Oil Drops Again

It looks like the oil bubble may have burst.

NEW YORK (al-AP) -- Oil prices kept falling Tuesday, sinking as low as $118 a barrel on growing concerns that a U.S. economic slowdown and high energy costs are curbing consumer demand for gasoline and other petroleum products.

Crude's decline is giving Americans more relief at the pump. A gallon of regular gasoline on average fell another penny overnight to $3.871, according to auto club AAA, the Oil Price Information Service and Wright Express. Gas prices have fallen four straight weeks for the first time in December; prices are off 5.9 percent from their July high as U.S. motorists cut back on their driving to save money.

A day after plunging as much as $5 a barrel in a dramatic sell-off, crude continued its downward trend Tuesday as traders sold oil contracts on the belief that prices are still too high in relation to demand and have further room to fall.

Light, sweet crude for September delivery lost $1.86 to trade at $119.55 a barrel on the New York Mercantile Exchange, after earlier falling to $118, the lowest level since May 5.

Crude has now fallen more than $25 since reaching a trading high of $147.27 on July 11.

"The market psychology has finally shifted," said Stephen Schork, an analyst and trader in Villanova, Pa., adding that "$4-a-gallon gasoline has clearly killed demand."

No kidding on that last line. Still waiting for the corresponding drop at the pump. Even while oil prices were falling, the price at the pump in Racine and Kenosha jumped 10-15 cents a gallon over the past two days.

Competing Energy Plans

You guess which one makes more sense.

From Gary Varvel via Townhall.com:

Interestingly Enough

Iran is stockpiling oil in tankers off of its coast. Why? Because it is waiting for higher prices. No, not prices bigger than $130.00 a barrel but perhaps $100.00 a barrel. Iran's oil is a heavy crude and not worth the same as the light crude. That sort of crude produces more heating oil of which there is supposedly and abundance of. See This Economist article for the whole story. In fact, the article I refer to states the discount rate on Iran's crude is growing larger! Check out this Belmont Club article & discussion that gives the news above an even more interesting twist.

Anyway, I do not think anyone is disputing the importance of developing alternative energies, but it will take more than clicking the heels together and chanting "I wish for alternative energy!" Solar and wind play a part but wind is viable only on large commercial scale and solar is *VERY* promising on the small scale (I seriously considered it for our home, had I calculated properly the first time our new house may have had PV material the south facing roof and I looked into geothermal heating but they play shell games with you on that), but is not going to be able to fit the bill on a large scale for some time (if ever). Nuclear is going to have to come back onto the table and if the choice is massive starvation (that'll solve our obesity crisis), nuclear energy, or pumping more oil out of the ground it is an easy choice the later two.

Re: Re: Bakken Oil Analysis

Lance says:

Looking back on those stories, I see a lot of “estimates,” but no real sourcing for those estimates. So it looks like I got sucked into speculation that was too good to be true.

The fellow I refer to in my post LC Price set it all off:

Then the stuff of legends came, along with one geochemist by the name of L. C. Price. Mr. Price, working for the US Geological Survey [USGS] performed extensive chemical analysis of abandoned oil wells, primarily in North Dakota and came away with an astonishing conclusion—The Bakken trend contains up to 200 billion to 500 billion, yes that is with a “B”, of original oil in place.

Source: The Bakken Trend: Lost Dutchmen Mine of the Oil Patch? – Seeking Alpha How did LC come up with his estimate? I have not seen his paper nor would I probably be able to really understand it (not having studied much geology).

Geologists and oil companies have known of this reserve for a long time, it is just costs more to coax the oil out of the ground there and only now with $110 per barrel oil is it feasible to extract that oil.

Bakken Oil Analysis Out

The USGS released its Bakken Oil analysis today.

Back in 2000 a guy by the name of LC Price put together a paper on the Bakken oil reserve and estimated the the reserve to hold between 200 and 500 Billion bbl.s of oil. I have seen some estimates go as high as 900 Billion barrels of oil. For comparison Saudi Arabia is thought to be sitting on 260 billion barrels of oil. However, the USGS did not release Price's report (Price has since died) and did further analysis of the reserves. The USGS released the much anticipated report today and the result is...

Nowhere near the numbers tossed around above. The USGS estimates the Bakken Reserve to hold about 3.65 billion barrels of recoverable oil. This increases our nation's known reserves from 14% to 19%. Not quite the spectacular as the hype (how typical). However a few things.

As our technology and expertise increase we will most likely bring more of the oil in the reserve into production. Secondly I recall reading (sorry can't get the source) that oil production in Alaska is outperforming early reserve estimates.

However, remember what I was saying yesterday, this is not cheap oil. Even if the amount was according to the hype the oil is hard to recover and most likely is more problematic to refine.

In addition the the petroleum there is natural gas to be found there.

My Business Plan

The new energy bill phases out the incandescent light bulb. Apparently, our government doesn't realize that the alternative technology is not a suitable "or equal" replacement yet, and Hollywood doesn't realize that those aren't CFL bulbs above the mirrors in the dressing room or in the ETC Source Fours lighting the stage.

Ok, whatever. If the government is taking away the light bulb, I may as well take advantage of it. I'm stocking up on illegal light bulbs, and then I'll wait. Plenty of people are going to want my product, because the light is still far superior to CFL and LED. I'll be able to own the black market. That's tax free income, too!

When I've sold enough of my contraband, I'll not stop there. The governement can't outlaw the components of an incandescent bulb. Argon, glass, and tungsten wire aren't used only in light bulbs. So, all I need to do is buy an abanodoned production line cheap from Ebay, put it in a warehouse, and fire it up. I'll be Thomas Edison and Paul Revere in one! And, I'll be rich.

I should thank the president for handing me my retirement plan.

Enough Already!

I'm all in favor of my car getting better mileage.

Just stop telling me that I need to shove my lunch in the gas tank.