Gas is creeping up again.....

In my opinion, gas prices over corrected dramatically - what we're seeing now is a stabilization. Unfortunately, I estimate seeing gas prices hitting $3.00/gallon in the near future.

 

Well..I dont think that world oil production will increase by over 40% by 2030 the the eia does..
http://www.eia.doe.gov/oiaf/ieo/highlights.html

Unlike the 70's when just about the only oil being used was by North America, Western Europe, Japan, and the British dominions, now maybe sub-Saharian Africa, and few other places dont use much oil. Didnt China just become the leading car maker?

 

I'm sure your right... seems it "always" creeps up till the public screams and starts calling in......
Bush didn't seem to sensitive to asking them to mellow out, but watched record breaking profits every quarter time after time.

For the sake of argument... I concede that there are tons of speculations without real proof as the real power behind the scenes has learned how to hide.
But nevertheless.... if supply honestly drops to drive up prices.... why the crazy profits?
Isn't it obvious they are jerking our chain?


why shouldn't the profits stay the same?

In other words, if the oil companies have to pay "more" for barrell, then how come the markup to us is not balanced so they continue with an honest profit?... somehow the profit skyrockets?

If I sell you a watermelon for 5 bucks and it cost me 2.50... I doubled my money. But if the watermelon cost me 5 bucks and I charge you 15... now I've tripled my money!

Why is it just and fair to make "more" profit when everyone is feeling the crunch?... why not keep status quo?

Instead it appears to be a deceptive engine powered by greed and profits when this happens.

If anything.. the times they should make the "most" profit is when they have to pay "less" per barrell.. not more!

 

In the late 90's oil was about $10/barrel and a gallon a gas sold in the US for about $1. If that ratio held today, since oil prices are at $58/bbl, would mean $5.80/gallon gas.

We could ration instead of letting the market determine the price, but people would probably complain more. See supply and demand.

 

Arithmetic, Population and Energy:

[ame=http://www.youtube.com/watch?v=F-QA2rkpBSY&feature=PlayList&p=6A1FD147A45EF50D&index=0&playnext=1]YouTube - The Most IMPORTANT Video You'll Ever See (part 1 of 8)[/ame]

 

You make an excellent point... but the rational works in reverse of what you may think if you do the math.
Your point "proves" that the real expense of production does not inversely coorelate to the price of the barrel of oil.

If things were being equal, it "really should" cost 5.80/gal now, but since it does not and they are still making record breaking profits, it just goes to show you its not about the price of the barrel of oil that really makes the difference.

There are 42 US gallons in one barrel of oil. Giving an extra 50.00 bucks for the original barrel of oil is nothing compared to the extra money made from the raise in price for gas.
It also says that "

"
We all know they get much more per gallon of those products than gas, so we will just assume its the same price as gas and be gracious.

42 gallons X "$2.00 more a gallon at present prices" (equals 3.00/gal total) equals 84.00 more revenue per barrel than before when at 10.00/barrel, minus 50.00 extra cost per barrel equals $34.00 more profit per barrel now than in the time period you spoke of. (this was if oil was 60.00/barrel)


Another way to look at it.. if it cost 10.00/barrel and there are 42gal/barrels and gas sold for $1.00/gal, thats $42.00 total income/barrel minus expense of $10.00 for that barrel equals 32.00/barrel profit minus other expenses.

Now it cost 50.00/barrel and gas sells for $2.25/gal, thats $94.50 total income/barrel minus expense of $50.00 for that barrel equals 44.50/barrel profit minus other expenses.
Twice the profit!

Recently it cost 90.00/barrel and gas sold for $4.00/gal, thats $168.00 total income/barrel minus expense of 90.00 for that barrel equals 78.00/barrel profit minus other expenses.
Over 2 times the profit from when it was 10.00 a barrel!

It doesn't take long to see how the law of multiplication (X 42) makes it much more profitable when the gallons of gas costs more per gallon and totally offsets the extra price per barrel (which is only a multiplication factor of 1).

--------------

Just because the price for a barrel of oil doubles, that does not mean the price per gallon of gas has to double to make the same profit and if it does the profit is much more than double.
-----------
To clear my own head.. lets do it more simple and start off with the example of what Gas and oil cost now.

It cost 50.00/barrel and gas sells for $2.25/gal, thats $94.5 total income/barrel minus expense of 50.00 for that barrel equals 44.50/barrel profit minus other expenses.

Now lets double the price of oil "and" double the price of the gas!

It cost 100.00/barrel and gas sells for $4.50/gal, ( doubling the present price ) thats $189.00 total income/barrel minus expense of 100.00 for that barrel equals 89.00/barrel profit minus other expenses.

Doubling the price of oil and simply doubling the price of gas to correspond to that higher oil price doubled the profits!

Instead of profit staying the same for charging twice the amount per gallon "since oil cost twice as much per barrel", the profit margin doubled (89 divided by 44.50)

I've always been terrible at math and I'm by no means a math genius, this must be wrong... am I doing something wrong in my calculations?

 

Politicians and businessmen (particularly the oil industry) will find a way to explain the math very differently. Don't forget, there are three types of lies: lies, damn lies and statistics.

 

Your math is wrong. Let's assume all crude goes to gas, which we all know is not the case. Anyway, $4.50/gal works out to $189 total income ($4.50 * 42 gal/bbl) - $100 crude cost = $89 for profit and other expenses.

 

right you are.. thanks!.. I told you I was terrible!.. anyway, Unless I'm still off, the profit doubles as the price doubles making for twice the amount of bonuses, etc able.

 

I am 61 Years Old. I started Driving at 17. I have observed that every May Gas Prices Started to increase. Heating Oil And Natural Gas Prices Started To fall.

Than Every September, Gas Prices Started To Fall And Heating Oil And Natural Gas Prices Started To Increase.

So That's The Game! It will never change. We Will Always Be Slaves To It!!

 

I just talked with a patient that was in the oil field.. His job is to clean and return the saltwater/mud retrieved from the holes they dig and he said we have barely scratched the tip of the iceberg of oil reserves on this planet.

The basin here is massive and he said the one over by Shreveport makes this one look tiny and they keep finding more and more without even searching.
He concurred that the problem is not supply but mere manipulation of a marketable item.

He also agreed that until we can access our own energy ourselves "personally" from the sun or wind, it will continue to cost us through the nose permitting what the market will tolerate.
As long as someone else has to transport, compress, refine, package or bottle, or prepare in any way before we can use it, it makes it marketable and so vulnerable to the whims and control of those who wield the power and money.

We have "the pool guy, the cable guy, the septic man, the plumber, electrician etc etc etc" we already have tons of specialist we are dependent upon for their services to maintain our lifestyles.
Why would it not be so hard for a market to open for the "solar guy" who installs and troubleshoots home alternative energy systems?"

This would be the oil companies death blow to allow individuals to have their own means to harness energy and thats why we will be lucky to see solar panel prices become affordable soon.
The space on every roof and wasted backyard and field space could harness massive amounts of energy and wind to put into our cars and run our houses. But that would be selling the eggs from the golden goose and the golden goose owners don't want that.

 

Speaking of Shreveport, that's my hometown and we still have a home there. It's a natural gas shale that is probably the biggest one in the US yet. It's been around a while, but it's just now being considered for drilling due to new technologies coming online (e.g. horizontal drilling).

If that shale gets properly developed, I may be able to retire early...

 

Take me with you!

 

Must not be talking about the East Texas Oil Field as its production was getting weaker every year when I lived on top of it. It is down to 10,000 bbl/day now, about 2% of its peak production year. They were still drilling nat. gas well there 10 years ago, don't know about now.

If you want to get more oil out of fields like this you really have to work at it. It ain't cheap and free like you think it is.

 

Not cheap to get true, but the rewards once you find it is enormous.. similar to the expenses of the Gold rush.

But because its so expensive to access the abundance of the vast untapped acres of the planet, is even more reason to leave it alone and get was all around us everyday!

Digging for miles for fuel is a bit ridiculous in todays technology.

We could use up what we've already tapped while we move to the next.

But as expensive as it is, there is so much there it is still cheaper than the alternatives.

I really think Big money needs to take the lead and "just do it".
My hat is off to the windmill farmers.

We could install massive lightweight francis type turbines under water just off the coastlines that would turn 24/7 as the tides moved in and out.

 

In other words what you claimed isn't true. It isn't producing without even trying. Where I lived the city was having to force owners to cap wells they had abandoned as memory serves. And the loss in oil revenues as production declined was definitely felt in the city budget.

On the contrary, the alternatives make tremendously more economic sense compared to the drill, drill, drill mantra. Drill, drill, drill has not worked and never will. It's bizarre fantasy that conservatives have been hooked on for around 40 years now, claiming that we could drill our way out of imported energy dependency--while instead moving in the opposite direction. Look at the East Texas Field, look at the Gulf of Mexico. These areas have had the highest rig densities in the world. East Texas has already undergone it's massive decline, and the Gulf is within a couple of years of its peak. (The Gulf's nat. gas production peaked in 1997 and has been in steady decline.)

And shale is fool's gold. The amount of energy (and CO2 production) that it will take to free that oil makes it something that is only going to happen when conventional sources are exhausted. Gold rush? Money pit is more like it.

 

Shawn, I'm sure there are some cases that fit your scenario but the little town I'm in has also felt the recent pinch of shutting oil production too.. but its not because its not there.. its because its not as lucrative to extract it until prices go back up.
We are pulling out about 1/4th what we did last year.... not because we ran out all of a sudden, its not not as cost effective now compared to then.

Very similar to copper mines.. they sit idle with copper in them, then when the price goes up, people find it cost effective to get it.

Abandoning oil wells rarely happens unless they are dry.. if so, they would sell their mineral rights for cheap right? But for some reason, no one wants to let go of their mineral rights.. even though the well is not producing.
And why is that?.. because you never know when they will see fit to fire it up again.

Some wells just don't produce "fast enough" to satisfy large scale efforts to manage it.

Yes some wells go dry, but others are tapped into so large a reserve they don't even have a way to measure and know how much they have.

the guy I spoke to said the gas reserves at the Shreveport area has enough pressure to shoot oil equipment a mile in the air if it wasn't managed properly.

If you know how large the space is, you can calculate times the pressure to guess how much you have, but they can't even tell how large it is its so big!

When buffalo were plentiful, we would kill them just for the tongue and leave the rest, I recon oil exploration to that.

The wells that produce massive amounts at a time we are interested in, but set aside many of the lesser producing wells.

regardless, it takes money and technology to tap oil and we are a tiny nation and there is "allot" of the planet left.

But other sources are even more abundant than oil.. its just that we are "tooled up" for oil right now as all our stuff runs off it and our means to extract revolves around it.

Someone has to give up "allot" of money to go to other sources.

 

Where's that $20/bbl oil you were betting on back in Feb? We are at about 3X that at present.

They were correct about peak oil in the U.S. back then. It's too bad that some folks are still in denial about that ("drill, Baby, drill" types.) We are now approaching the global peak. The USSR appears to have peaked about two years ago...

Windstrings keeps looking for these vast consipiracies and has cause and effect backwards. If we want to see oil prices and gas prices plummet, all we have to do is cut back a few percent in consumption...actually we did just that in the second half of last year. The real lever on pricing is demand now. There was a time where supply manipulation and artificial supply restriction was driving price spikes, but that time is past.

In recent years demand growth finally began to exceed the capacity for supply growth. And we were seeing that reflected in oil prices. It took a massive global recession to interrupt the trend.

There was a time when it was possible for a single nation to crank up production to absorb shocks, but that excess capacity is gone. That was proven when we punched through $50, 75, 100, and 125 over several years. These were all levels where all Windstrings (and the oil industry's) mythical waiting capacity was supposed to come on line at the magical price points. Didn't happen. Why? Because it wasn't really there to begin with.

I anticipated and predicted the run up following the previous recession although the $147/bbl level exceeded my imagination. I pointed out to project teams that the long term industry estimates for crude prices were ridiculously low back in 2003 (see China and India as for my why...as well as where we were in the cycle, coming out of a recession.) Why did I not anticipate such high levels as we actually acheived? Because at the time I still believed some of the "waiting production capacity stories" would moderate us somewhere in the $50+ range. I nailed the cause and effect, but not the magnitude.

If folks want to see gasoline prices tumble, all they have to do is cut back their usage a few percent. Refinery capacity is already in surplus well above what we actually need. It would be child's play to improve fleet efficiency incrementally each year (normal replacement) so as to keep refinery capacity in surplus for 10+ years...perhaps forever. That's the up side to our being so incredibly fuel inefficient as a nation, it's not hard to make an impact.