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To: thackney
Dear thackney,

“Refining companies, like nearly all producing companies, invest dollars to make products that make profits.”

Yes, I know. That's why I said immediately before the sentence fragment that you quote, “I guess the problem that I see is that there probably isn't much incentive for the refineries to do this.”

The lacking incentive, from my perspective, is “profit.” That's why the words that followed what you quoted were, “ order to use the additional diesel that they would produce after retrofitting, they'd wind up selling less refined product after having made major capital improvements.”

Not a very effective use of capital for most companies.

“’I don't know how we might move more toward the use of diesel passenger vehicles without some government intervention.’

“If it is cheaper, we will, baring government interference. If it isn't, I don't want to move that way.”

Maybe. A large move toward diesel passenger vehicles might well result in significant societal savings, as folks would use less fuel, from longer engine life (although I spend modestly more for maintenance than I did on my wife's gas-powered model). And the reduction in the overall use of oil would reduce demand for oil, thus causing a little downward pressure on the general price of oil.

“I buy vehicles based upon dollars per mile, meeting my specifications of usage and safety.”

As you point out, price isn't your only consideration. There are those “specifications of usage and safety.”

A lot of folks with whom I've spoken have “usage” issues with diesel. Noise, dirty and smelly exhaust, lack of acceleration.

But these aren't really issues in modern diesel vehicles, and haven't been for some years.

An incremental reduction in costs may not be enough to overcome ingrained beliefs and behaviors.

“’A long-term tax credit...’

“Please, no more social engineering via tax dollars.”

Well, that's why I said, “Something like a pretty sizable tax credit for purchasing a diesel passenger vehicle. I'd imagine most folks would be against that.”

I understand your preference for free markets. I prefer them, too.

And obviously, it would be very nice if our government stopped sitting on the domestic energy production industry, preventing them from doing what they can actually do.

But, the problem is that the markets for energy products don't seem particularly free, especially those parts of the market that are made outside our borders.

Energy production takes a lot of capital. So, even if we were to free up our own markets in our own country, the folks who run these very capital-intensive companies must still deal with, plan for, anticipate and figure out how to make profits when dealing with producers who don't necessarily abide by free market principles, who don't even always put optimization of profit over the long-term as their No. 1 concern, and in fact, who don't even always think it's important to obey the rule of law, especially contract law.

I'm just an interested outsider in this field, making no claims to expertise. Nonetheless, I've watched for a long time, and I try to connect the dots. As an example, I've watched Shell with their shale oil projects out west for some years. Obviously, the primary current problem with their work right now is the near-outright ban on producing commercially-viable amounts of oil from the shale. * sigh * That's a tough one to overcome.

But even during the Bush years, Shell was very cautious about what they were doing out there. This was in great part because of the great technological difficulties associated with producing oil from shale. But I read a lot of documents from Shell, and an interelated - and very significant - factor was Shell's concern that they'd start producing a bunch of oil that was profitable at a specific price - say, $50 per barrel - and they'd find themselves in an environment with $30 per barrel oil again.

And, obviously, making money, and sufficient amounts of it, are very important to companies like Shell. I read an interesting analysis about various internal rates of return on investment at different world oil prices, and how that dramatically affected Shell's plans to ramp up production. Obviously, if they anticipated sustained high oil prices, their interest was to ramp up much more quickly (by a factor of two over 10 years) than if prices were somewhat lower.

But they were understandably very skittish to really move forward much at all if they determined we might have another relatively prolonged period of prices below something like $50 per barrel.

Perhaps my observations are incorrect, but it seems to me that the folks who make significant efforts to control, or at least significantly affect, market prices through cartelization, don't seem to object too much to an occasional swoon in prices, as it clears out all the folks producing oil at significantly higher prices.

Which then allows them to restrict their production again, and drive prices back up.

I imagine that oil would be a lot cheaper and more plentiful if folks like the Saudis, the Venezuelans, the Russians and the Nigerians permitted free markets, honored contracts, and didn't try to cartelize the market.

But those things aren't the case.

And our domestic producers, to the degree that they have any range of freedom to act, must respond to these unfree market forces in a way where they can still make money.

All of which has a negative impact on us, American consumers.


33 posted on 08/09/2010 2:42:04 PM PDT by sitetest ( If Roe is not overturned, no unborn child will ever be protected in law.)
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To: sitetest

I believe Shell’s issue in Oil Shale is not so much techical as it is economics, politics and social acceptance.

Estonia has used Oil Shale for fuel for decades.

Brazil has been in Commercial Operations since 1992, see Petrosix for more info.

China has been operating Oil Shale for some years as well.

These all use above ground retorting combined with mining the shale like coal.

Shell has been focused on the most return for in-situ operations, partly I believe for political and social acceptance. Most of the US shale reserve are on federal land. There are some thin, low value oil shale in the Midwest, but there economics would be challenging. Green River formation would have the best returns.

34 posted on 08/10/2010 5:31:45 AM PDT by thackney (life is fragile, handle with prayer)
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