Weekly Petroleum Status Report - 6/24/05

[jimntx]

3. What is "oil"? Most oil used isn't the perfect very light, sweet variety. Some is even 'tar'. The heavy tars just need more refining. If all the tar and shale is counted, the supply of oil is significantly higher. Canada has more "tar" than Saudi has oil.
We will NEVER run out of fossile fuels, and supply will always equal demand (absent price controls and quotas)

[post="279613"][/post]​

I realize that my 20+ years in the oil business mean nothing next to your superior knowledge of everything, but it is NOT just a case of "tar need[ing] more refining." You also have to get the stuff to the surface of the ground.

Your argument that we will never run out of fossil fuels because some of it will cost $1000/bbl to recover is specious. That is like saying a man with no mouth will never starve to death because he has the key to the grocery store.

Yes, petroleum that cost $1000/bbl will probably remain in the ground and available. But, even if it doesn't, do you see your airline (or mine) surviving the cost of the resultant jet fuel? Given today's cost of oil vs. cost of jet fuel, $1000/bbl oil will produce jet fuel that costs $28.83/gal.

By the way, you might want to rethink your absolutist statement that "supply will always equal demand." Ford, General Motors, et al might want to dispute that. Judging from the desperate attempts to get rid of unsold motor vehicles, I would say that supply most definitely does not equal demand.

 

[Busdrvr]

I realize that my 20+ years in the oil business mean nothing next to your superior knowledge of everything,

If there is one thing I've learned in my years of aviation, experience does not equal knowledge or competance. Heck, I've been working "in and out" of the Female anatomy for nearly 25 years now... that doesn't make me an OB/GYN.

but it is NOT just a case of "tar need[ing] more refining." You also have to get the stuff to the surface of the ground.

Now that's kind of the point now itn't it. Trust me, I know a little bit about the tar sands.

Your argument that we will never run out of fossil fuels because some of it will cost $1000/bbl to recover is specious. That is like saying a man with no mouth will never starve to death because he has the key to the grocery store.

No it's like saying he won't starve to death despite a bare pantry because he's go a basement full of food. There ARE alternatives.

But, even if it doesn't, do you see your airline (or mine) surviving the cost of the resultant jet fuel?

Absolutely. The entire "fuel is the problem" argument is a crock of sh1t. There may be some issues due to a certain airline operating at would is "really' an operational lose and INVESTMENT gain while they wait for their hedges to expire, and helping keep fares low all the while, but fuel ain't the problem. Think about it, the ticket taxes amount to more than fuel costs.

Given today's cost of oil vs. cost of jet fuel, $1000/bbl oil will produce jet fuel that costs $28.83/gal.

Which is significantly more than it can be made for. To effect a large change in the price of oil, we don't need a solution that completely replaces it, we need cheaper alternatives that cut into the market by 5-10%. We currently have the capability to do that. It'll happen.

By the way, you might want to rethink your absolutist statement that "supply will always equal demand." Ford, General Motors, et al might want to dispute that. Judging from the desperate attempts to get rid of unsold motor vehicles, I would say that supply most definitely does not equal demand.

Not at all. Supply equals demand. GM and Ford could sell every car they make. All they have to do is lower the price even more. Now, in truth, that vehicle may be worth MORE to GM or Ford cut up for scrap to help keep the prices up, but then you could say that the are contributing to demand.

 

[jimntx]

What a burden it must be to be perfect! You have my sympathy.

 

[RowUnderDCA]

remember Jim, the gift of the internet is that you get to engage other people's ideas without having to actually meet them. It's a good thing.

 

[delldude]

reality check
merger trouble ahead??
could spawn a sell off of U assets down the road..... B)

 

[jimntx]

reality check
merger trouble ahead??
could spawn a sell off of U assets down the road..... B)

[post="280313"][/post]​

Dude, you should be ashamed of yourself for giving us links to bogus, inept sources.

I offer as evidence this quote from the obviously spurious article...
"We could be at $100 by this winter," Texas oil analyst Matt Simmons told Britain's Observer. "We have the biggest risk we have ever had of demand exceeding supply. We are now just about to face up to the biggest crisis we have ever had."

Busdriver has already told us that demand can NOT exceed supply or vice versa. Now pay attention.

BTW, if this prediction comes true, airplanes won't be the only thing parked in the desert. My fanny and those of a lot of other junior flight attendants will be as well. The airlines will have no choice except to reduce flying only to those routes that are GUARANTEED to make money.

 

[jimntx]

Per Bloomberg.com...

At 1220 CDT, oil up $.85 at $59.60/bbl.

 

[BoeingBoy]

Per CNBC, it's trading up $1.15 at $59.90

On another note, I find it hard to believe that we'll see $100/bbl oil this year absent a major disruption in the supply chain - whether intentional, accidental, or natural (we are in the hurricane season, after all). There does seem to be a number of traders betting on $80, however. According to Bloomberg, there are almost 7000 options held for December delivery at $80 - up about 90 times from the 77 such options held in Jan. Bloomberg converts this to a 21% chance of $80 oil by Dec.

On still another note, I tend to agree with Busdrvr in one respect. As in most manufacturing industries, supply & demand tends to be "self correcting" over time. When demand exceeds supply, some combination of increasing prices and increasing production brings the two in line. When supply exceeds demand, the opposite occurs.

The problem with petroleum (crude and refined products) is that there's little world-wide production capacity to offset increased demand, so that leaves only price as a mechanism to reduce demand when it exceeds supply (or looks like it will). This leads to bigger price fluctuations than would be the case if production could be increased more than marginally.

Jim

 

[700UW]

Crude oil prices rose above $60 a barrel Wednesday amid concerns about U.S. supply disruptions as a tropical storm forced oil companies to evacuate rigs in the Gulf of Mexico.

Light, sweet crude for August delivery on the New York Mercantile Exchange rose 62 cents to $60.21 a barrel in electronic trading by afternoon in Europe. The highest settlement price for the front-month crude futures contract on the Nymex was $60.54 per barrel on June 27.

 

[sfb]

Crude oil prices rose above $60 a barrel Wednesday amid concerns about U.S. supply disruptions as a tropical storm forced oil companies to evacuate rigs in the Gulf of Mexico.

It would not surprise me at all to see crude go to $70/barrel at this point if Tropical Storm Dennis, currently south of Hispaniola, strengthens as predicted to Category 3 or higher and takes a path that seems to be an almost exact duplicate of last summer's Hurricane Ivan. The computer models are all predicting landfall between Pensacola and Lake Charles, LA.

 

[BoeingBoy]

A last note before the weekly report comes out tomorrow - a day later than normal due to the Jul 4 holiday. To quote Bloomberg:

"Crude oil for August delivery rose $1.69, or 2.8 percent, to $61.28 a barrel on the New York Mercantile Exchange, the highest close since trading began in 1983. The contract touched $61.35 a barrel, a record intraday price. Futures are up 55 percent from a year ago."

"Gasoline for August delivery rose 10.81 cents, or 6.4 percent, to $1.7899 a gallon in New York, the highest closing price since the contract was introduced in 1984. Futures touched $1.7935, a record intraday price. Gasoline is 41 percent higher than a year ago."

"Heating oil for August delivery rose 6.24 cents, or 3.6 percent, to $1.7948 a gallon, the highest close since the contract was introduced in 1978. Futures touched $1.798 a gallon, an intraday record. Heating-oil futures are 64 percent higher than a year ago."

Bloomberg Story

Jim

 

[Busdrvr]

Dude, you should be ashamed of yourself for giving us links to bogus, inept sources.

I offer as evidence this quote from the obviously spurious article...
"We could be at $100 by this winter," Texas oil analyst Matt Simmons told Britain's Observer. "We have the biggest risk we have ever had of demand exceeding supply. We are now just about to face up to the biggest crisis we have ever had."

Busdriver has already told us that demand can NOT exceed supply or vice versa. Now pay attention.

BTW, if this prediction comes true, airplanes won't be the only thing parked in the desert. My fanny and those of a lot of other junior flight attendants will be as well. The airlines will have no choice except to reduce flying only to those routes that are GUARANTEED to make money.

[post="280316"][/post]​

While I'm still trying to understand which aspect of my response to you illicited the vitriolic response, I'll respond to this specific "rebuttle". I think you need to spend a little more time on Mr. Simmons website, reading his presentations, to understand what his position is.
1. He REPEATEDLY asserts that Demand for oil and gas CAN NOT exceed supply. While the demand curve WILL shift, the quantity demanded WILL equal supply and that will be governed by price.
2. Mr Simmons is not happy with current 'technology'. He believes that it does not improve total reservoir output, it does increase the rate of reservoir depletion. He contends that this will lead to MUCH steeper dropoffs in production.
3. Mr Simmons thinks we should "get real" and open up EVERYTHING for drilling.

Consider this. If $5 gas is an issue for us, do you think it is an issue for countries that have percapita GDP's around 1/10th of ours (China, India)?

The solution is PROGRESS. We need to act NOW. we need to move away from using transportable fuels to heat our homes and produce electricity. Nuke, Hydro, and even wind (in small doses), are the key to getting the price of petro under control.

 

[BoeingBoy]

I think jimntx was addressing delldude's post in his remarks you quoted above, busdrvr....

Jim

 

[jimntx]

I think jimntx was addressing delldude's post in his remarks you quoted above, busdrvr....

Jim

[post="280801"][/post]​

Don't even try to explain. The one thing that pompous blowhards do almost as well as blow hard is take offense when anyone disagrees with them or does not take them seriously.

 

[SpinDoc]

Don't even try to explain. The one thing that pompous blowhards do almost as well as blow hard is take offense when anyone disagrees with them or does not take them seriously.

[post="280841"][/post]​

Okay Kids. We've had enough from the greedy oil
companies and futures investors. We need to start
planning the revolution. If we can neutralize enough
oil company executives (preferably in their sleep)
and manipulate the futures market, we may be able
to turn the juggernaut around and send prices back
to normal levels of around $20 - $30 bbl.

Never mind. The pot has been poisoned beyond
acceptable levels and there are already too many
greedy people on the train to stop it. What a
shame that we have to live in the land of the
greedy.