Green In The Head

[Meta Blog]

Originally posted by Nicholas Provenzo from The Rule of Reason,

Another environmentalist is warning us that the world may soon end.

Kenneth Deffeyes believes the world passed a very important landmark, with very little notice, on Dec. 16, 2005.

On that day, he said, the world's residents finished off the first half of the world's oil and started in on the second. Price volatility will be the norm, and if some big changes aren't made, famine, pestilence, war and death are on the way.

Deffeyes, who presented his ideas during a talk Tuesday night at the University of Alaska Fairbanks, is a Princeton University professor emeritus and author of "Beyond Oil: The View from Hubbert's Peak" and "Hubbert's Peak: The Impending World Oil Shortage."

The idea comes from the work of M. King Hubbert, who predicted in 1956 that the amount of oil produced in the United States would peak in 1970, when half of the country's oil had been recovered, then start its decline. [

Stefan Milkowski, Daily News Miner

]

The article goes on to describe the Deffeyes? ?peak oil? thesis, claiming that civilization has "driven off the cliff," and that "we're in for a hard landing." Yeah, the same way we drove off the cliff and landed hard with whale oil.

It's amazing how environmentalists exploit ignorance of the basic laws of economics in order to sell their tales of gloom and doom. For example, it?s utterly impossible for the world to run out of oil. Let me explain.

When you have a good like oil, price signals its value. If oil is truly becoming scare, speculators can forecast a rise in future prices. These speculators start to store oil for that future day when they can sell it for more than what they bought it for.

That speculation causes oil prices to rise and any rise in price is met with rationing (that is, one finds ways to get by with less), and the search for alternatives (that is, one tries to find alternatives to oil itself). Man will not sit by and starve when it can build nuclear or hydro plants to serve its energy needs?that is if man still believes he has a right to exist in the face of the environmentalist's claims that he is a despoiler nature.

Notice though that the environmentalists never talk about the market's ability to ration goods though price or the power of price to produce substitutes. The market is freedom and it allows for people to provide for their material needs, yet according the environmentalist, it is the market itself that exploits the earth and savages the intrinsic value of nature.

That's why in my book, there's no such thing as a pro-human environmentalist. If there was, they would immediately become capitalists, fight for property rights and support man?s right to life his life for his own stake.

Yes, it is that simple, but as we all know, its not going to happen anytime soon. The egoism question strikes again.

[D'kian]

And here I thought we ran out of oil before the year 2000, as all the experts warned back in the 70s...

Seriously, I would like to add there exist yet three rather large sources of oil:

1) Wells untapped due to "environmental" considerations (off shore in California, the ANWR in Alaska, etc)

2) Oil sands. Canada alone has more oil in this form than Saudi Arabia does in liquid form. This oil is heavy, though, which means it doesn't have as many of the lighter, more valuable components like gasoline. And it is costlier to process, since ti first must be separated from the dirt it's embedded in (the costs could come down with large scale nuclear power). But there is a hell of a lot of oil in this form. In Canada, the US and Venezuela, among other places.

3) Shale oil. Much like oil sands, only mroe so. This is heavy oil trapped in rocks. And ther emay be mroe of this kind of oil than the oil sand kind.

Oil will get more expensive, but it won't run out for a good long time yet.

[softwareNerd]

Also,

• conventional undiscovered oil (recent finds in Mexico and Nigeria, show that the world is not yet fully explored)
  
• oil that is expensive to get at today (e.g. too deep etc.) but will available with tomorrow's technology
  

Those who think oil will run out will soon be able to buy an oil ETF and put their money where their mouth is.

[D'kian]

The latest issue of Discover Magazine has an ineresting story on the subject. A new plant that turns all sorts of waste into oil. Primarily they use animal waste (turkey heads, feet, pork fat and such), and old plastics as raw material. What comes out is oil suitable for power plants, and a high grade of liquid fertilizer (completely sterile due to the temperatures its subjected to in the process).

The bad news is, the cost seems too high. I say seems, rather than is, because the article makes a jumble out of the economics in the situation. There are government subsidies, costs that depend on certain regulations, plant shutdowns due to the smell of the exhaust, etc etc. It seems to add up to $80 a barrel.

I wouldn't dismiss it as eternaly too high even so. Government meddling aside, it is a first generation process. No doubt it will improve in time, especially if other companies become interested.

In any case, given all the untapped, potential, and largely untapped sources mentioned in this thread, I've no worry at all that oil will run out soon. Unless, that is, these sources are killed by environmentally-motivated government fiat. That does worry me.

[softwareNerd]

The "problem" with published oil-reserve figures is that they assume a particular price for oil. They're not a simple measure of a physical phenomena; they have an economic aspect. For instance, if a particular "find" will cost $1000 a barrel to extract, it would not be counted as "proven reserves". What about other "economically" unviable reserves like shale and a lot of oil-sands [now being tapped in Canada]. In 2003, Canada's oil-reserve rose from 5 BBL to 180 BBL, making it second to Saudi Arabia. No new resource was discovered. An existing, known resource became viable. [Aside: Good jobs in Alberta now.]

Here is another example. This is list of "proved oil reserves", according to the CIA Factbook. Venezuela is shown as having 75 billion barrels. However, this is because a lot of Venezuela's reserves are "extra heavy crude". At today's prices, these are viable. However, they are not included in reserves, because today's price is not the assumed long-term price typically used. The government of Venezuela is now trying to enter into a long-term deal with someone who is willing to buy it from them at $50 pr barrel. If a deal is signed, Venezuela's reserves will rise from 75BBL to 312BBL (higher than Saudi Arabia).

So, next time someone asks: "how can we increase the world's oil reserves?", one true reply could be: simple, just raise the price of oil.

[D'kian]

The "problem" with published oil-reserve figures is that they assume a particular price for oil. They're not a simple measure of a physical phenomena; they have an economic aspect. For instance, if a particular "find" will cost $1000 a barrel to extract, it would not be counted as "proven reserves".

That makes perfectly good sense for the people who run oil companies. I assume they also keep data on less profitable reserves as well. And one would expect geologists to know this also.

But then, "We're running out of cheap oil!" is not as alarmist as "We're running out of oil!" The prospect of $100 per barrel drawn from an ever diminishing supply, does hit harder than, say, $100 per barrel drawn from a larger supply.

So, next time someone asks: "how can we increase the world's oil reserves?", one true reply could be: simple, just raise the price of oil.

That's what the market's been doing lately. The Canadian oil sands would remain untapped if prices were as low as they were in the late 80s (I recall less than $10 per barrel).

Of course, it helps to know there are other,more costly, reserves to tap. It also exposes the entire "dwindling resources" argument for the nonsense ti is. I owe you one.

[NewYorkRoark]

That makes perfectly good sense for the people who run oil companies. I assume they also keep data on less profitable reserves as well. And one would expect geologists to know this also.

But then, "We're running out of cheap oil!" is not as alarmist as "We're running out of oil!" The prospect of $100 per barrel drawn from an ever diminishing supply, does hit harder than, say, $100 per barrel drawn from a larger supply.

That's what the market's been doing lately. The Canadian oil sands would remain untapped if prices were as low as they were in the late 80s (I recall less than $10 per barrel).

Of course, it helps to know there are other,more costly, reserves to tap. It also exposes the entire "dwindling resources" argument for the nonsense ti is. I owe you one.

There's a company called Wentworth Energy that teamed up with a company called Petromax to commercialize a product that enables the environmentally-friendly, economically-profitable extraction of oil from oil sands. Check it out at Wentworth Energy.

FYI, Wentworth Energy is a publicly traded company that I own shares of, so I may be biased, but I think the videos speak for themselves.

A quick side note: Is there a forum dedicated to stock buzz? Is there a place people can bounce companies off one another or is there some kind of SEC restrictions regarding online forums?

[softwareNerd]

A quick side note: Is there a forum dedicated to stock buzz? Is there a place people can bounce companies off one another or is there some kind of SEC restrictions regarding online forums?

There are forums (like Motley Fool) that are dedicated to discussions about specific companies. I doubt there are SEC rules against it as such. Of course normal SEC rules will apply: for instance, if you use a forum to release insider info, that might be illegal.

On a forum like Motley Fool, you'll find many more people who're interested in stock-discussions.

With that said, I've thought -- in other contexts (like Online gaming, Bridge, Chess) and also in the context of investment -- that it's fun to have these discussions with Objectivists who share the particular non-philosophical interest, even if they aren't one's primary group for such a discussion.