Re: Matthew Simmons on Oil

From: Al Koop <>
Date: Wed Aug 24 2005 - 18:09:00 EDT

>>> Rich Blinne wrote: <> 08/24/05 1:32 PM >>>
There are two reasons why the Saudis do not want the price too high. First,
a global recession would crash the price. Second, it makes expensive
alternatives more attractive. The question is not what the Saudis desire.

I agree only partially. The world clearly does not want a spike above $100 a barrel. But they need some stable high price that cuts the growth of demand in some way without a major recession. (There may be a recession anyway, but it not clear to me that the demand would fall to levels that would crash the price if Russia nd the Saudi cut back supply) It appears that $60 a barrel hasn't been that drastic a rise so far. The fact that they cannot control the rise above this level is an indication that indeed the Saudi's are unable to increase production right now (at least of light sweet crude) by any significant amount, and therefore that the Peak OIl supporters may be right and we are in for a nasty time regardless. Russia (to me) would seem to be even less inclined to bail out the US and other OECD countries by increasing production to drop the price. There are some who claim that the US got the Saudis to increase production greatly so that the Soviet Union could not ge!
t sufficient funds from their own oil production and therefore lost the Cold War.

There are no good oil substitutes anywhere on the horizon. Just as energy costs raise the cost of many things, they also raise the costs of alternative fuels. It is by no means clear that hydrogen, biofuels, etc will be economically feasible above $40 a barrel oil as the NYTimes author claims. There are several good studies by academics that claim that ethanol takes more energy to produce than it has in its final form. Even the proethanol group puts the gain of energy at less than twice of what one puts in--not likely to be feasible economically without subsidies. Also the need for food may require that land be used for agriculture to produce food rather than fuel. It seems to me that the hydrogen economy is a long way off, if it happens at all (and it will be a lot more expensive than $60 a barrel oil if it happens). The cost of mining coal also goes up as the cost of oil increases. I don't think we are going to see a solor-powered Boeing 7X7 taking off any time. Tha!
t's the real problem with oil depletion--there do not seem to be any good suitable alternative energy forms on the horizon in the amounts needed to replace petroleum no matter what the price. The same people who worship the god of technology that think technology will increase oil production to whatever levels we need for the next 50 years are the same people who think that technology will allow us to easily find any old substitute for oil cheaply. I happen to think they are wrong on both counts.

Received on Wed Aug 24 18:11:31 2005

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