TomS Words of Wisdom

My geology prof at VT spend a good chunk of a not one but a couple of
lectures talking about the reality of and likely economics of peak oil
production. His basic prediction was that the peak rate of oil
production would occur at some ill defined time in the following 20 to
30 years [that was about 12 years ago]. And that the fact that oil
production had peeked would only be apparent a few years later due to
several factors I've since forgotten. As I recall the economic
ramifications that he presented were: assuming a linear growth rate in
oil demand and a linear/moderately elastic demand curve; and given the
exponential energy costs of finding and recovering reserves; that the
price escalation of oil would shift from more or less following
inflation to exponential growth above the rate inflation as the existing
reserves get tapped out. In all he painted a very pessimistic picture
of high energy prices and crumbling western economies.

I also had an econ prof give a similar lecture about the timing and
economics of peak oil. Though his interesting insights were what
happens when the price of energy from oil starts to exceed those from
renewable sources like wind, solar and biofuels. As I recall this
started to kick in at about $4/gal in 1990 dollars. When these were
added to basically the same economic assumptions, he ended up with about
the same results for the price of oil but only a small bump in the
overall price of energy as the world shifts to renewable forms of energy
generation and the associated distribution and storage infrastructure.

So far what I've seen in the reports of world oil production and
expected total earth reserves still puts peek oil somewhere between 2010
and 2020. So with an useful life of five to ten years you should still
be able to afford gasoline for your 2006 H2 when it dies. But by then
you'll probably want to replace it with hydrogen fuel cell / electric
version.

As for refining capacity, I expect that Mexico may end up as a major
source of refined fuels for the US in coming years. And if Afghanistan
can achieve some sense of political stability then they could well
become the major refiner for China, assuming that China's environmental
movement grows faster then it's refining capacity. Which is likely
given, the speed of modern Internet communication, China's rapid and
rather dirty industrialization and their government's likely support /
tolerance of environmental activism in lue of political activism.

TTFN
Tom

Sayles, Charles wrote:

>Tom
>Last night at one of the low price gas stations I filled up the Buick at $2.999 gallon. All of the rest are $3.05 or more. It will be interesting to see what Ed and Laura pay on their drive up today. I have noticed in the last couple of times driving to Glendale from here that the traffic has been a little less and I attribute that to the higher price of gasoline is keeping the rift-raft off I-5.
>
>This morning an expert on TV was saying that cost of refining oil to gas, plus distribution, plus taxes is about $1 per gallon. There are 42 gallons per barrel. $3 gas translate into about $80 oil. To get $4 gasoline oil would have to go about $120 per barrel. He went on to say that those kinds are price are not likely. Currently the world demand is a 80 million barrels per day, and the supply is about the same. Over the next couple of years an additional 15 million barrel per day supply is coming on line and that will drive down oil prices.
>
>The higher price of gasoline is due to reduce refining capacity and with Louisiana refineries out of service there is a net flow go gasoline to the east and the prices all over the country go up. And since natural gas can be used in some cases as replacement for oil and gasoline its price is going up.
>
>I suppose Californians are going to be pretty adamant about fixing this problem. However new refineries in California or drilling off the coast are off the table.
>
>Dad
>
>Charles W. Sayles
>
>
>-----Original Message-----
>From: Tom Sayles
>Sent: Wednesday, August 31, 2005 8:13 PM
>To: Sayles, Charles
>Subject: Re: Bring Your Laptop
>
>
>Regular unleaded is already hitting $3+ at some to the stations up
>here. [I'm not really gona worry until it hits about $4.]
>
>TTFN
> Tom
>
>Sayles, Charles wrote:
>
>
>
>>Ed-Laura
>>
>>If you bring your laptop, you can wirelessly connect to the internet at Uncle Barry's and use a T10 connection at my place. We both have DSL.
>>
>>Looks like gasoline might cost $3 per gallon.
>>
>>Dad
>>
>>Charles W. Sayles
>>