 mb/d. I know most projections say world consumption will go to 120 mb/d but I believe it won’t go much higher than 100 mb/d for reasons that I will explain below.
That 9 trillion figure tells me that the world has enough oil for over 250 years. Thus far in the whole history of the world we have used 1 trillion barrels of oil and there are at least 9 trillion barrels left. What oil shortage? There only has to be the “will” and the “means” to get the known oil extracted. Part of the problem with the “will” to abstract more oil is caused by the anthropic global warming liars and the phobic brainwashed that follow them. If we burned all the oil in the world it would make the trace CO2 gas somewhat higher on earth but it still would still be a trace gas. Increased CO2 would increase more plant growth and world food production and because plants use CO2 to live on the CO2 in the atmosphere would come to a balance.
Even if it could be proved that the world would get warmer due to increasing CO2 (which they have not proved at all), warming would only enhance plant life on a planet with increasing food needs to support the rising population. The “means” to get this unconventional oil out of the ground is already pretty well-known. What is needed to accomplish the means is a new U.S. administration that will ignore the Gaia worshipers and allow the major oil companies to extract the shale oil
So, why won’t the world use as much oil as some are projecting? For several reasons: First, we are learning to use oil more efficiently, modern vehicles run more efficiently, oil demand in the United States is actually falling. Second, alternative energy sources will reduce the need for oil. Third, populations in the countries that use the most oil per person are generally decreasing and aging, for example, Europe, Russia, and Japan. Fewer people and more retired people means less use of gas. Fourth, growth will not continue much longer at the rate it has been in China and India. There simply will not be enough demand in the aging first world nations for never-ending increased production of consumer goods. Also, China with their one child policy will be aging sooner than you might think. Finally, the world population will level off around 2050 AD and then begin to decrease.
By the way, they will be able to get oil out of shale and oil sands for $50 to $70 barrel with the new environmentally friendly in-situ extraction methods. The bottom line is that God gave the world plenty of oil that we can get out of the ground for reasonable prices, but speculation and wars drives up the cost and restrictive governments and Gaia worshipers limit the production.
As a salesman on the road for 39 years, I have watched carefully the price of oil and what car I drive. The oil “problems” of the 1970’s were drive by middle eastern desire to punish America (1973 Yom Kippur war) and money. America needs to understand that their dollar is, since removal of the gold standard (1971?–1972?, Nixon), backed by oil, and a commitment to protect our “friend” Saudi Arabia. As we destroy the dollar with debt, it’s value goes down and consequently the “price” of oil goes up. The value of oil does not change, just the value of the dollar.
Americans have needed since the 1970’s reduce their use of oil and move to alternatives. We have not done that because the price is too low. In 1983 I installed $10,000. worth of solar hot water on the house. It worked WELL for more than 20 years, and no hardware repairs were needed. What did NOT work well was the price. Immediately after installation the price of oil fell causing my payback period to push beyond equipment life expectancy. As long as we have cheap oil we will NEVER transit to alternatives. The result? Exactly what I predicted in 1983. American blood in middle eastern sand. We are now trading American blood for oil.
Cheap oil is very expensive. American blood for oil.
We don’t need to go to the ME for oil. There is plenty right here in the US. If we drill here and put up new refineries, we put Americans to work and revive our own economy.
Ed,
You say the value of oil does not change it is all related to the fall of the dollar?? How then do you account for the high oil prices in all the rest of the world? The dollar has not fallen that much since the 70’s, maybe 20 percent at most. It is true that the price of oil is going to be directly related to inflation so let’s say we had 300 percent inflation since 1973. Just prior to the OPEC oil embargo of 1973 oil was selling for about $5 a barrel so that would make $15 the equivalent price now. Throw in the fall of the dollar that you mention and it should be selling for about $20 a barrel if the price of oil was only related to the value of the dollar. However last I looked it was selling for $105 dollars a barrel.
In 1983 you spent $10,000 for just solar hot water (that is equal to about $25,000 in today’s money, folks) and then you think those kind of energy prices are the answer? I can get a years hot water for $300 a year even at 2011 energy prices. Sounds to me like you made a misguided investment and you still have not learned your lesson that alternatives to oil are still much too expensive. I do not consider present oil prices “cheap oil” and neither do most Americans. It is not cheap oil when even today we can get conventional oil out of the ground for $20 a barrel off our coasts.
If we had the leadership in this country to develop our own oil resources we would not need to rely on Middle East oil. As knowledge increases alternative energy will be able to compete with oil, but until then I suggest that we start drilling so that energy prices in this nation stay reasonable. Otherwise, welcome to the greatest depression and the 2nd civil war.
Hi Bob,
That is correct, and by the way, most of our oil still comes from right here or it comes from Canada or Mexico. If all Middle East oil were cut off we would survive, although there would have to be temporary price controls and rationing. We do not have to fight wars for oil even now.
Don
Interesting article, and there is lots I’d like to comment on but I’ll try to keep it brief.
World production of 89mmb/d includes all liquids production, not just oil. If we count just oil then production/consumption is around 74mmb/d. The difference represents other liquids production such as natural gas liquids or primarily propane. The distinction is important because for the most part propane and other natural gas liquids aren’t used as transportation fuels like oil is except for a small percentage and in a few countries. At 74mmb/d world production of oil has essentially been flat since 2005. Yet, in that same time frame the price of oil has probably doubled. Ok, opec controls about 35% of world oil production so they can certainly influence price, but with the remaining 65% of production coming from the rest of the world one would think it easy to increase production to take advantage of the higher price, yet that increased production hasn’t happened. Why? I think mostly because of depletion of existing oil fields is running around 6% world wide. 6% depletion means we need to put into production new wells/fields of over 4mmb/d just to maintain our present production. Going forward the world needs to add a Saudi Arabia every two years. That isn’t happening. Take a look at wiki oil megaprojects to see what the worlds new oil projects coming online for the next few years. Considering it takes probably at least five years from discovery to production we will soon be facing a major price hike or demand destruction from high prices in the next couple of years.
http://en.wikipedia.org/wiki/Oil_megaprojects
Notice in the chart how small the additions to production coming from Canada. I think Canada’s oil sands production is only around 2mmb/d inspite of being in operation for years. The hoped for ramp up from Canadian oil sands just isn’t happening.
To get the Canadian oil sands and other oil shales production really ramping would require steady or guaranteed oil prices above $80. Imo we are seeing the start of another oil price spike which will lead to another collapse in price like late 08. This is really bad news for the oil industry and consumers as it will cause financing delays for desperately needed new oil development.
I think over half of world oil production comes from a dozen or so major oil fields that were all discovered and put into development decades ago. I hope as you suggest that the newly discovered oil shales can replace these aging giant oil fields. I just don’t think they can be developed within the time we have before some of these few remaining giant fields go bye bye.
T Boone Pickens has a plan to get Americas truck fleet running on natural gas. I’ve read estimates that we could eliminate our dependence on foreign oil if we would just convert our truck fleets. Supposedly, we now have +100yr supply of natural gas from the gas shale fields. Between natural gas, coal and thorium reactors we could be energy independent. Yet, where is our leadership? and where has our leadership been? Bush Sr, Clinton, Bush Jr, they are knew it was coming but did nothing to prepare this country. I guess they all figured they could spill blood in the middle east to keep it flowing.
Just an afterthought about natural gas. 6mcf of natural gas has the energy equivalent of one barrel of oil. Ng sells for around $4.20 per mcf. Or, in other words 6mcf of NG costs about $25 and has the energy equivalent of one barrel of crude selling for $105~$115. (This is before refining costs, transportation and taxes.) Makes a lot of sense to swith our truck fleets to run on NG. Of course the Saudi’s know this, whether they still have sufficient spare capacity of a variety that the worlds refineries can use we’ll soon see.
Why develop more dirty oil refineries, no one wants one in their backyard. NG doesn’t need a refinery like oil.
Agree with your comments about hot water for $300 a year. That’s about what I figured. The only solar that yet makes sense to me would be passive solar incorporated into the house during construction. That assumes you have the climate for it.
I’m not aware of any domestic oil companies that can produce oil for $20, well maybe one. On shore which is usually cheaper finding and development costs run around $15~20, production, taxes and transportation anther $15~20. These are for current and future oil. Legacy oil fields certainly were cheaper but going forward I think costs will only rise from here.
Hi Tim,
I agree with most of what you said but that oil projection on that table is just speculation on what mega projects will produce in the next few years. At prices above $50 a barrel I think just about every old oil field is going to be looked over. Like I said in the post they can now get a third more oil out of a field. We have tens of thousands of stripper wells in this country that need horizontal drilling and gas and flooding techniques to get what they could not get out of the ground with the technology of the past. I think the only thing holding down production is investment money and the availability of drilling rigs but that should be gearing up.
The problem in Canada is the same problem that we have here. The government pressured by the environmentalists is limiting the development. Nevertheless, the Canadians are planing a new pipeline that will get their oil sands all the way to the gulf of Mexico.
T.Pickens is correct about natural gas even if he was wrong about wind mills, but again, government and environmentalists are standing in the way of natural gas production. Like you said, there is a solution to our energy dependence but the leadership is just not there.
I do not think these people just thought they could spill blood in the middle east to keep the oil flowing. I think they all worship Gaia. They want higher prices so that we use less oil and produce less CO2. I know for sure that Obama does. Also, remember that you have to have a oil friendly Congress and we have not had that. Why? because of people like Al Gore and the rest of the Gaia club.
I agree that my $20 a barrel figure for offshore oil is to low. I owned pieces of oil wells and we could still make money when oil was S15 a barrel (but that was over twenty years ago when a dollar could buy twice as much). What killed us is when oil fell to almost $10.
I guess the energy problem in the United States is really a spiritual problem just like all our other problems.
I have done some limited alternative energy investment, solely for a minimal capability in the likely event of an EMP. I just continue to let my mind percolate [relatively cheap] ideas to [try to] survive when things get ugly (ok, really ugly).
Thanks for the detailed post… I plan on trying to internalize some of the figures. I’m sure they’ll come in handy at some point in my travails. The Gaia are seemingly everywhere — it’s as if I’m (we’re) a few wise men walking in a sea of idiots. Sorry, just venting.
What’s mind boggling, from above, is how much positive there is for the country to “right” itself / fix itself (not to mention other great ideas like an influx of legitimate human resources) and even pay down the debt. One would think even the “unions” would be all for it. Yes, a sea of idiots.
The price of all commodities, including food and gas, are rising. This is due to yes, speculation and gov’t. But the main reason the government is responsible for rising commodity prices is due to the HUGE increase in monetary supply by the Federal Reserve. Creating trillions of dollars of debt on the books, loaning it to private banks at .25%, and then with the underlying agreement of banks to buy U.S. Treasury debt, is what creates the rise in money supply, which leads to inflation. And yes, AFTER THAT, speculation is involved and that raises the price even further. But speculation is not the beginning of that game, only the end part. The sad part is most Americans, including the President/Congress (of both parties) are completely clueless to this game. The Federal Reserve is a federal gov’t agency that is “advised” by the banks. This “advisement” is provided by the banks in the form of a board of advisory. For example, the CEO of JPMorgan Chase, Jamie Dimon, sits on the board of the New York Federal Reserve. This so-called “advisory” position is in fact controlling the Fed. The banks OWN this country, and you will soon find yourselves on the wrong side of that bet (unless you’ve got really good connections). The middle class is doomed in this country. However, beyond that, the real reason is that the U.S. has rejected God. Judgement is very soon coming. The only people who will survive the Angel of Judgement of America’s swinging sword are those whose head is bowed to Jesus. Don’t like that? I don’t care what you like. That is what God is saying to His people.
Don,
You didn’t mention israels oil and natural gas discovery. I’m sure they will find alot more as they search. Ik even though it was a major discovery it’s nowhere near the size reserves of Iraq or Saudi Arabia. I always wonder what kind of spoil the enemies in the gog Magog war invade Israel for. If it is oil why not just invade Iraq or Saudi Arabia?
Jim,
Interestingly, Joel Rosenberg (not to be confused with Joel Richardson) had a similar thought to yours in his book, The Ezekiel Option. Rosenberg incorporated huge oil and gas discoveries as part of the plot in his novel.
Frankie,
Sounds like you are using my post on oil to put out your dirty laundry list.
Jim,
I am aware of Israel’s gas discovery but this post is about oil and actually the gas is not going to not going to make any major change in the world gas market anyway. I heard that Israel has shale oil and some are saying the reserves could be equal to the petroleum reserves of Saudi Arabia but I included that speculation under the category of the shale oil in the rest of the world.
Gog is not coming to take Israel’s oil. They are coming to carry things off one can hardly carry off what is in the ground. Israel obviously will be very rich and increased with goods in the day this happens. We are probably talking about a Israel that has expanded to larger borders here.
Hi Don
Came across this weekly video from Perry Stone, I didn’t know which post to put this item and question so put it here under oil.
Perry describes three visions he had while taping his show last November
He descibes his visions starting around 6 or 7 minutes into the program.
http://media.voe.org/Manna_fest/2230452
The first one concerned nuclear cooling towers,
The second concerns panicing Holstein bulls which he attributed to the stock market and
The third concerned oil storage facilities in an unidentified nation, and what he seemed to describe as an emp attack on that country.
I don’t know what to make of his first vision, maybe it applies to Japan and the subsequent stock market sell off but it wasn’t much of a sell off. Holstein cows originated from Europe so maybe the EU has a banking crisis and it spreads everywhere else. I wonder if the third vision concerns an Israeli attack on Iran? Any thoughts on this?
The fourth and more likely possibility is that they were not visions from God at all. If people want to claim messages from God they need to get more specific so people can judge what they say came from God. Then they should be willing to be stoned if they were speaking from their own mind or presumptions.