Gasoline: The new big U.S. export

CNNMoney ^ | 12/5/11 | Steve Hargeaves

[illiac]

NEW YORK (CNNMoney) -- The United States is awash in gasoline. So much so, in fact, that the country is exporting a record amount of it.

The country exported 430,000 more barrels of gasoline a day than it imported in September, according to the U.S. Energy Information Administration.

That is about twice the amount at the start of the year, and experts and industry insiders say the trend is here to stay.

The United States began exporting gas in late 2008. For decades prior, starting in 1960, the country used all the gas it produced here plus had to import gas from places Europe.

[illiac]

North Idaho....

[CowboyJay]

"The increased prices funds more technology for items like horizontal steerable drilling and make more sources economical to produces."

Supply has become increasingly inelastic. We have the same level of world supply we did 7 years ago despite the change in price. All that production from new technology isn't enough to replace the traditional plays that are going offline. They're more expensive than traditional recovery methods in terms of money, time, and capital invested and have a lower EROI. Higher prices make those sources marginally profitable for the producers. They don't make oil any more economical for consumers or from a macro perspective. And if there is no demand above a certain price level, then there is no increase in production.

Peak oil isn't a question of whether or not we have the technological capability to produce more. It's about whether we can increase our overall economic output enough to afford the increasing marginal costs of production, refinery, and distribution.

This chart obviously needs updating, but you can see what has happened to our economic output since 2000 in terms of being able to afford more oil.

[SunkenCiv]

The country exported 430,000 more barrels of gasoline a day than it imported in September... about twice the amount [as] at the start of the year... began exporting gas in late 2008. For decades prior, starting in 1960, the country used all the gas it produced here plus had to import gas

Thanks illiac. Blast from the Past sidebar:

OPEC Has Already Turned to the Euro
GoldMoney Alert
February 18, 2004

...The source for the euro exchange rate is the Federal Reserve, and I have calculated the euro's average exchange rate to the dollar for each year based on daily data.

US Imports of Crude oil
(1)	(2)	(3)	(4)	(5)	(6)
Year	Quantity (thousands of barrels)	Value (thousands of US dollars)	Unit price (US dollars)	Average daily US$ per € exchange rate	Unit price (euros)
2001	3,471,066	74,292,894	21.40	0.8952	23.91
2002	3,418,021	77,283,329	22.61	0.9454	23.92
2003	3,673,596	99,094,675	26.97	1.1321	23.82

We can see from column (4) in the above table that in 2001, each barrel of imported crude oil cost $21.40 on average for that year. But by 2003 the average price of a barrel of crude oil had risen 26.0% to $26.97 per barrel. However, the important point is shown in column (6). Note that the price of crude oil in terms of euros is essentially unchanged throughout this 3-year period.

As the dollar has fallen, the dollar price of crude oil has risen. But the euro price of crude oil remains essentially unchanged throughout this 3-year period. It does not seem logical that this result is pure coincidence. It is more likely the result of purposeful design, namely, that OPEC is mindful of the dollar's decline and increases the dollar price of its crude oil by an amount that offsets the loss in purchasing power OPEC's members would otherwise incur. In short, OPEC is protecting its purchasing power as the dollar declines.

[SunkenCiv]

[thackney]

We have the same level of world supply we did 7 years ago despite the change in price.

Only if you are ignoring some sources of petroleum like Canadian Oil Sands. We have reached back up above 87 MMBPD. We were several million BPD less in 2004.

http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=50&pid=53&aid=1&cid=ww,&syid=2004&eyid=2011&freq=M&unit=TBPD

All that production from new technology isn't enough to replace the traditional plays that are going offline.

Your opinion, not mine and many (not all) agree with me. Some of those old resources will go through many decades of enhanced production methods. The recoverable reserves from a typical field rises with the price as well.

And if there is no demand above a certain price level, then there is no increase in production.

That is a different concept than supply not meeting demand, as you first discussed.

Peak oil isn't a question of whether or not we have the technological capability to produce more. It's about whether we can increase our overall economic output enough

Of course some day we will use less petroleum and more of another source. The stone age didn't end becase we ran out of stones.

I would like to see your same chart ploted in tons of gold. It only proves that some commodities rise faster than the average market. Not really a surprise.

[CowboyJay]

"The recoverable reserves from a typical field rises with the price as well."

I think I know where we're missing each other here. That doesn't represent a movement along the existing supply curve. That represents a leftward shift of the supply curve, itself. That typically results in a new equilibrium point of a higher price, but the same quantity still being supplied.

"I would like to see your same chart ploted in tons of gold. It only proves that some commodities rise faster than the average market. Not really a surprise.

I'll go a step further. You can plot the same chart in terms of virtually any fungible commodity over the past 12-15 years, and while the amplitude will change and the peaks may move by a few months left or right, the basic shape of the graph does not. What it means is that the only way we can continue to consume at current levels is by taking on increasing amounts of debt, because our actual economic output - indexed to anything real - has been in almost nonstop contraction over that period.

[thackney]

The recoverable reserves from a typical field rises with the price as well.”

I think I know where we’re missing each other here. That doesn’t represent a movement along the existing supply curve. That represents a leftward shift of the supply curve, itself. That typically results in a new equilibrium point of a higher price, but the same quantity still being supplied.

- - - - - - - - - - -

It also means the predicted decline from the old fields, and the necessary new sources needed to make that difference up, declines.

[thackney]

What it means is that the only way we can continue to consume

I would also point out it means our GDP is become less a function of commodities and more a function of services and increasing value from the original commodity.

[CowboyJay]

"It also means the predicted decline from the old fields, and the necessary new sources needed to make that difference up, declines."

It's not a technical issue, so much as an economic problem. One of Saturn's moons might be made of hydrocarbons, and we could technically send a spaceship there to bring some back, but it's not of any value to us, because the cost would be such that it wouldn't produce a net economic surplus. The fact that the oil exists, and that we can technically get at it if we expend enough resources =/= "economically recoverable".

Even with the oil sands production, growth in world supply has flattened considerably in the last decade. It has nothing to do with a physical lack of oil, or because the technology does not exist to get it out of the ground. It's because marginal production costs are going up. And the proportion of world supply available to fuel the US economy is declining - because our economic output in relation to the cost of oil is in decline. I'm not alone in thinking this either. Production costs are already 4X what they were in 2000, and they're predicted to increase by 20%/yr for the forseeable future.

Whether or not we're actually at Peak Oil doesn't matter. The economic effects hit when the supply curve starts to flatten, and that happens ahead of the actual peak. IMO, we're already into the phase where US and world economic growth are starting to stagnate because of increasing inelasticity in energy supply.

[CowboyJay]

"increasing value from the original commodity"

The problem is, we're getting worse at that as a country, not better. That's why our GDP is in decline in relation to anything real. We're not creating enough real wealth or tradeable value that can be exchanged to afford the basic economic inputs we're using up, so we have to borrow forward against future production.

We've been kiting checks for gas money the last 15 years, and our creditors (individually, and nationally) are starting to put their foot down.

[Sherman Logan]

Do those Marxist walking dead out there on the left coast really believe the fossil fuel power plant necessary to produce the power that runs the busses is carbon footprint neutral—let alone negative?

Well, it is possible to produce the electricity to power the busses from hydro, wind, solar or nuclear power, all of which are carbon neutral.

And if the net carbon footprint of the electric bus is less than that of the diesel equivalent, it does reduce the city's carbon footprint.

[Freddd]

‘Gas prices seem to have dropped. Diesel however........’——————

I don’t know where you’re living, but it hasn’t dropped, it hasn’t ‘seemed’ to drop. If it was .99cents a gallon as it should be, or even close to that number, even $2 a gallon, I could understand you saying ‘gas prices seem to have dropped’. The rest is just propaganda.

[Paladin2]

It was below $3/gal in a few places during my Thanksgiving driving. I had not seen it below $3 for a long time.

I don't buy much gasoline anymore. A few gallons/yr for the lawnmower and tanks of gas for vehicles borrowed from relatives on occasion.

[Freddd]

Imagine how cheap gas would be if Obama would actually allow us to use our own resources....instead of letting Brazil, Cuba and others drill off our coasts...

[Freddd]

Try this news-—
—
U.S. is on pace to be a net exporter of petroleum products for the first time in 62 years, as domestic prices at the pump are at a record high for this time of year.

---

Did you get that? RECORD HIGH FOR THIS TIME OF YEAR. But keep up the propaganda for Obama, that prices ‘seem’ to be dropping.

[Paladin2]

http://www.DetroitGasPrices.com/retail_price_chart.aspx?city1=Detroit&city2=&city3=&crude=n&tme=6&units=us

[Paladin2]

Here's more charts of declining gas prices.