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Oil, Oil Everywhere
The Wall Street Journal Opinion Journal ^ | Sunday, January 30, 2005 12:01 a.m. EST | PETER HUBER AND MARK MILLS

Posted on 01/30/2005 8:24:37 AM PST by Woodworker

The price of oil remains high only because the cost of oil remains so low. We remain dependent on oil from the Mideast not because the planet is running out of buried hydrocarbons, but because extracting oil from the deserts of the Persian Gulf is so easy and cheap that it's risky to invest capital to extract somewhat more stubborn oil from far larger deposits in Alberta.

The market price of oil is indeed hovering up around $50 a barrel on the spot market. But getting oil to the surface currently costs under $5 a barrel in Saudi Arabia, with the global average cost certainly under $15. And with technology already well in hand, the cost of sucking oil out of the planet we occupy simply will not rise above roughly $30 a barrel for the next 100 years at least.

The cost of oil comes down to the cost of finding, and then lifting or extracting. First, you have to decide where to dig. Exploration costs currently run under $3 per barrel in much of the Mideast, and below $7 for oil hidden deep under the ocean. But these costs have been falling, not rising, because imaging technology that lets geologists peer through miles of water and rock improves faster than supplies recede. Many lower-grade deposits require no new looking at all.

(Excerpt) Read more at opinionjournal.com ...


TOPICS: Business/Economy; Culture/Society; Editorial; Foreign Affairs; News/Current Events; Technical
KEYWORDS: arabia; canada; economy; energy; investment; oil; resources; saudi
As in everything, the key is economics. Just as the USA could swing the world oil price up or down in the 1940's and 1950's, today the Saudi's have the same relative position.
1 posted on 01/30/2005 8:24:38 AM PST by Woodworker
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To: Woodworker
the Saudi's have the same relative position

But only because we allow them to. The $5 to $8 billion investment to develop the Alberta reserves is chump change. With but the minimum incentives on the part of the already wildly manipluated tax code it'd be no big deal to make Suadi Arabia once again as irrelevant as it shurely deserves to be.

This, however, presupposes the neutralization of the enviromental Nazis.

2 posted on 01/30/2005 8:39:07 AM PST by An Old Marine (Freedom isn't Free)
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To: An Old Marine
This, however, presupposes the neutralization of the enviromental Nazis.

.... and there is the problem. Dealing with Canada on when, where and how you can drill and produce is a huge problem. It is made worse when an American company tries it.

3 posted on 01/30/2005 8:44:16 AM PST by HoustonCurmudgeon (Redneck from a red city, in a red county, in a red state.)
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To: Woodworker; RightWhale
Hubbert's Peak, the Iraq War, and the Economy Crisis
4 posted on 01/30/2005 8:44:20 AM PST by Willie Green (Go Pat Go!!!)
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To: HoustonCurmudgeon
True. However having done considerable business up there I can tell you that ALberta is the "Texas" of Canada in amny ways. Many Albertans want outta Canada even more than the most radical of the Quebecers.

If Quebec ever goes Alberta will follow within a year.

5 posted on 01/30/2005 8:48:41 AM PST by An Old Marine (Freedom isn't Free)
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To: An Old Marine

I have lived and worked in Alberta and understand how they feel. The problem however is with their national government and I don't see Alberta pulling out anytime soon.


6 posted on 01/30/2005 8:56:58 AM PST by HoustonCurmudgeon (Redneck from a red city, in a red county, in a red state.)
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To: Woodworker
As in everything, the key is economics.

This article does a good job pointing out that the key to understanding the market price of oil is political.

7 posted on 01/30/2005 8:58:52 AM PST by cornelis
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To: Woodworker
Demand for oil grows daily in China and India, where good government is finally taking root, while much of the earth's most accessible oil lies under land controlled by feudal theocracies, kleptocrats, and fanatics.

China is a wildcard

8 posted on 01/30/2005 9:07:10 AM PST by cornelis
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To: Woodworker



9 posted on 01/30/2005 9:08:42 AM PST by William Terrell (Individuals can exist without government but government can't exist without individuals.)
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To: Woodworker
The only reason oil is $50 a barrel is the futures market being manipulated by the left-wing super rich in their desire to hurt the American people.
10 posted on 01/30/2005 9:12:14 AM PST by YOUGOTIT
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To: farmfriend


11 posted on 01/30/2005 9:26:31 AM PST by Libertarianize the GOP (Make all taxes truly voluntary)
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To: cornelis

Ah well, money is the mother's milk of politics...


12 posted on 01/30/2005 9:40:14 AM PST by Woodworker
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To: Woodworker
It is best, as the article does, to distinguish between good and bad politics. Aristotle is helpful here: happiness is an end, money is not.
13 posted on 01/30/2005 10:24:09 AM PST by cornelis
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To: Woodworker
Good article here that counters some of the extremely hawkish books that predict "$100 per barrel oil within ten to twenty years." It does, however, look like demand growth is going to soak up essentially all of Saudis' excess production capacity within 3-5 years. After that nobody will have the ability to boost production enough to collapse market pricing. So investments made today in production of oil from tar sands are going to pay off and I think you'll see more investment in that area and in conventional oil drilling.

There's also a lot of potential to increase energy efficiency in the transportation sector. Energy was cheap all through the 90's so there wasn't much effort made to make cars, trucks and buses more efficient. But that's all changing very rapidly. I was reading about this Dutch company that has revolutionized electric motor drive and produces these very quiet and efficient electric buses. Look for those buses to go into use for short hauls at ski resorts and college campuses and then move into the mainstream. Hybrid engines are coming on fast in the auto industry too with 40% gains in mileage.

14 posted on 01/30/2005 10:46:39 AM PST by defenderSD (At half past midnight, the ghost of Vince Foster wanders through the West Wing.)
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To: YOUGOTIT
The only reason oil is $50 a barrel is the futures market being manipulated by the left-wing super rich in their desire to hurt the American people

If there were an adequate supply, they could not drive the price upwards. It would plummet. Speculation and price-fixing aloane cannot levitate this market. It is simply too big. They would never be able to hold this price if there were more oil pouring out of the ground - and especially American ground.

I blame our environmentalist wackos and politicians, not the speculators. We have oil here for the taking and we have simply locked it up, preferring to go nationally bankrupt rather than risk a few (a very few) arctic terns and our environmental fantasies.

15 posted on 01/30/2005 10:47:25 AM PST by Gritty ("Proclaim liberty throughout the land to all its inhabitants"-Lev. 25:10 [Liberty Bell inscription])
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To: An Old Marine
If Quebec ever goes Alberta will follow within a year.

Can we have Alberta? Can we, can we, pleeeze?

16 posted on 01/30/2005 11:05:35 AM PST by valkyrieanne (card-carrying South Park Republican)
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To: Woodworker; abbi_normal_2; Ace2U; adam_az; Alamo-Girl; Alas; alfons; alphadog; AMDG&BVMH; amom; ...
Rights, farms, environment ping.
Let me know if you wish to be added or removed from this list.
I don't get offended if you want to be removed.
17 posted on 01/30/2005 3:40:31 PM PST by farmfriend ( Congratulations. You are everything we've come to expect from years of government training.)
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To: Gritty
"I blame our environmentalist wackos and politicians, not the speculators."

And of course, you'd be precisely correct in doing so!!!

18 posted on 01/30/2005 8:35:39 PM PST by SierraWasp (al-Najr, 38, after casting a ballot for the first time in his life. "I get to say I'm human now.")
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To: Woodworker

Much of the economic cost of exploration and production is complying with some excessive environmental regulations.
I heard a couple days ago that Phillips 66 was getting fined a huge sum of millions of dollars because of clean air violations. I know this has little to do with the cost of pumping oil, but it is part of the trickle down economics environmental regulations pose.
Probably in the Mid East, a lot less attention is placed on environmental stuff, hence, the lower cost of production and exploration.


19 posted on 01/30/2005 9:22:29 PM PST by o_zarkman44
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To: YOUGOTIT
The only reason oil is $50 a barrel is the futures market being manipulated by the left-wing super rich in their desire to hurt the American people.

I hope you really don't believe what you typed because it's not true.

20 posted on 01/30/2005 11:12:32 PM PST by Major_Risktaker
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To: farmfriend

BTTT!!!!!!


21 posted on 01/31/2005 3:03:53 AM PST by E.G.C.
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To: YOUGOTIT

They can only manipulate the price so high until it becomes cost effective to extract it from shale. THEN the gig is up (and the mid-East becomes utterly irrelevent).


22 posted on 01/31/2005 3:16:14 AM PST by raygun
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To: Major_Risktaker
They did it to silver (just two people)in early 1980 so why could they not do it to oil? The daily trade in futures in oil is somewhere between 50,000 to 100,000 contracts and each contract controls 1,000 barrels. Why could a group of speculators not drive the price.
23 posted on 01/31/2005 4:48:05 AM PST by YOUGOTIT
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To: HoustonCurmudgeon

Neither do I, unless however, Quebec starts the race for the door. My prediction is that Canada as Canada would not last 5 years if Quebec left.


24 posted on 01/31/2005 5:19:01 AM PST by An Old Marine (Freedom isn't Free)
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To: valkyrieanne

Might not be that great an idea. THe most conservative Canadian thinks like a Kennedy Lib. DO you really think that they'd be prepared to give up their "free" health care even if it meant that they'd finally actually get access to medical care.


25 posted on 01/31/2005 5:21:31 AM PST by An Old Marine (Freedom isn't Free)
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To: Woodworker

btttttttt


26 posted on 01/31/2005 5:24:18 AM PST by dennisw (Pryce-Jones: Arab culture is steeped in conspiracy theories, half truths, and nursery rhyme politics)
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To: YOUGOTIT
They did it to silver (just two people)in early 1980 so why could they not do it to oil? The daily trade in futures in oil is somewhere between 50,000 to 100,000 contracts and each contract controls 1,000 barrels. Why could a group of speculators not drive the price.

Well, the Hunt Brothers.



and the Silver Bubble

The collapse of the silver market meant countless losses for speculators. The Hunt brothers declared bankruptcy.

By 1987 their liabilities had grown to nearly $2.5 billion against assets of $1.5 billion. In August of 1988 the Hunts were convicted of conspiring to manipulate the market.

_______________________

Well, so much for cornering the market.

_______________________

The Coming Oil Crisis



You say the price of oil will rise much higher than it already has. Why?

"The problem we have is that there are 2.3 billion people in Chindia," Leeb says, using shorthand for a combined China and India.

"Today, China and India use the energy-equivalent of 5.5 barrels of oil per person per year, while rich nations use 39. No matter how rosy your thinking is as to the global supply of oil, there is no way there is going to be enough to satisfy the demands of an extra 2.3 billion people coming online."

_______________________

The National Debt.

Please take a look at the charts and see how printing money and Nixon's gold standard move makes gold and oil rise in price.

Gold Chart

Oil Chart

The Hunt bothers were hedging because Nixon took the US off the gold standard in 1971.

The National Debt doubled between 1971 and 1979 and is on the RISE today because of Bush's policies.

Because of a higher global demand for oil (remember oil prices are based on Dollars) and the US printing money to finance the war just like Vietnam era everything is priced higher.

Check housing prices lately?

One more thing about oil prices and Asia. 1998 was the last time I bought gas in Northern Virgina at .86 a gallon. I just came back from working in Europe and I couldn't believe my eyes when I pulled into the gas station.

How could fuel sell at that low, low price.

The 1997-98 East Asian financial crisis cause all of those oil tanks to turn around and headed to US ports with load of oil and gasoline that couldn't sell in Asia.

As the prices fell the cop layed off stop people from speeding on the highways in 1998. Well it looked that way in those days. Higher speeds burns up more gas.

WOW! look at those 1999 enforcement moving citations increase in Ohio.

Thanks to the IMF South Korean Union Sues the IMF in the wake of the 1997-98 East Asian financial crisis.

So Asia is back on line. Oil is in big demand all over the world and I'm out of here!!!

27 posted on 01/31/2005 8:52:13 AM PST by Major_Risktaker
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To: Major_Risktaker

Yep, there's is enough for everyone forever

by Secret Insider

Half a century ago every car could have double mpg with higher pressure fuel injection.

At some point those who manage the in~dust~trial fleet mpg dial setting* will allow same.

HP FI allows each hydrocarbon molecule change into energy without waste.

You could breathe the exhaust & drink the distilled water that comes out.

It's no secret, look into it.

* A crude capacity & refining ratio formula.

Hint= after no jets flying in the days following 9-11 you should have seen all the JP-5 & JP-8 going up the flares because all the storage & pipelines were full.

28 posted on 01/31/2005 2:33:53 PM PST by norraad ("What light!">Blues Brothers)
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To: norraad
I see you rebuilt your Citroén. Did you install that higher pressure fuel injection system for double the mileage?

Then you could breathe the exhaust & drink the distilled water that comes out.

Hint= after no jets flying in the days following 9-11 you should have seen all the JP-5 & JP-8 going up the flares because all the storage & pipelines were full.

What do you mean "going up in flares"?

If you meant "FLAMES" why should they go up
because all the storage & pipelines were full?

29 posted on 01/31/2005 5:11:37 PM PST by Major_Risktaker
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30 posted on 01/31/2005 5:13:40 PM PST by jla
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To: Major_Risktaker

Nixon didn't have much of a choice but to take us off the Bretton Woods "gold standard." And the oil embargo just made the problem worse. The two combined were pretty much an act of war by France and OPEC, IMO.


31 posted on 01/31/2005 5:24:54 PM PST by Moonman62 (Republican - The political party for the living.)
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To: Gritty

Environazi's motto;
OUR WAY OR EVERYONE DIES.
They prefer giving money to terrorists who care nothing about the environment than being more self sufficient.


32 posted on 01/31/2005 5:31:23 PM PST by chuckwalla
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To: cornelis

So true.
Another point that is usually missed, is that oil is a global market. US does not have to be "energy independent" to seriously affect the global price. If we pumped 2 million barrels a day more (a fraction of our imports *and* a practical, obtainable goal) for our own use, that would, for all practical purposes, add the same amount to the open market. Bingo, oil prices take a serious dip.

40% of our domestic output comes from the North Slope. Drilling there passed the Senate by 1 vote. Where would we be right now without that one vote? Pretty scary to contemplate. Will we look back 20 years from now and wish we had tried harder to get those few votes needed to drill in ANWAR? Yep.


33 posted on 01/31/2005 8:29:41 PM PST by ChildOfThe60s (If you can remember the 60's.....you weren't really there.)
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To: Major_Risktaker
Unusable excess goes up the flares (tall burners whose tips would fill a living room) because it's cheaper than shutting down or reforming.

Didn't refit the Cit's because I was selling them as restored originals.

To make a real difference it has to be industry wide standard.

Fleet MPG has not really increased much beyond a minuscule factor of the formula stated above.

Radial tires made as much a difference as anything.

34 posted on 02/01/2005 12:52:34 PM PST by norraad ("What light!">Blues Brothers)
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