Global oil crysis - can USA *alone* do anything? (in Debates)


Sickone March 25 2012 2:36 PM EDT

Last debate touching on the subject got close because it deviated from factual statements and opinions about projections into a political mudslinging and personal attack drivel.
I WOULD STRONGLY ADVISE TO CHECK OUT THE EGO AND POLITICAL ORIENTATION TO THE DOOR FOR THIS PARTICULAR THREAD.
Any admins still around, please simply blank out parts of any posts that are not related directly to the discussion at hand, instead of closing down the thread.

So, here is the data most of us can agree is very close to reality:

USA extracts 8 mil barrels of crude oil per day (about 9% of world production) and eats up roughly 19 mil per day (about 22% of world consumption). A bit over TWO THIRDS of that consumption is transportation-related consumption.
China extracts 4 mil/day and eats up 9.4 mil/day. India extracts less than 1 mil/day and eats up 3 mil/day. The entire world production combined recently was around 87.5 mil/day (and it's going downwards) with combined consumption around 86 mil/day (steadily increasing on average in spite of increasing price).

Oil consumption in China and India is going UP by anywhere between 5% to 10% per year. Combined, those two countries' increased demand represents the vast majority of worldwide demand increase in later years. Demand of oil from them is expected to go up FASTER in the coming years. In 10 years, China and India could be consuming an additional 7 to 12 mil barrels of oil per day compared to how much they consume now, even if price would keep going up (within certain limits).

USA, in spite of its negative oil balance is NOT only importing oil - it's BOTH importing and exporting oil. Thanks to a free market economy and due to oil companies following their own financial interests, some of those that extract oil locally are selling it abroad instead of keeping it within the confines of the nation.

A certain difference in the price of oil does not result in the same difference in the price of gas at the pump.
If price of oil goes up or down by a certain percentage, price of gas only goes up or down roughly half as much as a percentage, because there are quite a few factors determining oil prices that do not scale well or do not scale at all with oil price (refining cost, transportation costs, excise taxes where applicable, expected profits for any mentioned stage, etc).

A statistical analysis of 36 years of monthly, inflation-adjusted gasoline prices and U.S. domestic oil production made recently by The Associated Press shows no statistical correlation between how much oil comes out of U.S. wells and the price at the pump.
That's because oil is a global commodity and U.S. production has only a tiny influence on supply. Factors far beyond the control of a nation or a president dictate the price of gasoline.
If more domestic oil drilling worked as politicians say, you'd now be paying about $2 a gallon for gasoline in the USA instead of paying roughly the highest price ever (even after adjusting for inflation).

In the LONG run, price of crude oil is indeed determined by classic supply and demand curves (the higher the demand, the higher the price goes with demand going down, the more oil is extracted, until a new price equilibrium is reached).
However, since drilling for additional oil (especially when already discovered reserves get harder and harder, and therefore more and more expensive to extract with time) is not an instantaneous process (delays between starting a drilling project and actually getting a steady supply of oil from it taking several years, not a few months), the SHORT term prices of oil are heavily dominated by speculative effects on the oil markets.
For instance, the recent price spike is certainly not determined by an actual critical shortage of oil right now, but by the expectations that oil in the future will be harder to extract and therefore more expensive, but also increasingly more in demand, so a double whammy as far as expected prices go. Add to that the fears of possible wars involving major oil producing countries and you get the perfect storm for prices to go up.
It is true that if people WOULD believe enough additional oil (at similar average extraction costs to today's ones) would be extracted to match and even surpass the projected increases in demand, and they also would believe no war would be coming, then oil prices would go down by a lot faster than the actual supply would be available. Also, volume of oil used up does not easily go up or down depending on price, because other factors are at work here too.

The current "proven" oil reserves of the USA are about 22 billion barrels. In other words, if current extraction rates (8 mil/day) could be maintained just from the proven reserves (which they seldom can), still only enough to last another 7 and a half years. And that's just for current extraction rates, not current consumption rates. Given consumption rates (assuming they won't go up, but sadly they will), it still would only last a bit over 3 years.
The estimates put ANWR reserves of "cheaply extractable" oil at around 12 bil barels. At the current consumption rates, that's LESS than 2 extra years at most.
There's also an estimated (or hoped for) 86 billion barrels in various near-coastal reserves, which are harder and more risky to extract (and therefore slightly more expensive, but not by much). STILL, even that would represent only about 12 years and a half of oil usage, again, assuming usage would not go up (which it most likely will if prices don't keep going up).
Sure, there are also a truckload more in "technically recoverable" deposits, both discovered and estimated to be discovered (with highest estimates of as much as nearly 4 trillion barrels, so enough for hundreds of years), but there are two big problems with that particular oil - for those already discovered, the cost of extraction is so high that only at current price levels their extraction is starting to become feasible (also, a big chunk of that high estimate is in suspected but undiscovered reserves).

Either way, the above story about reserves mostly just estimates the time it would take to suck them all dry and consume.
The big problem however is EXTRACTION RATES, with a sub-problem of it being extraction cost. You don't just want to have oil, you want to have ENOUGH oil on a regular basis, and you want it CHEAPER on average than you have it now.

All in all, everything paints a pretty bleak picture.
The USA would need to MORE THAN DOUBLE its production output to just match its own consumption, and in order for oil prices to NOT go up, the global supply (assisted by the USA's increase) should keep increasing at the same rate as global demand. But global demand is gong up radically, and even a doubling of USA production in 10 years will only match expected increases in demand from just 2 other countries (China and India), let alone others. And the traditional oil supplying countries are not increasing their production, they're barely running even, as their supplies dwindle and extraction gets slower (costlier).

So what exactly can the USA alone, just from internal policies regarding oil drilling do to decrease oil prices (or at least keep them stable) in the long run ?
My position is that they can basically do nothing meaningful with just THAT and nothing else.

They would also need to ban or at least heavily tax exports (but keep imports and not tax them at all, or negligibly), while also striving to decrease transportation-related consumption and heavily invest in cheaper alternative energy generation (where available).
They would still need to encourage OTHER countries to reduce (or at least not increase) their consumption, and somehow convince countries that produce oil to try and produce even more.
Last but not least, they should avoid starting any wars anywhere near oil-producing countries.
And with all of that combined, MAYBE they can keep oil prices steady, at least for a while.

QBsutekh137 March 25 2012 10:54 PM EDT

From everything I've read, there are a few main points that affect this:

-- Oil does not follow the usual lines of supply/demand due to speculation. It might as well be Apple stock. And if you think Apple stock follows supply/demand, just check it's Price/Earnings ratio (it's about 17 times away from reality -- Google's is even worse). Supply and demand have nothing to do with a speculated commodity, right from the outset.
-- The quality of oil from US grounds is not the same as "sweet crude" from Arabian fields (not sure about Russian quality -- they have a lot of oil).
-- If oil companies want to drill, why aren't they starting with the 7000-odd permits already available?

All that aside, the US can do plenty -- use less oil. More specifically, if we're serious about fossil-fuel energy policy, switch all commercial trucks to natural gas and do a reverse tariff on exporting gas (the latter is a dangerous game to play in regards to the global market). The former is great because it is from the "demand" side, the side that always wins if done right, no matter much speculation is involved.

There are also a lot of speculator regulations that could help, but they go way above my knowledge of economics. Get rid of the speculation, get the market leveled out, THEN get things localized, and cut down consumption (which is local by definition).

That's a start.

Lord Bob March 25 2012 11:39 PM EDT

Uh, everything Sut said. I think he covered everything there.

Sickone March 26 2012 1:17 AM EDT

Not much of a debate when we all agree on the general principles and at most can disagree partially on some minor details :p

QBsutekh137 March 26 2012 10:50 AM EDT

Well, I should have read Sickone's original post better... He basically already said what I did, I just picked out what I personally think are the main points distilled from his stuff and some conclusions from the "Drill baby drill" thread.

Perhaps I highlighted conservation/reduction a bit more, mainly because that IS something we can do on our own, and I think it would be helpful. I think a lot of folks (including me) are in a mode like: "I know I could use a little less gas, but what can one person do?" And the starfish story isn't going to cut it any more. *smile* But simply drilling for more oil feels wrong to me on a ton of levels -- it's just more of the same, bad-habit-encouraging behavior. Though I can't say how much I believe the government or current administration should be trying to steer capitalistic behavior. It's tricky.

But I guess it's also capitalism, by definition. Can't have growth without more more more. I'm SUPPOSED to be driving more, buying bigger cars, building bigger houses, and drinking more Coke. At the same time, the "right" decisions are to drive less, not leverage too much credit for a new car payment (my current vehicles are paid off -- no good for the economy there...), making do with my current resources (even while growing a family), and avoiding soft drinks.

Kind of a Catch-22. :\ If we all started making the "right" decisions: making do, using fewer resources, growing more of our own (healthy) food, it would be disastrous for our CONSUME MORE, gotta-grow-or-die economy.

Any ideas on THAT? I think that is really the meta-issue behind this oil example. When you look closely at any sector, these questions arise. What then must we do?

Sickone March 26 2012 5:10 PM EDT

Well, in that particular take on the case, you end up with the problem of "lending money with an interest" and its consequences.
If all banks would be national banks (as opposed to private enterprises) and only allowed lending without interest (only charging some fixed processing fees to cover costs, basically running as non-profit organizations), then you would drastically mitigate the need of an exponentially increasing money supply. But that boat has kind of sailed a long time ago and is unlikely to sail back in any time soon. To stretch the analogy a bit, it will have to sink badly first for anybody to start building a new better boat. Basically, without a complete global collapse of the current banking system first, you're stuck with exponential growth issues, doomed to perpetual inflation and other such things.
But that's a story for a completely different thread...

Sickone March 31 2012 1:36 AM EDT

Hmm. Funny. Is Ranger the only conservative we have on CB ?

AdminTitan [The Sky Forge] March 31 2012 1:54 AM EDT

Excluding me, probably.

Mikel March 31 2012 2:48 AM EDT

I'm a conservative. I just get tired of debating when neither side is going to budge.

Sickone March 31 2012 3:58 AM EDT

Well, if you address the numbers and can show how they can possibly support your position as opposed to demolish it, be sure there will be some budging.

Lord Bob March 31 2012 11:51 AM EDT

Excluding me, probably.
And Nightstrike, and Jon but he's never here.

Sickone April 1 2012 2:36 AM EDT

Well, then, I'm declaring a clear and uncontested victory from a mathematical and logical standpoint against the "Drill, baby, drill" rhetoric.

AdminTitan [The Sky Forge] April 1 2012 2:45 AM EDT

If you want a debate about that you're asking the wrong question.

Sickone April 1 2012 11:25 AM EDT

So what would, in your opinion, be the right question then ?

AdminTitan [The Sky Forge] April 1 2012 3:17 PM EDT

What are the benefits of the US drilling in the US?

What are the negatives ..... ?

Do the benefits outweigh the negatives over "x" amount of time?

Sickone April 1 2012 3:33 PM EDT

Well, then, let's see.

What are supposed to be the benefits of expediting at an even faster rate more drilling rights in the US on top of the already more than 7000 valid but unused public land oil and gas drilling permits ?
Exactly how much lower do you think fuel prices will go if you do open up ANWR for drilling, and for how long ? Also, how eco-friendly would you say opening up ANWR to drilling will end up being ?
How much lower do you estimate gas prices to get if the regulatory process is made even laxer with regards to offshore drilling ? And much how longer do you think it will pass until yet another BP-type incident will happen ?
How many long-term jobs do you think will be created by this oil rush ? On the other hand, how high do you estimate the likely healthcare and other similar negative externalities to be for all of this ?
In the end, what is the alleged expected goal of "drill, baby, drill", and how exactly would any of the requested measures actually accomplish that ? Feel free to use as much math and cite as many studies as you need, in fact, I insist you use as much math and cite as many studies as it is possible.

AdminTitan [The Sky Forge] April 1 2012 4:36 PM EDT

1) I don't think lowering gas prices would be the only benefit of increased oil production in the US.

2) I do think gas prices would go down; probably not by a large amount; but possibly by a quite small amount for a few years.

3) I don't think it would be immediately hazardous to the eco-system.

4) That leaves long term effects
a) I think that the US along with other countries with quickly run out of oil within the next 100 years.
b) I don't think the US would greatly benefit from "hoarding" it's oil reserves.
c) *This is the most important* I think something significantly will change in the next 100 years that none of this will come to pass.

Believing the things above; I think the US should focus on short term benefits over long term benefits.

Also, since the whole believe revolves around the last bullet, 4.c. It wouldn't make sense to debate any other part; so I'm down for discussing that if you want!

Sickone April 2 2012 12:05 AM EDT

To 4c : with currently available "cheapo" tech, 25% grid-to-engine efficiency via liquefied hydrogen, gasoline is 36kWh/gal, wind power electricity at around 10 cents/kWh in sufficiently plentiful quantities, only add minimal profit margins, and you're looking at equivalent vehicle operating prices as if gas was about 15 USD/gal.
Improve hydrogen generation efficiency, improve hydrogen fuel cell efficiency, massively invest in wind parks, and you might get it down to about 10 USD/gal equivalent within the next decade, let alone century.
Or, another alternative, via future improvements in battery tech, add some wind tech improvements too, and you could be looking at 80% overall efficiency and about 7 cents/kWh on a massive scale, or 3.15 USD/gal equivalent before needed profits, potentially even cheaper than current oil prices if it would be fully state-owned and run as a "non-profit" (just breaking even) thing.

So the question is, why the bloody hell go with oil at all in the first place ?

AdminTitan [The Sky Forge] April 2 2012 12:30 AM EDT

So the question is, why the bloody hell go with oil at all in the first place ?

Because it would work 10x better than the awesome Obama recovery.

Gunny Pew Pew [Red Permanent Assurance] April 2 2012 12:38 AM EDT

Titan..can't tell if you're joking, trolling, or just not thinking. =/

AdminTitan [The Sky Forge] April 2 2012 12:44 AM EDT

Can't tell if you're trolling, or just like being a jerk.

Opening up access to more domestic oil would provide a good recovery in forms of jobs, and maybe even the slightest decrease in the cost of gas. All at the expense of not 700 billion fed debt.

Lord Bob April 2 2012 1:21 AM EDT

Believing the things above; I think the US should focus on short term benefits over long term benefits.
This. This is the problem not only with pro-oil advocates, but with US politics in general. Both parties.

AdminTitan [The Sky Forge] April 2 2012 1:28 AM EDT

but with US politics in general

There's definitely things I think the politicians are wrong for focusing short term on, it's just that the running out of energy resources are not one of those things. If you disagree I would invite you to argue against point 4.c. like Sickone did.

AdminNemesia [Demonic Serenity] April 2 2012 1:34 AM EDT

Not focusing on the long run especially in something as important as energy resources seems like asking to shoot yourself in the foot.

AdminTitan [The Sky Forge] April 2 2012 1:41 AM EDT

I did address is; by saying that we won't need to address it, in the next hundred years we won't need to worry about fossil fuel energy for a number of possible solutions.

Lord Bob April 2 2012 1:45 AM EDT

If you disagree I would invite you to argue against point 4.c. like Sickone did.
If your 4c wasn't so vague perhaps I could. Being vague and evasive is no substitute for a real argument.

AdminTitan [The Sky Forge] April 2 2012 1:48 AM EDT

Ok, I'll give some more concrete examples for you to refute tomorrow after I sleep.

Lord Bob April 2 2012 1:51 AM EDT

.. tomorrow after I sleep.
Yeah, that actually sounds like a spectacular idea. Goodnight everyone!

Sickone April 2 2012 2:02 AM EDT

So the question is, why the bloody hell go with oil at all in the first place ?

Because it would work 10x better than the awesome Obama recovery.

That doesn't make any sense at all, because, for starters, it doesn't even answer the question that was asked.
Let's assume for a second you would have answered with a mildly to-the-point rebuke about creating jobs fast and all that broohaha that's the only thing left at the centerpoint of the "drill, baby, drill" that wasn't completely debunked by simple math.

How exactly would focusing on COMPLETELY RENEWABLE and CLEAN resources that could actually ACHIEVE and even surpass "energy independence" in a couple of decades be in any way, shape or form any worse than burning prehistoric sludge and gas you need to crack the ground open and force high-pressure chemical-filled water into to even get to it properly in the first place, damaging the environment and people's health both on extraction and in usage, and KNOWING full well it's going to run out sooner rather than later anyway ?
And what makes you think putting the exact same amount of funds and effort into building massive amounts of windfarms everywhere feasible and radically upgrading the energy grid infrastructure WOULDN'T create just as many, if not MANY MORE JOBS anyway ? And you would also save a truckload of cash in healthcare bills directly, let alone increase relative overall productivity by no longer suffering from the same level of health-related labour losses.

Gunny Pew Pew [Red Permanent Assurance] April 2 2012 5:28 AM EDT

*This is the most important* I think something significantly will change in the next 100 years that none of this will come to pass.
Having faith in what doesn't exist only saves us from the problems/solutions we avoid.
it's just that the running out of energy resources are not one of those things
Bonk.
Let's flip this energy crisis for a second. Oil is still finite and goes into everything that makes anything. Meds, dyes, makeup, plastics, jets, roads, lube, metal, etc. Power can come from just about anywhere, like lakes of plankton or pig poo, while quality oil for certain industries is another matter. All prices will rise before including transportation costs as oil is depleted over the next 100 years. What I'm saying is we quickly forgot the pump isn't the only place crude is dumped. >.>
Not focusing on the long run especially in something as important as energy resources seems like asking to shoot yourself in the foot.
Another doctor approved cure for gangrene. ;) Not!

Sickone April 3 2012 8:13 PM EDT

tomorrow after I sleep
That's one heck of a long sleep, Titan ;)
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