On Oil and Taxes

[Extra Stout]

Another thing. Listening to Rush today........waiting till all the catcalls die down.........a lady called in today who had been a trader on the floor of Wall Street and she made the statement, which I had made, and was scoffed at, that if they opened up ANWR and other areas and announced that they were going to start drilling the cost of oil would more than likely fall by 30-40 dollars almost
immediately. Rush said, yeah, but none would be produced for 10 years, her comment, yes, but traders are trading into the future and that is what they base their price on. And she made a valid point. Crude feel today on news that the Saudis were going to start producing from a newly developed field. And on the stronger dollar.
Any comments.

Added: She also said she though oil was in a bubble right now and
could have a dramatic fall in price.

Speculation isn't always rational. Drilling ANWR and the coasts doesn't supply all that much oil, but might it deflate the bubble sooner? Perhaps.

There is a bubble right now. Talking to my uncle, the fundamentals support $80-$100 oil which is still pretty high.

[xrayzebra]

Speculation isn't always rational. Drilling ANWR and the coasts doesn't supply all that much oil, but might it deflate the bubble sooner? Perhaps.

There is a bubble right now. Talking to my uncle, the fundamentals support $80-$100 oil which is still pretty high.

Boy aint that the truth, nothing is rational anymore. You got to worry about dumb tomatoes even. Who would have thunk it. I'll bet my old Grandpappy is spinning in his grave, shouting,
Tomatoes......OMG And I hope he doesn't hear about the price of watermellons, he used to give them away....

[ElNono]

Speculation isn't always rational. Drilling ANWR and the coasts doesn't supply all that much oil, but might it deflate the bubble sooner? Perhaps.

There is a bubble right now. Talking to my uncle, the fundamentals support $80-$100 oil which is still pretty high.

Drilling ANWR will do absolutely nothing. Look what happened since Brazil announced they found a 8 billion barrel reserve last November. It will take years to start pumping oil out of it, and speculators know that.
And FWIW, I personally don't give a crap about the environment. What bothers me is that a bunch of dudes sit down somewhere and decide how much I'm going to be paying for gas this week. It's an inflated bubble. So at the first opportunity I have to give them the middle finger, I will.

[MannyIsGod]

"A/C"

anybody tried living in SA hot months w/o any a/c at all?

When I spent summers with my grandparents in the valley as a small child they had no AC. It really wasn't as bad as people imagine. It wasn't great, but you just find places with a breeze or stay next to a fan.

[boutons_]

"Drilling ANWR will do absolutely nothing."

Bull , it enriches the oilcos.

We'll see if more supply affects the price:

"Plan Would Lift Saudi Oil Output to Highest Ever

By JAD MOUAWAD
Published: June 14, 2008

Saudi Arabia, the world’s biggest oil exporter, is planning to increase its output next month by about a half-million barrels a day, according to analysts and oil traders who have been briefed by Saudi officials."

http://www.nytimes.com/2008/06/14/bu.../14oil.html?hp

So what's the predicted per day volume PEAK from ANWR?

I love how the Saudis brief the speculators and manipulators so those players can place their bets and make their millions.

[TDMVPDPOY]

it doesnt really help much when you got ot economists coming out saying per barol is going to be 200bucks in the foreseable future, thats when OPEC knows hey if they can afford it, theres no reason why we cant set the sale price in that range.....

[ElNono]

"Drilling ANWR will do absolutely nothing."

Bull , it enriches the oilcos.

We'll see if more supply affects the price:

"Plan Would Lift Saudi Oil Output to Highest Ever

By JAD MOUAWAD
Published: June 14, 2008

Saudi Arabia, the world’s biggest oil exporter, is planning to increase its output next month by about a half-million barrels a day, according to analysts and oil traders who have been briefed by Saudi officials."

http://www.nytimes.com/2008/06/14/bu.../14oil.html?hp

So what's the predicted per day volume PEAK from ANWR?

I love how the Saudis brief the speculators and manipulators so those players can place their bets and make their millions.

What I meant by 'doing nothing', is in relation to the gas price.
And Brazil just found another field with ~30 billion more barrels.
LINK

We'll see how the market reacts to the news...

[boutons_]

If the US grabbed all 0.5M barrels of increased SA output, then it would supply about half an hour/ of US oil usage.

[Wild Cobra]

Internal combustion engines are so inefficient, it's not even funny. On average, even when aided with turbochargers, the efficiency is only about 20%. That is, you only extract 20% of energy from the gas you burn. Even if somehow we created the perfect IC engine, the law of thermodynamics limits your efficiency to 37% max.

This may be true, but I did hear modern engines are up to about 25% rather than 20%.

We need to move away from gas, and into electric and/or hydrogen. The problem with going entirely electric is that we need more R&D into battery technologies.

Move away, YES. But nothing is viable at current fuel costs.

What about the hazardous waste from battery production? As much as people don't believe so, gasoline engines are likely more green than the current alternatives.

Here's a company that has an all electric car on the market already: Tesla Motors
Their Roadster is too expensive right now, but they're planning for a more economical version, and if cars like this could be mass produced, the cost would be a lot cheaper.

Are those the ones that buy the batteries from China, and who knows what type of waste they are polluting some site with. In my opinion, since they sell to first world markets, they will probably demand we include them in our superfund sites and pay for cleanup in the future.

As far as hydrogen, I'm pretty sure Honda will lead the market with their FCX Clarity
They've been working on it for a long time, and they even have a small hydrogen station you can install in your garage and produce hydrogen yourself at home. I'm not currently aware of the range in these cars, but hydrogen is relatively cheap and easy to produce.

Hydrogen is not cheap to produce, especially to the quality needed to keep impurities from breaking down the fuel cell membranes. 44,000 watt hours for 1 gallon equivalent gasoline for vehicle use. It takes electricity to crack hydrogen out of water unless you go to a hazardous waste causing chemical method.

Has anyone ever seen a miles per dollar calculation of these alternate vehicles? For the time being, I think we are stuck with hybrids... with all the environmental damage they do in battery production!

[Wild Cobra]

You're not thinking forward. You're thinking right now.
Back then when we had near infinite amount of oil supply, and our entire infrastructure was based on combustion engines, it was the obvious choice to keep using what we had. It was more economical than exploring alternatives. Plus the technology didn't exist to have an all-electric or all-hydrogen car that was usable.

Are you thinking in the future? Increase hydrogen demand, and how much will it increase in price? Right now, the cheapest hydrogen is made from methane. We only have so much methane available before having to crack it from water using electricity. Increase electrical need to supply all the power for a car, and how much will that effect supply and demand pricing?

Right now oil supply is meeting demand, and it will get worse over time on the demand side. It's a limited resource. Simple as that.

If oil was meeting demand, fuel would be cheaper. We have enough oil reserves to drill cheaper than $100 per barrel and have 100% energy dependence. However, everywhere we have oil, the demonrats won't let us drill.

Many companies have spent a lot of money on alternative energy sources. That's why we have solar panels, wind turbines, etc.
As far as cars are concerned, the technology right now can build an all-electric car that can do ~220 miles on a single charge. The cost can vary between 1 to 4 cents per mile, depending when and where you charge your car. The beauty of all-electric is that you can charge pretty much anywhere. The infrastructure cost is minimal, plus electricity can be generated from solar, wind, hydro, etc that are pretty clean sources.

If I did my math right, costs for the Tesla would be a minimum of $0.07 per mile, by their numbers. 110 kw per km at $0.10 per kwh. In a dynamic world, electricity prices would sharply rise if we put enough of these on the road.

Hydrogen can also currently do about ~220 miles on a single fuel cell. The biggest caveat being that a lot of infrastructure will need to be built to handle it.

Too many drawbacks to a fuel cell vehicle. Have they worked out the degradation of the separator yet? Hydrogen prices at transportation volumes?

My biggest beef with lawmakers is that it's unfortunate they keep feeding the Detroit cartel with incentives and tax breaks, while it's mostly foreign and independent companies that build and bring to market actual cars with innovative technology. I'm sure that at least the independent company could have used a tax break or a 30 million incentive from the government while developing their car.

Maybe Detroit is still the only viable way to go with the known sciences...

[Wild Cobra]

silicon crystals are so fragile. is that the research you're trying to improve?

Silicon is amazingly flexible when it's thin. Look at the abuse smart cards go through!

[Wild Cobra]

The idea is to move away from silicon.

The bottleneck with silicon is the high cost of purification, not its brittleness.

I think it was in Popular Science in the early 70's. A guy developed a way to use sand to create solar panels. He couldn't get funding to go large scale. Energy was still dirt ceap back then, and this was suppose to be a cheap alternative as prices would rise.

Yes, pure silicon wafers get expensive. It's nothing but refined sand. In solar generation, the same purity isn't needed. I wonder if someone revitalized the reaserch I read about so many years ago?

[Wild Cobra]

Drilling ANWR will do absolutely nothing. Look what happened since Brazil announced they found a 8 billion barrel reserve last November. It will take years to start pumping oil out of it, and speculators know that.

Isn't that a defeatist thinking process?

If we never develope more oil because it takes time to get it, then how much worse will we be in those 8-10 years when we have no new wells?

[scott]

Hey Scott. Two things. I can remember here in Texas when the Permian Basin was the center of oil and oil was selling for next to nothing, they stacked rigs. Then when it went up they couldn't find or buy enough rigs to get into the fields. So, somehow this doesn't fit into the picture you have painted. OILCO's drilled but most drilling was done by independents. I had an uncle that worked with lots of wildcatters. He worked them all,
cable tools and rotary and did it all from dressing tools to driller to tool pusher. Another uncle who was a roughneck and got killed by falling out of a rig into the tools on the floor.

Another thing. Listening to Rush today........waiting till all the catcalls die down.........a lady called in today who had been a trader on the floor of Wall Street and she made the statement, which I had made, and was scoffed at, that if they opened up ANWR and other areas and announced that they were going to start drilling the cost of oil would more than likely fall by 30-40 dollars almost
immediately. Rush said, yeah, but none would be produced for 10 years, her comment, yes, but traders are trading into the future and that is what they base their price on. And she made a valid point. Crude feel today on news that the Saudis were going to start producing from a newly developed field. And on the stronger dollar.
Any comments.

Added: She also said she though oil was in a bubble right now and
could have a dramatic fall in price.

Wow, wasn't this thread to become so popular.

I don't have a whole lot of time to respond, so I'll only address the point of drilling domestically and so-called oil independence.

There seems to be a continued misperception that drilling ANWR will allow us to be free of foreign oil, or that the reserves down there are just massive. It simply is not the case.

First, the US consumes over 20 million barrels a day of oil.

Estimates for reserves in the ANWR assessment area (which includes all public and private lands) are that there is a 95% chance the area contains at least 5.7 billion barrels (low end) and a 5% chance the area contains 16.0 billion barrels (high end).

Despite the odds, lets assume the high end and all of the oil is economically recoverable (some barrels cost more than others to extract, we'll assume here they are all profitable to extract).

16 billion barrels of oil divided by demand of 20 million barrels a day gives us 800 days of supply, or 26 months.

Now, obviously, it is unrealistic to assume we could get 100% of our oil from that field. 1) It would be physically impossible 2) it wouldn't be economic (a refinery in Texas would still prefer crude from Mexico, for example, just because of shipping economics).

If we just wanted to replace current imports (approximately 1/2 of currently supply), we would then have 52 months of supply.

Now, what if we wanted to use these additional reserves to merely cut out certain countries we don't want to feel "held hostage" by? Say, OPEC for example.

In 2007, we imported approximately 2 billion barrels of oil from OPEC. So, we could kick them out of the picture for up to 8 years (again, this assumes high case for ANWR supply).

If we wanted to exclude Persian Gulf oil (775 million barrels in 2007), we could do so for approximately 21 years.

Keep in mind, it is not realistic to assume we could produce this much oil from that field... just not physically possible.

Also, many people don't realize who we import most of our oil from. We import about 10 million barrels a day. Here is the list of the top 5 nations from which we imported in 2007:

1) Canada - 1.86 million barrels per day
2) Saudi Arabia - 1.45 million barrles per day (OPEC Nation)
3) Mexico - 1.41 million barrels per day
4) Venezuela - 1.15 million barrles per day (OPEC Nation)
5) Nigeria - 1.08 million barrles per day (OPEC Nation)

It is worth noting that #6 on the list is Angola with a mere 496 thousand barrels per day. The top 5 nations listed above accounted for 69% of oil exported to our country.

Now, about the crude trader's comments. Yes, traders trade oil based on information in the future. However, the spot price of oil is NOT based on oil projects to be coming online 10 years from now. You can buy a 2018 contract today, and that would certainly be impacted by news of a field to come online in that time frame... but if congress allowed unrestricted access to ANWR tomorrow, you would see very little impact in the price of oil today.

Time for bed.

[Wild Cobra]

Wow, wasn't this thread to become so popular.

I don't have a whole lot of time to respond, so I'll only address the point of drilling domestically and so-called oil independence.

There seems to be a continued misperception that drilling ANWR will allow us to be free of foreign oil, or that the reserves down there are just massive. It simply is not the case.

I think too many people forget there are so many other places we have reserves, but are forbidden to drill. We have plenty of oil to make us independent for decades still. The oil companies are simply forbidden.

Want to see prices come down? Open the USA up to the known reserves, forbid or tax imports and exports heavily, and let the free market compe ion between the oil companies set the USA market prices.

[scott]

I think too many people forget there are so many other places we have reserves, but are forbidden to drill. We have plenty of oil to make us independent for decades still. The oil companies are simply forbidden.

Want to see prices come down? Open the USA up to the known reserves, forbid or tax imports and exports heavily, and let the free market compe ion between the oil companies set the USA market prices.

I'll have to address this more specifically later, but I think you significantly overestimate our reserves, our ability to extract them, and the economics behind that extraction. There are also a lot of places we have reserves and CAN drill, but don't because those reserves have not been able to compete on price with other sources of oil.

Second, heavily taxing or restricting imports and exports will have the effect of raising prices, not lowering them. Restricting imports to protect a higher-price domestic good does not result in that good being lower priced domestically. See ethanol for a current real-world example.

[Wild Cobra]

Second, heavily taxing or restricting imports and exports will have the effect of raising prices, not lowering them. Restricting imports to protect a higher-price domestic good does not result in that good being lower priced domestically. See ethanol for a current real-world example.

Only is such policies were implemented before we can supply enough for our own needs.

[scott]

Only is such policies were implemented before we can supply enough for our own needs.

For the sake of this thread, I'll only address this from an economic perspective, without any input of my personal opinion on the matter.

If we were able to supply enough oil for our own needs and do so economically, then there would be no need for import restrictions or quotas, because imports would not be able to compete on price and would never enter our market.

Now, if you wanted to prevent this domestic oil (which by definition would be price advantaged to other foreign sources) from leaving our market, then an export quota would do the trick. However, it comes at a cost. In this scenario, our domestic price would be lower than the world price, and domestic suppliers would want to export their oil to obtain a higher price for their good or service. Your plan has now literally forced them into receiving sub-market returns on their investment, which in turn would result in a flight of capital from these domestic oil companies (who wants to invest in a company that earns sub-market rates of return?), this less investment and less domestic production until the domestic market equalizes to the world market.

If your objective (again, back to keeping an eye on the objective) is to reduce the amount of oil we import, the only realistic way (short of discovering trillions of barrels of economically viable oil under a rock in Arizona somewhere) is to reduce demand for oil domestically.

In the meantime, I feel inclined to ask, what is it about importing oil that really bothers people, especially considering where 70% of those imports come from?

[ElNono]

This may be true, but I did hear modern engines are up to about 25% rather than 20%.

Compare with hydrogen at 40%+ and electric at 60%+...

Move away, YES. But nothing is viable at current fuel costs.

What about the hazardous waste from battery production? As much as people don't believe so, gasoline engines are likely more green than the current alternatives.

Wow, I can tell you know very little about rechargeable batteries. Li-Ion is what's mostly used since they don't have the memory issues of old nickel batteries. They are fully recyclable, and their components can be reused to make new batteries.
Do a google search for Lithium Ion battery disposal.

Are those the ones that buy the batteries from China, and who knows what type of waste they are polluting some site with. In my opinion, since they sell to first world markets, they will probably demand we include them in our superfund sites and pay for cleanup in the future.

This just shows your ignorance on the subject. Please do some reading, then we'll talk about it. And FWIW, current cars have plenty of Chinese components and plastics that are not biodegradable.

Hydrogen is not cheap to produce, especially to the quality needed to keep impurities from breaking down the fuel cell membranes. 44,000 watt hours for 1 gallon equivalent gasoline for vehicle use. It takes electricity to crack hydrogen out of water unless you go to a hazardous waste causing chemical method.

Really? Natural Gas is a hazardous waste material? News to me. Now if you would at least bothered to follow the Honda link I provided and did a little reading, you wouldn't sound like a complete ignorant on the matter.

Has anyone ever seen a miles per dollar calculation of these alternate vehicles? For the time being, I think we are stuck with hybrids... with all the environmental damage they do in battery production!

Hybrids use batteries too, in case you were not aware.
The biggest hurdle with electric cars has nothing to do with the enviorment. These are not alkaline batteries we're talking about here. The biggest hurdle was to have the technology to be able to secure a big enough Li-Ion battery against heat and or fire. Read up n the Tesla page on how they achieved that.

[ElNono]

Silicon is amazingly flexible when it's thin. Look at the abuse smart cards go through!

Do you realize that the chip inside a smartcard is entirely contained right on top of the contacts, and it's not flexible at all? The rest of the card is plastic.
Try this: With an old smartcard you don't use anymore, heat it up right around the contacts, then bend it where the contacts are. The chip should come flying right out.

[ElNono]

Are you thinking in the future? Increase hydrogen demand, and how much will it increase in price? Right now, the cheapest hydrogen is made from methane. We only have so much methane available before having to crack it from water using electricity. Increase electrical need to supply all the power for a car, and how much will that effect supply and demand pricing?

Currently hydrogen is generated in bulk mostly from natural gas by steam reform. The byproduct is methane and syngas. Methane and syngas can also be generated by coal. Further, hydrogen can be created from carbon monoxide and water.
And that's just for chemical generation. You also have what you mention, electroysis, using electricity. There's a third way, using heat.
Check the Hydrogen production page at wikipedia.
Even if we had to be stuck with electrolysis, there's way more ways to generate electricity here at home (hydro, wind,solar, coal,nuclear) than relying in a foreign limited commodity such as oil.

If oil was meeting demand, fuel would be cheaper. We have enough oil reserves to drill cheaper than $100 per barrel and have 100% energy dependence. However, everywhere we have oil, the demonrats won't let us drill.

We don't have that kind of reserves, get over it.

If I did my math right, costs for the Tesla would be a minimum of $0.07 per mile, by their numbers. 110 kw per km at $0.10 per kwh. In a dynamic world, electricity prices would sharply rise if we put enough of these on the road.

We're going to have to increase electrical capacity even when the pluggable hybrids come around. Things is, you can generate electricity here athome and in many ways. Down the road you might want to invest in putting some solar panels in your roof and generate some of your own.

Too many drawbacks to a fuel cell vehicle. Have they worked out the degradation of the separator yet? Hydrogen prices at transportation volumes?

The Honda is a fuel cell vehicle. You can lease one right now if you live in southern Cali. I guess whatever problem the separator had, they found a way to make it work. The biggest hurdle is infrastructure. Not many hydrogen stations anywhere outside of California yet.

Maybe Detroit is still the only viable way to go with the known sciences...

Well, Im sure they'll stick around. However they're not stupid, and now that they have to swallow a big ass inventory of Hummers and Suburbans, Im sure they're going to start paying attention.

[ElNono]

Isn't that a defeatist thinking process?

If we never develope more oil because it takes time to get it, then how much worse will we be in those 8-10 years when we have no new wells?

You assume that drilling there will give you independence from foreign oil in 8-10 years. You assume wrong. I would rather see the money spent there used to expand our electrical capacity. If electric cars are already being sold now, you can bet they're going to be out there in 10 years. Same thing with hybrids. I actually see the hybrids moving more and more towards fully electrical as technology improves and costs get cheaper.

[xrayzebra]

Wow, wasn't this thread to become so popular.



There seems to be a continued misperception that drilling ANWR will allow us to be free of foreign oil, or that the reserves down there are just massive. It simply is not the case.


Also, many people don't realize who we import most of our oil from. We import about 10 million barrels a day. Here is the list of the top 5 nations from which we imported in 2007:

1) Canada - 1.86 million barrels per day
2) Saudi Arabia - 1.45 million barrles per day (OPEC Nation)
3) Mexico - 1.41 million barrels per day
4) Venezuela - 1.15 million barrles per day (OPEC Nation)
5) Nigeria - 1.08 million barrles per day (OPEC Nation)

First, I am not or was not saying ANWR was the absolute answer to our problem. All fields will come to end, in time. Although, there is now some saying oil is still being formed. A whole new argument, not for this thread.

The point I was trying to make is that we should not restrict ourselves on where we drill. I read an article this weekend, which I am sure you are very familiar with the subject, deep drilling in the gulf. It stated that PEMEX and the Mexican government were considering joining with American companies in exploration of the gulf, simply because they don't have the capability or knowhow and their production is peaking and expect their production to start declining. Which isn't good news for us.
See #3 on your list. Also Mexico was thinking of negotiating some sort of agreement with our government on sharing of oil along the international borders. They and others feel that some pools may extend under each others territory. (which made me think of Cuba and China. They are drilling in the gulf between Florida and Cuba, 90 miles only separates the two.
llllo all you environmental folks, who don't want us drilling off our coast.)

Anyhow, I seriouslly doubt we could ever, now, become energy independent for oil. Under our free enterprise system and with so many uses of oil, I just don't think it is possible. But we certainly could have enough oil to sustain us in cases of wars or stop ourselves from become victims of blackmail by some of our friends in the ME.

And I suspect things are going to start heating up between the Pakis and Afghanistan. Afghanistan is rattling their sword and saying that they feel justified in going into Paki territory to root out those that are invading their country.

Added: One other thing. Wasn't there suppose to be a new pipeline coming out of the gulf into Texas or Louisiana that was going to bring about
3 Mil barrels a day? I haven't heard anything about it lately.

[boutons_]

"more oil supply" is a right-wing ideological rigidity that, as always, makes right-wingers as stupid as ever. Totally "faith based" oil bull .

[RandomGuy]

Has anyone ever seen a miles per dollar calculation of these alternate vehicles? For the time being, I think we are stuck with hybrids... with all the environmental damage they do in battery production!

Hmm

Kilowatt hours/charge* charge/miles*dollars/kilowatt hour= dollars/mile

One google under "electric car charge" gets this:

http://www.spectrum.ieee.org/nov07/5685

250 kilowatts*10 minutes= 2500 kilowatt minutes /60=41.67 kwhours

one charge=160 km=100 miles

rates for electricity in Austin, going forward:
http://www.bizjournals.com/sacrament...l?ana=from_rss

550 khw= $73.08 73.08/550=$0.1328 per kwh

.1328*41.67=$5.53 per charge, which gets you 100 miles, or

$0.0553 per mile. Call it 6 cents per mile.

Gasoline, assuming a 35mpg vehicle, is $4.00 per gallon 4/35= $.114, or call it $0.12 per mile

Seems like a winner.

BUT

Assume that the electric car costs a $20,000 premium over what a comparable gas-powered car would cost.

$20,000/.06= 333,333


MEANING:

It would take 333,333 miles driven before the electric car would "pay for itself" and be cheaper thatn the gas car in terms of Fuel, well beyond the normal life for any passenger vehicle.

LASTLY:

If the electric car cost the same as it's gasoline-equivalent, you should go for it for normal driving conditions, because the savings would eventually almost pay for the car itself.

Bear in mind that this was ONE calculation for ONE type of electric car using ONE utility rate that is likely understated. If you are using 41.6 kwh per DAY charging this car, your rates get a bit more expensive per unit of electricity, to my understanding, reducing the cost benefit.

BOTTOM LINE:

Still kind of a wash, but electric cars are getting there. Give oil another decade of record per barrel increases, and utilities installing a lot more renewable generating sources, and the equation WILL heavily favor the electric vehicle.

My grandchildern will not be driving gasoline-engine cars, except when their grampa let's them play with his old museum piece.