Political Crossfire Forums

[ieatfood]

Preechr wrote: At this point, we are just going around in circles. We are not talking about oil running out. Peak oil concerns the flow rate. If all you want to do is argue that oil will never run out, you are right. Oil will never run out. It simply won’t be able to be delivered to market at the rate it is now for very much longer.

you are dressing up a wolf in sheep's clothing
saying that the flow rate of oil will decrease is pretty much saying that the supply of oil will one day be geologically constrained, which is the point i'm trying to say is false. Whether you want to call that "running out" or not, i dont really care.

my point is that oil production is not constrained by geology. It is constrained by capital spending. Thus, even if there is a peak, it will not be a geological peak, as you suggest.

Preechr wrote: When talking about oil, only in your mind is Saudi Arabia irrelevant.

firstly, saudi arabia represents only about 13% of world oil output (at least in 1996)--thus, they cannot singlehandedly inflate prices in the long-run
secondly, the amount of oil in Saudi reserves is irrelevant. This is not about reserves--this is about oil that has yet to be found and technology that has yet to be employed. No one knows where this oil is because it hasnt been found yet. And it hasn't been found because no one is exploring.

Preechr wrote: ..and of course you have some evidence for that claim. Please post the link because I think you just made it up and don’t know what you are talking about.
If you don't believe that capital investment in oil exploration is very low, then I invite you to look at the charts in some of the previous posts (i think on page 2 of this thread).

The basic gist of my argument is that if oil exploration were constrained by geological features, then it would be harder and harder to find more oil as time goes on. But that isn't the case. For the past 3 decades, the marginal price of finding oil has not risen. Thus, there is no evidence that it is any harder to find more oil today than it was 30 years ago. So why don't companies just find more oil? THe answer is because oil exploration is a risky business. There is only a 10% success rate for oil exploration, which often involves capital investments into the billions. You try going to vegas and gamble away a billion dollars on a game that only has a 10% payoff. Now, assume that you don't know what the payoff is going to be--it could be very high, medium, or very low. And for the past 2 decades, it has been very low. Then, add a bunch of social, political, and environmental risks. Would you make that gamble?

The evidence for my argument is all in the article I sent you. If you chose to ignore it, that's not my fault. If you choose to make arguments to dispute what I have said, then you are free to do so. Otherwise, attacking me by saying that "i don't know what I am talking about" is not an argument, and it only shows that you have nothing substantive to say.

[Preechr]

ieatfood wrote: you are dressing up a wolf in sheep's clothing
saying that the flow rate of oil will decrease is pretty much saying that the supply of oil will one day be geologically constrained, which is the point i'm trying to say is false. Every single well ever drilled, and every single oil field ever discovered has geological constraints on what it can produce. To think that somehow global production won’t be constrained by geology is ridiculous.

ieatfood wrote: my point is that oil production is not constrained by geology. It is constrained by capital spending. Provide a link. Or supporting argument. Or something. Anything.

ieatfood wrote: Thus, even if there is a peak, it will not be a geological peak, as you suggest. Every well and every oil field….

ieatfood wrote: firstly, saudi arabia represents only about 13% of world oil output (at least in 1996)--thus, they cannot singlehandedly inflate prices in the long-run Peak oil is not about prices. Peak oil is about flow rate. Focus.

ieatfood wrote: No one knows where this oil is because it hasnt been found yet. And it hasn't been found because no one is exploring. Each year they find less and less oil. I’d also like to see you come up with a link regarding no one exploring for oil because it’s total bulls**t. In 2005, Exxon alone spent nearly 1.7 billion dollars looking for oil. Not only is your statement completely false, but I don’t think you’ll even be able to find a single oil company that had zero FD&A costs (‘looking for oil’ costs) last year. If you are going to start making things up, at least try to make your tales semi-plausible.

ieatfood wrote: Preechr wrote: ..and of course you have some evidence for that claim. Please post the link because I think you just made it up and don’t know what you are talking about.
If you don't believe that capital investment in oil exploration is very low, then I invite you to look at the charts in some of the previous posts (i think on page 2 of this thread). You can’t provide a link, can you? You totally made it up and now you are stuck. There is no chart on page 2 of this thread (or page1, or page 3, or page 4) about capital investment being low.

ieatfood wrote: The basic gist of my argument is that if oil exploration were constrained by geological features, then it would be harder and harder to find more oil as time goes on. But that isn't the case. For the past 3 decades, the marginal price of finding oil has not risen. Thus, there is no evidence that it is any harder to find more oil today than it was 30 years ago. even if your bit about exploration costs not rising were true (it's not true, you are wrong again), there is always the obvious lack of discoveries.

ieatfood wrote: So why don't companies just find more oil? THe answer is because oil exploration is a risky business. So let me see if I have your story straight: It’s just as easy to find oil as it ever was and the cost is the same. Oil companies used to find more oil than they do now because it’s risky now even though you say it’s just as easy now as it used to be.

I guess I just don’t understand the way you seem to have rationalized this to yourself. Why are oil companies not exploring as much as they used to if exploration costs are the same, it's just as easy as it ever was, and sale prices near an all time high?



ieatfood wrote: There is only a 10% success rate for oil exploration, which often involves capital investments into the billions. You try going to vegas and gamble away a billion dollars on a game that only has a 10% payoff. What are you talking about? An oil field is discovered on 1 of every 10 leases? An oil field is imaged on 1 of every 10 seismic shots? 9 of every 10 wells finds nothing? …and when you make clear whatever it is you are trying to say, can you please provide some supporting evidence? I’d love to say that once again you don’t know what you are talking about, but the truth is I no idea what you are even trying to say.

ieatfood wrote: Now, assume that you don't know what the payoff is going to be--it could be very high, medium, or very low. And for the past 2 decades, it has been very low. …But you were just saying that it’s as easy to find oil as it ever was. Now you’re contradicting yourself.

ieatfood wrote: The evidence for my argument is all in the article I sent you. If you chose to ignore it, that's not my fault. I didn’t ignore it. I’ve read it several times. First, it doesn’t provide evidence for your arguments any more than the mysterious missing charts on page 2 of this thread. If you want to pull quotes from that piece, I will show you how you are misunderstanding it, or the evidence they are citing doesn’t support the conclusion they are alleging.

[Canadian_Patriot]

Oil is not running out for a long time. The price is rising because their aren't enough refineries and taps. It is about supply and demand they just aren't putting out the supply to keep prices lower. We aren't running out of oil we just aren't meeting demand and thus higher prices. There is no evidence to say we will run out and suck the ground dry.

[social]

I'D avoid using neoclassical economicS to explain the geological nature of the earth...

[ieatfood]

Preechr wrote: Every single well ever drilled, and every single oil field ever discovered has geological constraints on what it can produce. To think that somehow global production won’t be constrained by geology is ridiculous.

I'm not disputing that. No kidding, each well drilled has a limit. That's why we can calculate proven reserves. My point is that proven reserves are irrelevant because they say nothing about the oil that hasnt been discovered or the technology in the future that will allow us to discover and extract more oil.

Preechr wrote: Provide a link. Or supporting argument. Or something. Anything.

I already have--its in the article i sent you earlier. The marginal price of oil exploration has not increased in the past 20-30 years. That's all the proof I need.

Preechr wrote: Peak oil is not about prices. Peak oil is about flow rate. Focus.

uh, they are one and the same
if the flow rate is being increasingly constrained by geology, then the cost of increasing that flow rate (finding new oil) should increase. but it hasn't.

Preechr wrote: Each year they find less and less oil. I’d also like to see you come up with a link regarding no one exploring for oil because it’s total bulls**t. In 2005, Exxon alone spent nearly 1.7 billion dollars looking for oil. Not only is your statement completely false, but I don’t think you’ll even be able to find a single oil company that had zero FD&A costs (‘looking for oil’ costs) last year. If you are going to start making things up, at least try to make your tales semi-plausible.

i already have all the numbers i need. Theyre all in the article i sent you. Once again--it is not getting any more expensive to find oil. That much is clear. You say that oil companies invest a lot today. But that's not true. There has not been much growth in oil exploration investment despite soaring oil prices. I'm too lazy to find the link. But it's true. Exxon mobil made 157 billion in profit in 2005. They only invested 1.7 billion in exploration? I think i've made my point.

btw, the link is for sales of oil products--i think you posted the wrong link

Preechr wrote: You can’t provide a link, can you? You totally made it up and now you are stuck. There is no chart on page 2 of this thread (or page1, or page 3, or page 4) about capital investment being low.
there's a chart that says that we are finding fewer and fewer new barrels of oil and theres evidence that the cost of finding an additional barrel of oil has not changed
put 2 and 2 together.

Preechr wrote: even if your bit about exploration costs not rising were true (it's not true, you are wrong again), there is always the obvious lack of discoveries.

uh, did you even read the article that you just posted? Basically, they paid 500 grand for a ship because of "shortages in labour and equipment." It says nothing of the actual cost of oil exploration, which has remained constant over the past 30 years:

"Worldwide, is it getting harder and more
expensive to find new deposits and develop them into reserves?
Up to about 15 years ago, the cost data clearly said no. Since
then, much of the relevant data are no longer published.
To make up for that lack, Campbell Watkins and I tabulated
the sales value of proved reserves sold in-ground in the United
States. Our results are a window on the value of oil reserves
anywhere in which entrepreneurs can freely invest. (That rules
out the opec countries and a few more.) If the cost of finding
and developing new reserves were increasing, the value per barrel
of already-developed reserves would rise with it. Over the
period 1982–2002, we found no sign of that."
http://mit.edu/ceepr/www/R2004-171.pdf


Preechr wrote:
I guess I just don’t understand the way you seem to have rationalized this to yourself. Why are oil companies not exploring as much as they used to if exploration costs are the same, it's just as easy as it ever was, and sale prices near an all time high?
well, a couple of reasons
one is that opec has constraigned supply over the long term and that has put a damper on opec exploration
the other is that opec and increasing use of oil as a commodity causes speculation which causes the price to fluctuate. This fluctuation makes the risk of exploration quite uncertain. However, if oil prices continue to increase, that reduces the risk to the investor and exploration will pick up. Right now, investors are scared because even though oil prices are high now, they have been low for the past 2 decades and could drop in the future.

You'll be surprised to learn that oil companies aren't all that profitable, at least not over the long term. Their profits are about average for any manufacturing company (http://www.fordfound.org/elibrary/documents/0150/193.cfm). They have periods of very high profits, but they also have periods of very low profits. It's a risky game and they have to be very careful of the chances they take.


Preechr wrote:
What are you talking about? An oil field is discovered on 1 of every 10 leases? An oil field is imaged on 1 of every 10 seismic shots? 9 of every 10 wells finds nothing? …and when you make clear whatever it is you are trying to say, can you please provide some supporting evidence? I’d love to say that once again you don’t know what you are talking about, but the truth is I no idea what you are even trying to say.
are you too lazy to do your own reasearch? a simple google search is not hard.
"though modern oil-exploration methods are better than previous ones, they still may have only a 10-percent success rate for finding new oil fields."
http://science.howstuffworks.com/oil-drilling1.htm

"Oil exploration is an expensive, high-risk operation. "
http://en.wikipedia.org/wiki/Oil_exploration

Preechr wrote: ieatfood wrote: Now, assume that you don't know what the payoff is going to be--it could be very high, medium, or very low. And for the past 2 decades, it has been very low. …But you were just saying that it’s as easy to find oil as it ever was. Now you’re contradicting yourself.

uh no--its just as easy to find oil, but the payoff is based on the market price of crude oil. Since that market price fluctuates, you may spend a lot of money trying to find more oil during a time of high oil prices. But by the time you find oil, the world prices may have dropped and then you're screwed. Oil companies are afraid of this and that is why they are cautious when investing in oil exploration.

[ieatfood]

social wrote: I'D avoid using neoclassical economicS to explain the geological nature of the earth...

I'd avoid using geology to explain an economic phenomenon.
I remind you, when it comes to resource economics, geologists have had a terrible track record. Geologists have been predicting global imminent supply shortages in every single natural resource imaginable for like the past 150 years. They have been wrong every single time. It's not even funny.

THey might as well be pulling their predictions out of a tarot card deck.

[ieatfood]

I'd also like everyone to keep in mind that the price of crude oil is only 44% of the price of gasoline.

http://www.slate.com/id/2125099/

Thus, even if crude oil prices rose tremendously, it won't have as much of an effect as you think.

[Preechr]

ieatfood wrote: Preechr wrote: Peak oil is not about prices. Peak oil is about flow rate. Focus. uh, they are one and the same That’s just stupid. Demand is a key component of pricing and is totally irrelevant to maximum flow rate. Just as an example, the price of oil is very close to what it was 35 years ago while the flow rate has trippled.

ieatfood wrote: i already have all the numbers i need. …and those that you don’t have, you can quickly make up and not provide any links to support them.

ieatfood wrote: You say that oil companies invest a lot today. But that's not true. There has not been much growth in oil exploration investment despite soaring oil prices. I'm too lazy to find the link. Oh yes, I’m sure it’s just “laziness” that prevents you from providing a link. It couldn’t possibly be that your entire argument is complete bulls**t and you can’t find a link to justify yourself.

ieatfood wrote: Exxon mobil made 157 billion in profit in 2005. I am starting to understand why you are so hesitant to post numbers. It seems every single number you post is wrong.


ieatfood wrote: btw, the link is for sales of oil products--i think you posted the wrong link You can ask for help. There is no shame in not knowing how to read a spreadsheet, and there is certainly no need to blame others to hide that fact. At the bottom of the page are tabs. Select the one that says ‘Capex’. That is short for ‘Capital Expenditures’ and the section contains the data about how much and where Exxon spent money. As luck would have it, exploration expenditures are the top group of numbers. Total exploration expenditures for 2005 were reported as $1,693,000,000.

ieatfood wrote: "Worldwide, is it getting harder and more
expensive to find new deposits and develop them into reserves?
Up to about 15 years ago, the cost data clearly said no. Since
then, much of the relevant data are no longer published.
To make up for that lack, Campbell Watkins and I tabulated
the sales value of proved reserves sold in-ground in the United
States. Our results are a window on the value of oil reserves
anywhere in which entrepreneurs can freely invest. (That rules
out the opec countries and a few more.) If the cost of finding
and developing new reserves were increasing, the value per barrel
of already-developed reserves would rise with it. Over the
period 1982–2002, we found no sign of that."
http://mit.edu/ceepr/www/R2004-171.pdf I applaud you for at least attempting to hold up one of your arguments with an outside source. The falsehood in your piece is that it assumes the price of the reserves is dictated by the difficulty of finding and developing it. The truth is that an asset is worth what the market is willing to pay for it, not what it cost to develop.

To make it easier to understand, think of proven reserves as a tank of oil. When a buyer wants to purchase the oil in the tank, they don’t ask how hard the oil was to find, or if whomever owned the oil field spent a lot in the effort. The buyer just asked how much oil is in the tank and multiplies that by the current market price. Buying proven reserves is just like that.

The author of your article chose his years very carefully. In 1982, the average price of oil was 65.41 per barrel. In 2002, the average price of oil was 27.54. A tank of oil would cost more in 1982 than that exact same tank of oil would cost in 2002. For that exact same reason, buying proven reserves in 2002 would be less expensive than they would have been in 1982.

http://www.forbes.com/static_html/oil/2004/oil.shtml

The mistake you made is that you don’t limit your statements to the year 1982 and 2002, instead opting for 3 decades. In 1986, the average price for oil was $26.07 per barrel and the current price here in 2006 is over $70. Being that oil is almost 3 times as expensive now as compared to 3 decades ago, I can easily shoot everything you post full of holes.

[ieatfood]

Preechr wrote: ieatfood wrote: Preechr wrote: Peak oil is not about prices. Peak oil is about flow rate. Focus. uh, they are one and the same That’s just stupid. Demand is a key component of pricing and is totally irrelevant to maximum flow rate. Just as an example, the price of oil is very close to what it was 35 years ago while the flow rate has trippled.
uh, price is determined by supply AND demand.
thus, for any given demand, the flow rate is a direct determinant of price
i'd appreciate it if you wouldnt call things stupid especially when you're wrong. in any case, you are arguing that the future flow rate of oil is geologically limited and that the price of oil will inevitably go up because of that. Is that not your position?

Preechr wrote:

ieatfood wrote: Exxon mobil made 157 billion in profit in 2005. I am starting to understand why you are so hesitant to post numbers. It seems every single number you post is wrong.

you know, you are very good at insulting people, but that's about it
i was talking about gross profit which was 157 billion (http://finance.yahoo.com/q/is?s=XOM&annual)
in any case, you've already lost this argument
no matter if you take gross or net profit, investment in oil exploration is still a small percentage of profit (1% vs gross profit and 5% vs net profit)
they could spend a lot more than they are on oil exploration, but they're not


Preechr wrote:
I applaud you for at least attempting to hold up one of your arguments with an outside source. The falsehood in your piece is that it assumes the price of the reserves is dictated by the difficulty of finding and developing it. The truth is that an asset is worth what the market is willing to pay for it, not what it cost to develop.

To make it easier to understand, think of proven reserves as a tank of oil. When a buyer wants to purchase the oil in the tank, they don’t ask how hard the oil was to find, or if whomever owned the oil field spent a lot in the effort. The buyer just asked how much oil is in the tank and multiplies that by the current market price. Buying proven reserves is just like that.
except that proven reserves, unlike a tank of oil, take decades to deplete. During this time, the price of oil is unpredictable and may change wildly.

you've confused the price of oil at any given time with the selling value of proven reserves. One has nothing to do with the other. THe price of oil may fluctuate wildly but the selling price of proven reserves remains constant. Investors know that the price of oil changes constantly and thus the price of oil at any one time is irrelevant. Just because the price of oil today is $70 doesnt mean that you will be selling oil from that well for $70 for the life of the well.

in truth, the cost of finding an oil well very much dictates the selling value of that well. Why? Well think of it this way. Let's say that the selling price of a given well is 10 million while the cost of develping it is only 5 million, then any rational person would spend 5 million to develop a well, and then sell it for 10 million for a 5 million profit. Of course, most investors are savvy and rational and if this opportunity were actually possible, investors would all flock into the oil business and continue to build oil wells at 5 million and sell for 10 million. Every time they did this, they would make a killing and so they would do it more and more. Of course, as more and more oil wells were built, the selling price of oil wells would gradually decrease. When would it stop decreasing? Answer: when the selling price was close to the cost of developing the well. Econ 101. Thus, any increase in the cost of developing wells would result in an increase in the selling price of proven reserves. However, we clearly have not seen that. In fact, the selling price has remained flat for the past 3 decades.



Preechr wrote:
The author of your article chose his years very carefully. In 1982, the average price of oil was 65.41 per barrel. In 2002, the average price of oil was 27.54. A tank of oil would cost more in 1982 than that exact same tank of oil would cost in 2002. For that exact same reason, buying proven reserves in 2002 would be less expensive than they would have been in 1982.

http://www.forbes.com/static_html/oil/2004/oil.shtml

The mistake you made is that you don’t limit your statements to the year 1982 and 2002, instead opting for 3 decades. In 1986, the average price for oil was $26.07 per barrel and the current price here in 2006 is over $70. Being that oil is almost 3 times as expensive now as compared to 3 decades ago, I can easily shoot everything you post full of holes.

um, if you actually read the piece a little more carefully, the reason why he selected 1982 is because that is when the data on cost ceased to be published. ("Up to about 15 years ago, the cost data clearly said no. Since then, much of the relevant data are no longer published.") The data before 1982 also clearly showed that the cost of finding new oil was not increasing. That is why I said that for the past 30 years or so, the cost has not increased.

you can try and shoot things full of holes, but I'm afraid so far, you're shooting blanks...

[Preechr]

ieatfood wrote: Preechr wrote: Peak oil is not about prices. Peak oil is about flow rate. Focus. uh, they are one and the same
ieatfood wrote: price is determined by supply AND demand. It is hilarious the way you change your argument when confronted. First you say that flow rate is the SAME THING as price, then when confronted with the stupidity of that statement, you quickly change to flow rate being a CO-DETERMINANT of price.




While I am starting to get used to the way you change whatever it is you are trying to say after proven wrong. It is funny to me that you can’t even keep your story straight from the beginning of the post to the end.
ieatfood wrote: price is determined by supply AND demand.
ieatfood wrote: cost of finding an oil well very much dictates the selling value So which is it? Is price determined by supply and demand, or is price determined by the cost of the product? Personally, I think you had it right with the first one.




ieatfood wrote: it hasn't been found because no one is exploring.
ieatfood wrote: investment in oil exploration is still a small percentage of profit
ieatfood wrote: they paid 500 grand for a [exploration] ship because of "shortages in labour and equipment." Well, at least you’ve got all your bases covered. They don’t explore at all. They don’t explore enough. They’re exploring so much that they’ve created a shortage of men and equipment.




ieatfood wrote: the reason why he selected 1982 is because that is when the data on cost ceased to be published. ("Up to about 15 years ago, the cost data clearly said no. Since then, much of the relevant data are no longer published.") 15 years ago was 1991, not 1982.

[ieatfood]

Preechr wrote: It is hilarious the way you change your argument when confronted. First you say that flow rate is the SAME THING as price, then when confronted with the stupidity of that statement, you quickly change to flow rate being a CO-DETERMINANT of price.

While I am starting to get used to the way you change whatever it is you are trying to say after proven wrong. It is funny to me that you can’t even keep your story straight from the beginning of the post to the end.


ugh
look, a geologically limited flow rate would cause prices to permanently skyrocket
we both agree with this
so lets just leave it at that

Preechr wrote:
ieatfood wrote: price is determined by supply AND demand.
ieatfood wrote: cost of finding an oil well very much dictates the selling value So which is it? Is price determined by supply and demand, or is price determined by the cost of the product? Personally, I think you had it right with the first one.

ugh-you are insufferable
take an econ class please
the cost of producing something determines the supply, which along with demand, determines the price
thus, increasing the cost will decrease the supply which will increase the price
econ 101--learn the determinants of the upward sloping supply curve
this is something that is taught in high school

it's just frustrating me that you are taking this condescending tone while you display a fundamental lack of understanding of basic economics.

Preechr wrote:
Well, at least you’ve got all your bases covered. They don’t explore at all. They don’t explore enough. They’re exploring so much that they’ve created a shortage of men and equipment.

i never said that don't explore at all
my point is that they have enough capital to explore a lot more than they currently are

And you, in your genius economic insight, have equated a shortage of men and equipment with a surplus of exploration instead of lack of long-term investment in such equipment. Clearly, economic thinking is not your forte.


But all this is really beside the point. In these forums, it is very easy to get lost in trying to contest every little point, while losing track of the big picture. You seem to be especially prone to that.

Look, the cost of finding new oil is not increasing. That's the bottom line. And that's really the only argument I need to make because if the cost is not increasing, then new oil is just as easy to find as ever and thus the flow rate is not geologically constrained. Unless you have actual evidence to contradict this, I'd suggest that you stop trying to fight reason with condescension and insults.

[social]

ieatfood wrote: social wrote: I'D avoid using neoclassical economicS to explain the geological nature of the earth...

I'd avoid using geology to explain an economic phenomenon.
I remind you, when it comes to resource economics, geologists have had a terrible track record. Geologists have been predicting global imminent supply shortages in every single natural resource imaginable for like the past 150 years. They have been wrong every single time. It's not even funny.

THey might as well be pulling their predictions out of a tarot card deck.

Your post is an exaggerated piece of nonsense that neither acknolwedges geology for what it actaully is - a broad-ranging discpline that emcompasses, according to this dictionary, "the scientific study of the origin, history, and structure of the earth" - but completely ignores the fact that, without geology, oil would not be extracted from the earth today! It is beyond beleif that you are capable of lambasting a whole branch of science for 'inaccuracy' whilst at the same time lauding your partial and halfway economic models! Stop worshipping the market, ieatfood; you will soon find out it is more fickle, more prone to collapse, than anything a geologist will talk about.

[social]

To clarify a few things: To suggest that the market and the economic principles on which it is based are an accurate means to predict the decline of oil, may be true - in the sense that prices will, invariably, increase as supplies of oil decrease. However, this does mean we should rely on the fluctuations of the market as a means to predict oil supplies; they will merely act as a sign, when the time has come, that oil is running out. Yet since there are other causes for rises in prices, some unrelated to supply and demand, we won't know when oil has run out until a few years before it actually happens. Thus, we are best avoiding the market and leaving the study of oil supplies to those who specialise in it.

[Preechr]

ieatfood wrote: Look, the cost of finding new oil is not increasing. That's the bottom line. And that's really the only argument I need to make because if the cost is not increasing, then new oil is just as easy to find as ever and thus the flow rate is not geologically constrained. Unless you have actual evidence to contradict this, I'd suggest that you stop trying to fight reason with condescension and insults. If that is the only argument you have, then you need to concede the point. Oil is getting more expensive to find, has been getting more expensive since 1994, and has been exploding since 2003. Remember where your article stated the relevant data hasn’t been published for the past 15 years? That was a lie. Oil companies release that information every year, and most do it every quarter. The US government also publishes the information, although they are a little slow. They published the 2002-2004 data just this past March.

US Department of Energy wrote: Average worldwide finding costs for the FRS companies rose $1.91 per boe for the 2002-2004 period, easily the largest real dollar increase in the history of the FRS, for which comprehensive finding costs data date back to the 1981-1983 period.

US Department of Energy wrote: With a substantial 170-percent increase, finding costs in the U.S. offshore region jumped to the highest level among the FRS regions in 2002-2004, with 3-year finding costs of $27.66 per boe, just edging out the previous leader, Canada, which nonetheless experienced an increase of 113 percent.

US Department of Energy wrote: In general, finding costs have been rising since the middle of the 1990s and have been more variable for the U.S. offshore region than for the U.S. onshore region or the combined foreign regions. The rise in offshore finding costs in the 2002-2004 period is clearly the most spectacular in the history of the FRS.

I hesitated to use this report because the information is 2½-4½ years old, and doesn’t adequately reflect how costs have risen in the past few years. While much newer than the government piece, this article is still over a year old and doesn’t show how crazy things are here in 2006:

Forbes wrote: Jackup [oil exploration drilling rig] rates have doubled in two years, in some cases topping $90,000 a day. For more advanced deepwater-drilling rigs, analysts eyeing the action expect the rents to hit a record $300,000 a day this year. Leading offshore driller Transocean recently contracted a deepwater-drilling rig to ChevronTexaco for $207,000 a day, up from $140,000 a day a year ago.



The article I brought up previously was an announcement that BP had contracted to pay $520,000 per day. That article was from April, 2006.

$140,000 per day in 2004
$207,000 per day in 2005
$520,000 per day in 2006

The cost of finding new oil is increasing dramatically.

[ieatfood]

social wrote:

Your post is an exaggerated piece of nonsense that neither acknolwedges geology for what it actaully is - a broad-ranging discpline that emcompasses, according to this dictionary, "the scientific study of the origin, history, and structure of the earth" - but completely ignores the fact that, without geology, oil would not be extracted from the earth today! It is beyond beleif that you are capable of lambasting a whole branch of science for 'inaccuracy' whilst at the same time lauding your partial and halfway economic models! Stop worshipping the market, ieatfood; you will soon find out it is more fickle, more prone to collapse, than anything a geologist will talk about.

dude, i never said that geologists arent good at extracting oil--they are!
i said that they suck at predicing oil prices and oil shortages
and if you look at their track record, it is abysmal.

and i am not lauding any economic models
there are no models involved
it is simply the observation that it is not getting any harder to find oil and thus there is no evidence of an imminent shortage

thats common sense, whether you want to put it under the blanket of "economics" or not.

[ieatfood]

social wrote: To clarify a few things: To suggest that the market and the economic principles on which it is based are an accurate means to predict the decline of oil, may be true - in the sense that prices will, invariably, increase as supplies of oil decrease. However, this does mean we should rely on the fluctuations of the market as a means to predict oil supplies; they will merely act as a sign, when the time has come, that oil is running out. Yet since there are other causes for rises in prices, some unrelated to supply and demand, we won't know when oil has run out until a few years before it actually happens. Thus, we are best avoiding the market and leaving the study of oil supplies to those who specialise in it.

except that if you have read anything i have posted, i am not using oil prices to predict oil shortages

i am using in ground reserve selling prices to point out the fact that oil is not getting any harder to find and thus, there is no evidence that we are going to run out any time soon.

[ieatfood]

Preechr wrote: ieatfood wrote: Look, the cost of finding new oil is not increasing. That's the bottom line. And that's really the only argument I need to make because if the cost is not increasing, then new oil is just as easy to find as ever and thus the flow rate is not geologically constrained. Unless you have actual evidence to contradict this, I'd suggest that you stop trying to fight reason with condescension and insults. If that is the only argument you have, then you need to concede the point. Oil is getting more expensive to find, has been getting more expensive since 1994, and has been exploding since 2003. Remember where your article stated the relevant data hasn’t been published for the past 15 years? That was a lie. Oil companies release that information every year, and most do it every quarter. The US government also publishes the information, although they are a little slow. They published the 2002-2004 data just this past March.

US Department of Energy wrote: Average worldwide finding costs for the FRS companies rose $1.91 per boe for the 2002-2004 period, easily the largest real dollar increase in the history of the FRS, for which comprehensive finding costs data date back to the 1981-1983 period.

US Department of Energy wrote: With a substantial 170-percent increase, finding costs in the U.S. offshore region jumped to the highest level among the FRS regions in 2002-2004, with 3-year finding costs of $27.66 per boe, just edging out the previous leader, Canada, which nonetheless experienced an increase of 113 percent.

US Department of Energy wrote: In general, finding costs have been rising since the middle of the 1990s and have been more variable for the U.S. offshore region than for the U.S. onshore region or the combined foreign regions. The rise in offshore finding costs in the 2002-2004 period is clearly the most spectacular in the history of the FRS.

I hesitated to use this report because the information is 2½-4½ years old, and doesn’t adequately reflect how costs have risen in the past few years. While much newer than the government piece, this article is still over a year old and doesn’t show how crazy things are here in 2006:

Forbes wrote: Jackup [oil exploration drilling rig] rates have doubled in two years, in some cases topping $90,000 a day. For more advanced deepwater-drilling rigs, analysts eyeing the action expect the rents to hit a record $300,000 a day this year. Leading offshore driller Transocean recently contracted a deepwater-drilling rig to ChevronTexaco for $207,000 a day, up from $140,000 a day a year ago.



The article I brought up previously was an announcement that BP had contracted to pay $520,000 per day. That article was from April, 2006.

$140,000 per day in 2004
$207,000 per day in 2005
$520,000 per day in 2006

The cost of finding new oil is increasing dramatically.
2 issues:

1. if you look here:
http://www.eia.doe.gov/emeu/perfpro/fig16.htm
the price has only been increasing for the past 3 years.
and the increase is not much greater than the range of fluctuation for the past 15 years.
we're basically at the same level as we were in 1990


2. The relevant data for oil has not been published for the past 15 years. This is data from an aggregate of oil and gas. However, this is an inaccurate way to make such calculations: http://72.14.203.104/search?q=cache:lBGfUx2eGY8J:web.mit.edu/ceepr/www/2002-011.pdf

in fact, adelman argues that the increase in recent costs is an overestimate: "Recent overestimation of aggregate costs under traditional methods implies corresponding underestimation of corporate profitability and a larger upward shift of aggregate reserve supply curves than may actually have happened."

Adelman argues that the "divisia approach", which is based on the sale price of oil reserves, is much more accurate. That data show that oil is not becoming any harder to find.


as for the price of the drillship, it is irrelevant
we only really care about geological limitations on oil flow.
that the price of ships are getting more expensive is irrelevant because the price of ships is not related to the geological supply of oil.

we could make ships cheaper simply by building more ships. we could make ships more expensive by blowing up a few ships.
but that has nothing to do with the amount of oil in the ground.

[social]

ieatfood wrote: dude, i never said that geologists arent good at extracting oil--they are!
i said that they suck at predicing oil prices and oil shortages
and if you look at their track record, it is abysmal.

and i am not lauding any economic models
there are no models involved
it is simply the observation that it is not getting any harder to find oil and thus there is no evidence of an imminent shortage

thats common sense, whether you want to put it under the blanket of "economics" or not.

No economic models involved? You've based your analysis on the theory of supply and demand for Christ's sake! I can't remember whether it's in this thread or in the other, but at some point in our debate you've definately suggested that oil can't be running out because oil prices haven't risen (which of course they have, but lets forget that for the time being).

The new argument you've come up with is hardly any better. To suggest that oil cannot be running out becuase it is now being extracted at a greater rate than ever before is foolish, since, for the last time, oil is not being produced as fast as we are consuming it! Therefore, oil is running out! Whatever you say is not going to change that. Whatever model you use or however much "common sense" you appeal to will not stop oil running out! It is running out! Accept it. Move on.

[ieatfood]

social wrote: ieatfood wrote: dude, i never said that geologists arent good at extracting oil--they are!
i said that they suck at predicing oil prices and oil shortages
and if you look at their track record, it is abysmal.

and i am not lauding any economic models
there are no models involved
it is simply the observation that it is not getting any harder to find oil and thus there is no evidence of an imminent shortage

thats common sense, whether you want to put it under the blanket of "economics" or not.

No economic models involved? You've based your analysis on the theory of supply and demand for Christ's sake! I can't remember whether it's in this thread or in the other, but at some point in our debate you've definately suggested that oil can't be running out because oil prices haven't risen (which of course they have, but lets forget that for the time being).

The new argument you've come up with is hardly any better. To suggest that oil cannot be running out becuase it is now being extracted at a greater rate than ever before is foolish, since, for the last time, oil is not being produced as fast as we are consuming it! Therefore, oil is running out! Whatever you say is not going to change that. Whatever model you use or however much "common sense" you appeal to will not stop oil running out! It is running out! Accept it. Move on.

i NEVER said that oil isn't running out because oil prices havent risen
and I NEVER argued that oil is being extracted at a greater rate

please pay attention!!!
my argument is that the selling price of proven in-ground reserves hasnt risen
that means that finding a new barrel of oil is just as easy today as it was 15-20 years ago.
thus, there is no reason to believe that oil is geologically scarce.

now, you are free to disagree with this, but you need to find some logical reason for your disagreement
your idea of logic seems to be yelling: "its running out, its running out, accept it!!!"

personally, I don't find that logic very convincing.

[Preechr]

ieatfood wrote: 2 issues:

1. if you look here:
http://www.eia.doe.gov/emeu/perfpro/fig16.htm
the price has only been increasing for the past 3 years.
and the increase is not much greater than the range of fluctuation for the past 15 years.
we're basically at the same level as we were in 1990 The chart you are pointing to is a combination of production costs and finding costs. If you want to isolate the costs of finding and developing new reserves, see the page I linked to previously. The only reason you could be motivated for going from a chart showing the pure relevant statistic to the combo chart that waters down the data you don’t like is that you can’t deal with the results and aren’t a big enough person to admit that you’re wrong.


ieatfood wrote: 2. The relevant data for oil has not been published for the past 15 years. This is data from an aggregate of oil and gas. However, this is an inaccurate way to make such calculations: http://72.14.203.104/search?q=cache:lBGfUx2eGY8J:web.mit.edu/ceepr/www/2002-011.pdf What is it with you and old data? This one, stopping in 2001, is even more out of date than your last one. Let me guess: Everything including 2006 data ruins your ridiculous concept of the way things are and so you refuse to see it. If you really, really, really want to argue the world didn’t hit peak oil in 2001, I’ll let you have that one.