Congressional Hearing on the Effect of Speculation On the Price of Oil

[edward]

I caught this on C-Span last night. It is very interesting, also very long. Some big time players testify here. There is a lot of talk about the "Enron Loophole"

If nothing else watch Dr. Mark Cooper at about the 50 trough 60 minute segment. Yea I know he is involved in consumer affairs, but I think he nailed a big problem concerning the speculative market. Most of the participants did. edit: Including george Soros who's segement begins at about the 20 minute point.

http://www.c-span.org/Topics/Energy.aspx

[TheStatutoryApe]

It sounds interesting but apparently my computer can't play it.

[edward]

It sounds interesting but apparently my computer can't play it.

Most of the same information is in the link below. It can be viewed with Windows media Player. There is a place to click on the right. To get the main gist of the hearing you can start at about the 33 minute point and see Michael Greenberger.

A lot of hedge fund involvement apparently is not accounted for due to the "Enron loophole"

http://www.c-spanarchives.org/library/index.php?main_page=product_video_info&products_id=205797-1

[DrClapeyron]

blah

[RobertR]

Speculators cannot defy the fundamental law of supply and demand for very long , unless they wish to loose all their assets.

This is nothing but Democrats trying to blame a problem they partually created by restricting supply, on free enterprise system. Their solution of coarse was stated by Maxine Watters. Socialize the oil industry.

If America lets them get away with creating a problem, and then proposing socialism as the solution, they are destined to rule the world, as our economic knowledge has ceased to exist.

Domestic production of oil in the US has been almost cut in half since 1980. We have approx 120 billion barrels of natural oil in known reserves which is currently off limits to drilling.

Adam Smith figured it out some 230 years ago. It's called supply verses demand.

[RobertR]

If I were allowed to post URL's I would direct you to a site which shows where every time OPEC did something to cut supply since 1970, the price increased accordingly.

You can find it at the Energy Information Administration

then add this on the end of it once your there. emeu/cabs/AOMC/Overview.html

Of course it does not matter who cuts supply, the US or OPEC, the effect is the same on the world market.

Both the US and OPEC have been pulling in the same direction. The problem with that is, it is making them rich, and it is going to make us poor.

We are an industrial nation, they are not, and only 40% of each barrel of oil goes to make gas for transportation. The other 60% goes primarely to industrial production, which includes, food, heat, etc

"Our goal is to socialize , ah nationalize, ah take over and run all your companies" Maxine Waters , speaking the truth.

Why else would our government seek to create poverty in its own country if not for the accumulation of their own power?

These dog and pony shows are for no other purpose than propaganda, to sell an idea. Socialism. They have little to do with reality.

[loseyourname]

Speculators cannot defy the fundamental law of supply and demand for very long , unless they wish to loose all their assets.

This is nothing but Democrats trying to blame a problem they partually created by restricting supply, on free enterprise system.

Except that speculation takes place on the world commodities market. Whatever you think of domestic supply, worldwide, the supply of oil still exceeds present demand by at least 10% or so if I've been told correctly.

Hedge funds are doing what they're named for - hedging. They're betting that future supply will be impacted by instability in major oil producing regions and that future demand will grow quickly as massive populations in developing Asian markets start to consume like westerners. Betting this will happen, they're getting rich right now in futures trading. In addition, commodities in general are becoming more valuable as the dollar, being the currency in which global commodities are traded, becomes less valuable.

The price of a gallon of crude on the world market doubled between 2003 and 2007, which you can legitimately attribute to changes in supply and demand thanks to the invasion of Iraq, turmoil in Venezuela and oil-producing parts of Africa, and to rapid development in southeast Asia and China. Then, in the last year, it doubled again. We recently saw gasoline domestically hit a record median price for 27 out of 28 consecutive days. Crude futures saw the highest intraday surge in the history of the New York Mercantile Exchange last night, in a span of one hour before trading closed. This is a speculative bubble, plain and simple. If speculators are correct, and future supply and demand truly do surge, it may very well continue for some time. But when has that ever been the case? At this point, they're just betting that the bubble will continue, that crude will go to $200 a barrel by the end of the year, and they'll be able to get out before it collapses.

[DrClapeyron]

$200 per barrel would not be bad. People's willingness to pay is much higher. If you consider that new demand comes from a country with large reserves of cash US dollar, they will be much willing to purchase oil. For other countries, willingness is not as high. And for those who pay for gasoline, their willingness may not be as high.

If a large majority of crude buying nations have a high willingness to pay, then prices will increase as demand increases. Demand will decrease once the willingness threshhold has been crossed. Where is that at? I do not know, you may have to speculate on that.

[TheStatutoryApe]

Most of the same information is in the link below. It can be viewed with Windows media Player. There is a place to click on the right. To get the main gist of the hearing you can start at about the 33 minute point and see Michael Greenberger.

A lot of hedge fund involvement apparently is not accounted for due to the "Enron loophole"

http://www.c-spanarchives.org/library/index.php?main_page=product_video_info&products_id=205797-1

Thank you Edward. I watched the open and skimmed it at the 10min and 33min marks.
I've always thought that futures trading was dangerous. Perhaps unreasonably since I don't really understand well how the stock market works and it's impact on the economy as a whole. So maybe I'm just afraid that this sort of thing is the norm or somehow inevitable since I don't really understand it.

[chemisttree]

Last weekend the Saudis proposed increasing their output of oil to bring down prices.
Saudi Arabia, the world's biggest oil exporter, may announce an output increase at a meeting it's hosting in Jeddah on June 22, an OPEC official said yesterday. The Middle East kingdom will pump an extra 200,000 barrels a day next month, Agence France-Presse reported yesterday, citing United Nations Secretary-General Ban Ki-Moon. http://www.bloomberg.com/apps/news?pid=20601103&sid=aJDIEJjFUEk0&refer=us

It seems that the price of oil is largely (if 60% of the price can be considered 'largely') based on speculation!
http://globalresearch.ca/index.php?context=va&aid=8878

Are we doing this to ourselves? Is our greed to make a buck on hedge funds or a better return in the market?

The Senate investigated this back in 2006...
A June 2006 US Senate Permanent Subcommittee on Investigations report on “The Role of Market Speculation in rising oil and gas prices,” noted, “…there is substantial evidence supporting the conclusion that the large amount of speculation in the current market has significantly increased prices.”

What the Senate committee staff documented in the report was a gaping loophole in US Government regulation of oil derivatives trading so huge a herd of elephants could walk through it. That seems precisely what they have been doing in ramping oil prices through the roof in recent months.

The Senate report was ignored in the media and in the Congress.http://levin.senate.gov/newsroom/supporting/2006/PSI.gasandoilspec.062606.pdf

Why would our candidates for president ignore this absolutely crucial issue? Is there anything more critical at hand?

[Astronuc]

I heard this morning a discussion about this very matter. The question was about what is driving the price of oil, and even with the Saudis ramping up production, and even when demand drops below supply, the price of oil keeps rising.

From Marketplace Morning Report - June 16, 2008

Analyzing the oil bubble
http://marketplace.publicradio.org/display/web/2008/06/16/sloan_price_of_oil/
Jagow: Well if this is actually a bubble, are we assuming then that the supply/demand aspect of this isn't as strong as some people are making it out to be?

Sloan: Right. I think a lot of what's going on here is financial speculation. People have made a lot of money betting on oil, and I think that's happening with a lot of the commodities. And you can make a supply and demand case, but I don't believe it. And I can't tell you why I don't believe it, and I can't demonstrate logically that it's wrong, but I don't believe it.

Jagow: How much of this do you think is being driven by fear?

Sloan: The stock market is more fearful now than usual. I would say a lot of it. I just don't think that what's going on in many cases is rational. And if it's not rational, it's gonna come to an end. Because it always does.


Part of it is speculation on a number of things. The value of dollar has fallen against other currencies, so there is some speculation this will continue. There is speculation on the stability of supply - from places like Iraq, Iran, Venezuela. There is hold back by non-OPEC producers, and some concern that this will continue.

The question becomes - "how much speculation is too much speculation". Speculation has been tolerated because is enhances the liquidity in the commodities markets, BUT it can also hurt the end-users and consumers when costs go much higher than peoples ability to pay.

There is concern about speculation of all commodities, not just oil.

[chemisttree]

And what happens when the speculator's bubble bursts? A bailout? I think I'm gonna be sick...

[Ivan Seeking]

The Saudis are worried that the high prices will drive a shift to alternative fuels, and they should be! Let the speculators rock and roll, it only helps to end the misery once and for all; and sooner rather than later. And the sooner we can quit the imported oil, the less painful the transition will be. What we see now is only a birth pang of what's to come if we don't get off the oil.

And the best part is that we add a half-trillion to the US economy annually, instead of sending that money to foreign suppliers.

[chemisttree]

I don't think its gonna work like that. More likely we will continue to send them the same or more money but have to spend even more at home for a partial replacement of the energy what we already use.

[Ivan Seeking]

With China and India coming online, it will have to change.

Notable: In some areas it would now be cheaper if you could run your car on milk.

[chemisttree]

Well, I don't live in Wisconsin! How about cow patties?

[drankin]

According to this site http://watthead.blogspot.com/2006/03/where-does-your-oil-come-from.html we only get 12% of our imported oil from Saudi Arabia. I don't know that their increase will make that much of an impact. (FYI, 33% total comes from the US.)

But it doesn't matter where the oil comes from if I understand it correctly.

All the oil produced in the world goes into the OPEC pool and that's where the price is determined. If all oil producers were able to increase production 10% then you would think that the price would drop accordingly unless there are other determining factors outside of "supply/demand".

If I'm wrong, someone help me out. I'm trying to get my head around how this all works.

[Astronuc]

This might help to put things in perspective - somewhat -

http://www.eia.doe.gov/emeu/international/contents.html
on that page - http://www.eia.doe.gov/emeu/international/images/int_oil2.gif

Non-OPEC nations produce more crude oil than OPEC.

Petroleum stats - http://tonto.eia.doe.gov/country/index.cfm
http://www.eia.doe.gov/emeu/aer/txt/ptb1105.html

http://tonto.eia.doe.gov/country/country_energy_data.cfm?fips=US

Country Analysis Brief
The United States of America is the world's largest energy producer, consumer, and net importer. It also ranks eleventh worldwide in reserves of oil, sixth in natural gas, and first in coal.

U.S. oil production has been declining for years. In 2005, Hurricanes Katrina and Rita slashed oil output from the Gulf of Mexico.

The U.S. is the world’s largest consumer and second-largest producer of natural gas.

The U.S. has the world’s largest coal reserves, with the Western U.S. accounting for 55 percent of current U.S. coal production.

U.S. electricity demand is increasing, as are prices.

I think we need to become more energy independent. But why is it we have to wait for a crisis?

[wildman]

Speculators cannot defy the fundamental law of supply and demand for very long , unless they wish to loose all their assets.

This is nothing but Democrats trying to blame a problem they partually created by restricting supply, on free enterprise system. Their solution of coarse was stated by Maxine Watters. Socialize the oil industry.

If America lets them get away with creating a problem, and then proposing socialism as the solution, they are destined to rule the world, as our economic knowledge has ceased to exist.

Domestic production of oil in the US has been almost cut in half since 1980. We have approx 120 billion barrels of natural oil in known reserves which is currently off limits to drilling.

Adam Smith figured it out some 230 years ago. It's called supply verses demand.

Actually most of it is not off limits. Most of it is too expensive or beyond our present technology. There is still some cheap oil in ANWR (15 billion barrels) which is about enough for 5% of our oil consumption. And some off Florida (5 billion barrels) about enough for 2% of our consumption. The biggest potential (100 billion barrels) is in the deep shelf in the Gulf of Mexico. This is NOT closed to drilling. It is just VERY expensive. It will be long in coming even with the present high prices and will probably never amount to more than 20-25% of our present consumption. There is also other oil here and there (resulting in a total considerably more than 120 billion barrels) but it is all VERY deep and expensive.

The idea that we can just free the oil companies to explore in the US and then everything will go back to normal is a wet dream (literally!). Sorry.

(I think these figures are correct. Someone tell me if they are not)

[wildman]

According to this site http://watthead.blogspot.com/2006/03/where-does-your-oil-come-from.html we only get 12% of our imported oil from Saudi Arabia. I don't know that their increase will make that much of an impact. (FYI, 33% total comes from the US.)

But it doesn't matter where the oil comes from if I understand it correctly.

All the oil produced in the world goes into the OPEC pool and that's where the price is determined. If all oil producers were able to increase production 10% then you would think that the price would drop accordingly unless there are other determining factors outside of "supply/demand".

If I'm wrong, someone help me out. I'm trying to get my head around how this all works.

Oil is heavy and costs a lot to move. We get the oil that is closer to us (like South America). Europe takes the oil closer to them. It is all one big market.

[wildman]

And what happens when the speculator's bubble bursts? A bailout? I think I'm gonna be sick...

I wouldn't sell short if I were you.

[AhmedEzz]

What worries me further is that IF the US is actually going to attack/bomb Iran, the oil prices are going to increase sharply since the whole gulf area will be affected and Iran will stop supplying oil as well, Iraq is also a potential target...

[chemisttree]

According to this site http://watthead.blogspot.com/2006/03/where-does-your-oil-come-from.html we only get 12% of our imported oil from Saudi Arabia. I don't know that their increase will make that much of an impact. (FYI, 33% total comes from the US.)

But it doesn't matter where the oil comes from if I understand it correctly.

All the oil produced in the world goes into the OPEC pool and that's where the price is determined. If all oil producers were able to increase production 10% then you would think that the price would drop accordingly unless there are other determining factors outside of "supply/demand".

If I'm wrong, someone help me out. I'm trying to get my head around how this all works.

Last year the US imported about 35 billion dollars worth of 'business' (it's either oil or sand) with Saudia Arabia. Our deficit with them was about 25 billion. If that's only 12% of our petroleum, it is easy to see how much leverage a speculator could have in our economy by nearly doubling the price for that commodity. http://www.census.gov/foreign-trade/balance/c5170.html

I think we are about to learn a lesson about supply and demand in the petroleum business later this summer. Let's see if it works...

[chemisttree]

A little math.

42 gallons, US = 1 barrel
Current price per barrel of oil is approximately $130.

130/42 = $3.10 per gallon (FOB Saudi Arabia or wherever)

Cost to ship oil by supertanker is roughly 3 to 4 cents per gallon... that's about 1% of the cost of the oil. The cost to transport oil by pipeline in the US is about $1.05 a barrel ($1.05/42 = 2.5 cents per gallon) from Houston to New York (http://www.enewsbuilder.net/aopl/e_article000391720.cfm) which is nearly the same price for the supertanker shipment. That's not a cost driver for imported oil IMO. In the US, most of our oil is domestically produced. Our largest volume of imports comes from Canada followed by Mexico and Saudia Arabia. (http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html) Only Saudia Arabia is an OPEC country in that short list but Canada and Mexico still enjoy the benefits of a ginned up price for the stuff.

You can see that oil trades in a fairly narrow range regardless of the source and the quality. (http://tonto.eia.doe.gov/dnav/pet/pet_pri_wco_k_w.htm)

[drankin]

A little math.

42 gallons, US = 1 barrel
Current price per barrel of oil is approximately $130.

130/42 = $3.10 per gallon (FOB Saudi Arabia or wherever)

Cost to ship oil by supertanker is roughly 3 to 4 cents per gallon... that's about 1% of the cost of the oil. The cost to transport oil by pipeline in the US is about $1.05 a barrel ($1.05/42 = 2.5 cents per gallon) from Houston to New York (http://www.enewsbuilder.net/aopl/e_article000391720.cfm) which is nearly the same price for the supertanker shipment. That's not a cost driver for imported oil IMO. In the US, most of our oil is domestically produced. Our largest volume of imports comes from Canada followed by Mexico and Saudia Arabia. (http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html) Only Saudia Arabia is an OPEC country in that short list but Canada and Mexico still enjoy the benefits of a ginned up price for the stuff.

You can see that oil trades in a fairly narrow range regardless of the source and the quality. (http://tonto.eia.doe.gov/dnav/pet/pet_pri_wco_k_w.htm)

Don't forget, only a portion of "crude" oil equates to gasoline. It has to be refined.

[drankin]

Last year the US imported about 35 billion dollars worth of 'business' (it's either oil or sand) with Saudia Arabia. Our deficit with them was about 25 billion. If that's only 12% of our petroleum, it is easy to see how much leverage a speculator could have in our economy by nearly doubling the price for that commodity. http://www.census.gov/foreign-trade/balance/c5170.html

I think we are about to learn a lesson about supply and demand in the petroleum business later this summer. Let's see if it works...

Also, that is 12% (so 12% of 66%) of the imported oil. 33% of all of our oil comes from the US, if that article I cited is correct.

[chemisttree]

Don't forget, only a portion of "crude" oil equates to gasoline. It has to be refined.

I didn't forget. I just wanted to drive home the point that if you were to pump crude oil into your car, you would start off at about $3.10 a gallon! Refining, distribution, TAXES and profit add only about a dollar.

[DrClapeyron]

In the short run, supply increase cannot immediatley catch up to demand increase in order to reach equilibrium. In the long run however, as demand increase wanes supply increase will catch up. This equilibrium in the long run does not mean oil price per barell will fall it means change in oil price will not increase or will not increase with the same magnitude as it previously had.

That is why drilling in remote regions like ANWR is costly. Only after a supply shock in the early 1970's were oil companies capable of producing oil at Prudhoe Bay on the Alaskan North Slope. Price increases were expected to be great in magnitude and last for several years. If however, OPEC suddenly creates a supply shock by increasing supply, the price will fall and investors who take risk in expensive projects will be ruined.

[mheslep]

I wouldn't sell short if I were you.
I would. December 08 contract.

[wildman]

I would. December 08 contract.

You are probably right. The price always goes down in the winter.

[Astronuc]

U.S. oil regulators work on London
http://marketplace.publicradio.org/display/web/2008/06/18/us_british_oil_regulation/
The American oil regulator told Congress it will try to impose its regulations on a London contract.
. . . .

the American regulator, the CFTC, has just told Congress that it's going to attempt to impose its regulations on this contract traded in London. Because the feeling is that U.S.-based oil traders are evading the American regulations, dealing directly with London.
. . . . Of course it requires approval by the British regulatory authority, which is apparently reluctant to put constraints on the British market.

[Art]

I didn't forget. I just wanted to drive home the point that if you were to pump crude oil into your car, you would start off at about $3.10 a gallon! Refining, distribution, TAXES and profit add only about a dollar.Aren't you forgetting most of that initial $3.10 is pure profit for the oil companies?

I read somewhere one of the price drivers in the US is the shortage of light, sweet crude oil. There is plenty of heavy, sour oil available on world markets but to refine this is more complicated and would require expensive retooling by US refiners.

[Astronuc]

In the article -
Bush Will Seek to End Offshore Oil Drilling Ban
http://www.nytimes.com/2008/06/18/washington/18drill.html

it states:
No one knows for certain how much oil is in the moratorium area, but the federal Energy Information Administration estimates that roughly 75 billion barrels of oil in the United States are off-limits for development, and that 21 percent of this oil — or 16 billion barrels — is covered by the offshore moratorium.

https://www.cia.gov/library/publications/the-world-factbook/print/us.html

According to the CIA Country Brief (World Factbook) on the US, the oil consumption is about 20.8 million bbl/day! So if ANWR has 15 billion bbl, that's good for 721 days (about 2 yrs) equivalent. Of course, there is other oil, so really that would stretch out.

For the entire 75 billion bbls cited in the NY Times article, at present consumption, it would be gone 3606 days or ~ 9.9 years, barring other supplies. Matching those supplies elsewhere would simply extend the consumption to 20 years, barring alternative fuels.

Two decades would pass quickly, and my kids' generation would be stuck in the same dire situation we now face. I don't want to leave the next generation and subsequent ones to suffer from the folly of this generation or previous ones.

[DrClapeyron]

So if ANWR has 15 billion bbl, that's good for 721 days (about 2 yrs) equivalent.


You would have to assume that there would be no oil loss from pumping. If there are 15 billion bbl, I would imagine that only half could be pumped under optimal conditions.

[mheslep]

In the article -
Bush Will Seek to End Offshore Oil Drilling Ban
http://www.nytimes.com/2008/06/18/washington/18drill.html

it states:


https://www.cia.gov/library/publications/the-world-factbook/print/us.html

According to the CIA Country Brief (World Factbook) on the US, the oil consumption is about 20.8 million bbl/day! So if ANWR has 15 billion bbl, that's good for 721 days (about 2 yrs) equivalent. Of course, there is other oil, so really that would stretch out.

For the entire 75 billion bbls cited in the NY Times article, at present consumption, it would be gone 3606 days or ~ 9.9 years, barring other supplies. Matching those supplies elsewhere would simply extend the consumption to 20 years, barring alternative fuels.

Two decades would pass quickly, and my kids' generation would be stuck in the same dire situation we now face. I don't want to leave the next generation and subsequent ones to suffer from the folly of this generation or previous ones.Certainly the US wouldn't want ANWR as a sole source nor could it be. Consider instead that ANWR provided just 4 million bbl/day, i.e. double the best ever flow rate of the Trans-Alaska pipeline. That would cut imports from 13m bbl/day to 9 and places the country back under 50% imported oil. That could be sustained for 10 years out of ANWR alone, and would have the desirable effect of rapidly cutting the price of oil back down to something manageable, and improves the geopolitical energy security problem. Meanwhile, investment into renewable and liquefied/gasified coal energy goes on, as the nation then has the GDP to fund research and deploy results instead of going broke on imported oil prices. Why must one be done exclusive of the other? I doubt you want your kids generation paying half of their income on 95% imported oil, all because Pappy Astronuc bet the ranch all-or-nothing on renewable fuels.:wink:

[wildman]

So if ANWR has 15 billion bbl, that's good for 721 days (about 2 yrs) equivalent. Of course, there is other oil, so really that would stretch out.

For the entire 75 billion bbls cited in the NY Times article, at present consumption, it would be gone 3606 days or ~ 9.9 years, barring other supplies. Matching those supplies elsewhere would simply extend the consumption to 20 years, barring alternative fuels.

Two decades would pass quickly, and my kids' generation would be stuck in the same dire situation we now face. I don't want to leave the next generation and subsequent ones to suffer from the folly of this generation or previous ones.

Oil can't be pumped out all at once. Large fields take 30-60 years to pump out. That means that even if we develop all the above fields, it still would be a fraction of the oil we consume. The party is over.

[wildman]

Certainly the US wouldn't want ANWR as a sole source nor could it be. Consider instead that ANWR provided just 4 million bbl/day, i.e. double the best ever flow rate of the Trans-Alaska pipeline. :

It is doubtful that ANWR will produce more than 1.5 million a day. Astronuc is right, we need to get off oil and now. Better to leave ANWR in reserve.

[Gokul43201]

Certainly the US wouldn't want ANWR as a sole source nor could it be. Consider instead that ANWR provided just 4 million bbl/day, i.e. double the best ever flow rate of the Trans-Alaska pipeline. That would cut imports from 13m bbl/day to 9 and places the country back under 50% imported oil. That could be sustained for 10 years out of ANWR alone, and would have the desirable effect of rapidly cutting the price of oil back down to something manageable, and improves the geopolitical energy security problem. Not sure what you mean by "rapidly", but I should warn you to not get impatient over the next decade or two or three.

According to the DOE's Energy Information Administration: The projections in the OCS access case indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030.

http://www.eia.doe.gov/oiaf/aeo/otheranalysis/ongr.html

[mheslep]

Not sure what you mean by "rapidly", but I should warn you to not get impatient over the next decade or two or three.

According to the DOE's Energy Information Administration:

http://www.eia.doe.gov/oiaf/aeo/otheranalysis/ongr.html
Yes understood it would take some time, I mean when it eventually comes online, which it would be now if Clinton had not vetoed it in the 90's. Lets not make the same mistake again.

[mheslep]

It is doubtful that ANWR will produce more than 1.5 million a day. Yes I read about 1.5; to make a dent the offshore fields need to be drilled too. Astronuc is right, we need to get off oil and now. Nice sentiment. Other than making blog posts, what's the plan for doing that 'now'?

[mheslep]

Not sure what you mean by "rapidly", but I should warn you to not get impatient over the next decade or two or three.There's is also the economic theory that says just announcing ANWR and offshore drilling would immediately drop the price of oil as the market recalculates price based on increased future supply.

[edward]

Presuming that speculation is one of the driving forces behind oil and gas prices.

I would be curious to see what would happen with the speculation if we could cut the speed limit down to 60mph for a short period, say just 30 to 60 days.

At least it wouldn't take 10 years to find out if it helps.

[DrClapeyron]

There's is also the economic theory that says just announcing ANWR and offshore drilling would immediately drop the price of oil as the market recalculates price based on increased future supply.


That would have a very long term impact, not short term. Drilling in a remote wilderness with no existing infrastructure and zero capital growth is not the same as renting a drilling platform off the coast of Texas where the infrastructure is heavily invested and capital growth increasing. Even offshore Texas fields take years to produce once oil is found.

All you have in ANWR are carribou and wolves. When congress announced it would drill in Prudhoe in the early 1970's it had no effect on markets, albeit there were no futures for oil back then. Oil produced from new fields isn't cheap either, the oil is tremedously more expensive than the oil from a mature field; so tax breaks are the rule not the exception.

ANWR is the poster child of the conservative politicians while windfall tax profits the poster child of the liberal politicians. Neither solution will have much effect, so just sit back and let the markets adjust.

[mheslep]

That would have a very long term impact, not short term. Drilling in a remote wilderness with no existing infrastructure and zero capital growth is not the same as renting a drilling platform off the coast of Texas where the infrastructure is heavily invested and capital growth increasing. Even offshore Texas fields take years to produce once oil is found.

All you have in ANWR are carribou and wolves. When congress announced it would drill in Prudhoe in the early 1970's it had no effect on markets, albeit there were no futures for oil back then. Oil produced from new fields isn't cheap either, the oil is tremedously more expensive than the oil from a mature field; so tax breaks are the rule not the exception.
...Not at all. ANWR is not starting from scratch infrastructure in the way that Prudhoe did, because of Prudhoe. See here for instance:
http://www.anwr.org/anwrcol1.GIF. ANWR drilling targets on the coastal plain are ~100 miles away from Prudhoe and its existing pipeline/highways, and ANWR is not all carribou: Kaktovik (http://en.wikipedia.org/wiki/Kaktovik%2C_Alaska) is in ANWR on the coast. Regards, long vs short term effects, that is going to be significantly effected by elasticity of demand and the world is still running ahead of supply. Still ANWR by itself is not going to cause a big change, but add it to E/W offshore and together you have a $1 perhaps drop for a gallon of gas.

[DrClapeyron]

100 miles from Prudhoe is still thousands of miles from the nearest industrial center. You'd have to go to Korea to find rigs, ships and other heavy equipment or have everything routed from Houston, through Panama on up to ANWR. The only time such a project could be employed outside of an oil supply shock is if Canada were to also invest heavily in exploration in the upper most remote regions of its territory near Alaska.

[Gokul43201]

There's is also the economic theory that says just announcing ANWR and offshore drilling would immediately drop the price of oil as the market recalculates price based on increased future supply.Speculators reacting today to something that is a decade away? By itself, if nothing else happened, that doesn't sound like it will be a significant effect. But add to this the economic theory that says oil production from ANWR will result in reduced production in other countries...and that squashes most of the expected gain in price. I believe the EIA calculated a peak price reduction (for light crude) of less than 1%...to be expected about 2 decades from now. That's hardly a few pennies on the gallon.

[wildman]

Yes I read about 1.5; to make a dent the offshore fields need to be drilled too.

The problem is that there isn't enough oil even in the offshore fields. That doesn't mean not to drill them, just don't think that is all we have to do. Americans have been sticking their heads in a hole in the ground ignoring the coming crisis. Drilling more (while it doesn't hurt) won't get us out of this fix. There just isn't enough oil. And the oil that there is is expensive and deep. The net oil in a lot of the 100 billion barrels in the Gulf isn't that great because of the high cost of energy to drill in very deep water. Remember, it isn't total oil that is of interest. It is NET oil.

Getting off oil is not just a nice sentiment. It is necessary or we are scr_wed.

[mheslep]

Speculators reacting today to something that is a decade away? By itself, if nothing else happened, that doesn't sound like it will be a significant effect. But add to this the economic theory that says oil production from ANWR will result in reduced production in other countries...and that squashes most of the expected gain in price. I believe the EIA calculated a peak price reduction (for light crude) of less than 1%...to be expected about 2 decades from now. That's hardly a few pennies on the gallon.
Sure, 5, 10, 20 years. A significant factor in the value of a commodity today is the expected quantity of supply in the future, reflected back to today's price by net present value calculation. The time lines relevant to someone calculating todays price are based on the time lines involved in changing the supply and the demand. That way if it is known, for instance, that the world supply of some commodity will be totally exhausted in 10 years at current demand, a price signal is sent _now_ that reflects that looming depletion, and of course vice versa if it is expected that the supply will increase in 10 years.

[mheslep]

100 miles from Prudhoe is still thousands of miles from the nearest industrial center. You'd have to go to Korea to find rigs, ships and other heavy equipment or have everything routed from Houston, through Panama on up to ANWR....Yes but that is all trivial compared to the scope of what had to be done to get into Prudhoe - pipeline, ice roads, etc; access is no longer a barrier (on that scale).

[mheslep]

The problem is that there isn't enough oil even in the offshore fields. That doesn't mean not to drill them, just don't think that is all we have to do. I not aware of any political leadership that says 'that is all we have to do'
Getting off oil is not just a nice sentiment. It is necessary or we are scr_wed.Wildman you said get off oil 'and now', thats to what I was referring. Again, can you cite a plan for getting off oil 'now'.

[mheslep]

... But add to this the economic theory that says oil production from ANWR will result in reduced production in other countries...and that squashes most of the expected gain in price. ...Yes I see that argument posed quite a bit now. I havn't looked carefully, but it seems to me that if the 800 lb gorilla producer argument really held true then nobody would ever mine/drill/farm for some resource unless they were the world's largest producer, as then logically the larger producer could always just reduce its production rate and defeat your efforts to depress price. Visibly, this is not universally true. I suspect not mainly because the large producer most often maximizes income at high production unless a glut state is reached. The only impact the large producer can have is to cause short term spikes to punish or attempt to bankrupt smaller producers, which can't be done here.

[Gokul43201]

Yes I see that argument posed quite a bit now. Here it is, being posed by the EIA(DOE): With respect to the world oil price impact, projected ANWR oil production constitutes between 0.4 and 1.2 percent of total world oil consumption in 2030, based on the low and high resource cases, respectively.17 Consequently, ANWR oil production is not projected to have a large impact on world oil prices. Relative to the AEO2008 reference case, ANWR oil production is projected to have its largest oil price reduction impacts as follows: a reduction in low-sulfur, light (LSL) crude oil18 prices of $0.41 per barrel (2006 dollars) in 2026 in the low oil resource case, $0.75 per barrel in 2025 in the mean oil resource case, and $1.44 per barrel in 2027 in the high oil resource case. Assuming that world oil markets continue to work as they do today, the Organization of Petroleum Exporting Countries (OPEC) could neutralize any potential price impact of ANWR oil production by reducing its oil exports by an equal amount.

http://www.eia.doe.gov/oiaf/servicerpt/anwr/results.html

[mheslep]

Here it is, being posed by the EIA(DOE):

http://www.eia.doe.gov/oiaf/servicerpt/anwr/results.html
...Assuming that world oil markets continue to work as they do today, the Organization of Petroleum Exporting Countries (OPEC) could neutralize any potential price impact of ANWR oil production by reducing its oil exports by an equal amount.Yes no doubt they could. The interesting argument is whether they would. I argued above it is counter to their interests to do so as they'd lose income. I observe that major commodity suppliers only cut production when supply greatly surpasses demand causing a possible glut and price collapse, such as with US farmers paid to leave fields fallow; that is not going to happen with oil given world demand.

[quadraphonics]

Sure, 5, 10, 20 years. A significant factor in the value of a commodity today is the expected quantity of supply in the future, reflected back to today's price by net present value calculation. The time lines relevant to someone calculating todays price are based on the time lines involved in changing the supply and the demand. That way if it is known, for instance, that the world supply of some commodity will be totally exhausted in 10 years at current demand, a price signal is sent _now_ that reflects that looming depletion, and of course vice versa if it is expected that the supply will increase in 10 years.

What you're missing is that the speculators are not bidding up on the premise that oil supply is going to run out in 10 years. They're bidding up on the premise that *demand* for oil is going to continue to ramp up over the next decades, due to China and India (not to mention the US). Increasing world oil production by a couple of percent is not going to alter that fact. It might produce a momentary slowdown in the increase of the price of oil, but on the other hand the signal it would send to consumers (don't worry about cutting back, just keep consuming) would tend to reinforce the specualtive pressures.

[mheslep]

What you're missing is that the speculators are not bidding up on the premise that oil supply is going to run out in 10 years.
I used that boundary case to show clearly how future demand / supply expectations are factored in to today's prices, not to imply any serious market movers think the world supply will exhaust in 10 years.
They're bidding up on the premise that *demand* for oil is going to continue to ramp up over the next decades, due to China and India (not to mention the US). Increasing world oil production by a couple of percent is not going to alter that fact. It might produce a momentary slowdown in the increase of the price of oil, but on the other hand the signal it would send to consumers (don't worry about cutting back, just keep consuming) Yes demand will go up but new supply will come on line like the large Brazilian offshore. I suspect the US is actually looking at a price hike up to $6-$9/gal in 5 yrs w/ no drilling, versus perhaps maintaining small price increases by opening ANWR and offshore. Certainly the current price is not telling anyone be happy, don't worry.
...would tend to reinforce the specualtive pressures.The main speculative pressure is due to the weak dollar and inflation, not consumer spending habits which have indeed changed without oil price effect.

[edward]

People are apparently starting to conserve.

With gas prices at record levels above $4 a gallon, Americans are driving less and abandoning gas-guzzling vehicles, according to government data. Americans drove 1.4 billion fewer highway miles in April compared with the same month last year, and 400 million fewer miles than they did in March, according to the Transportation Department.

http://www.startribune.com/business/20586524.html?location_refer=Business

[edward]

The oil Futures Exchange has been labled The Dark Market.

http://www.businessandmedia.org/articles/2008/20080618102504.aspx

Edit: short video clip on link.

[mheslep]

People are apparently starting to conserve.



http://www.startribune.com/business/20586524.html?location_refer=BusinessI don't know if conserve is the appropriate verb, but certainly gas use has declined.
http://www.greencarcongress.com/images/2008/04/30/cagg.png

[mheslep]

Some other opinions: $10-15/barrel
...However, one of the sidebars suggested another consequence of drilling. Speculators have been blamed for driving up oil prices, but as Alaskan Republican Rep. Don Young pointed out, drilling in ANWR would scare off some of the speculators driving gas prices up.

Young, ranking Republican on the House Natural Resources Committee, introduced a measure Wednesday to allow development in the coastal plain of ANWR.

“The way you address high gasoline prices is to increase supply,” he said.

Rolling out legislation to open ANWR has become Young’s personal never-ending task in the House, but this time he’s hoping consumer anger over record prices at the pump will spur moderate members of both parties to support the measure.

“If we passed ANWR, it would drop $10 to $15 off the price of a barrel of oil because speculators would see that we’re serious about increasing domestic production,” he said.
http://newsminer.com/news/2008/may/22/gop-ready-roll-out-energy-plans/

[wildman]

I not aware of any political leadership that says 'that is all we have to do'
Wildman you said get off oil 'and now', thats to what I was referring. Again, can you cite a plan for getting off oil 'now'.

Well duh! By "now" I mean we need to start working on the problem in a serious way now. The problem with most of the "drill more" people is that is all they want to do. They don't want to finance research, they don't want to encourage conservation, they don't want to do anything but drill, drill, drill. That is a plan alright. It is a plan for disaster. There isn't enough oil.

I am not sure what should be done, but the plan you are pushing will fail so you don’t have a plan either.

Here is a possible set of ideas. I don’t know if they will work, but we need to start thinking creatively.

The first thing we need to do is guarantee a bottom to oil prices so they Arabs can’t manipulate the price of energy in this country. Say $100 a barrel. If it drops below that level, we add taxes to the imported oil. (Domestic oil would not be taxed). That will give private companies a guarantee that they will not be taken for a big loss if they invest in energy like what happened in the 70’s. The people who invested in oil shale at that time had the rug pulled right out from under them. We need to prevent that from happening again. Keep in mind that the Arabs (unlike the rest of the World) are not yet at peak oil (maybe) and can therefore manipulate the price (if what I think is true). This is also the real reason a lot of the oil in the Gulf of Mexico hasn't been drilled. It is too expensive and the oil companies are afraid of be undercut by the Arabs.

Next, we need to change the tax laws to encourage conservation. Do you realize there is a law that gives people who purchase Hummers a big tax break? This is nuts. Tax the sale of new gas guzzlers and return the tax to the people who purchase hybrids or other gas saving cars.

Then greatly increase spending for research and development in the energy sector. This can come out of some of the money we are spending for defense right now. After all, the real reason we are in Iraq is the oil. It wouldn’t take too many days spending in Iraq to greatly increase energy research. Energy is security. After all, 9-11 was financed with Saudi oil money. No oil, no money, no terrorists.

There are lots of great ideas. They just need to be given the funding they need and private energy companies just need to be protected from predatory practices .

[DrClapeyron]

Being undercut by OPEC (not Arabs) has always been an issue with large scale projects, like the North Sea or Prudhoe.

ANWR is child's play and commodities markets do not speculate on supply and demand issue 10 years from now. Most investors are concerned with the immediate future: the present to whatever the longest term future is.

No congressman wants to truthfully say the US is a price taker.

[mheslep]

Well duh! By "now" I mean we need to start working on the problem in a serious way now.The US is, now. Are you familiar with the sums of money being spent on renewable energy installation and research in the US?

...Here is a possible set of ideas. I don’t know if they will work, but we need to start thinking creatively.

The first thing we need to do is guarantee a bottom to oil prices so they Arabs can’t manipulate the price of energy in this country. Say $100 a barrel. If it drops below that level, we add taxes to the imported oil. (Domestic oil would not be taxed). That will give private companies a guarantee that they will not be taken for a big loss if they invest in energy like what happened in the 70’s. The people who invested in oil shale at that time had the rug pulled right out from under them. We need to prevent that from happening again. Keep in mind that the Arabs (unlike the rest of the World) are not yet at peak oil (maybe) and can therefore manipulate the price (if what I think is true). This is also the real reason a lot of the oil in the Gulf of Mexico hasn't been drilled. It is too expensive and the oil companies are afraid of be undercut by the Arabs.I think the chief beneficiaries of that import tariff would be oil companies with domestic reserves and leases.

Next, we need to change the tax laws to encourage conservation. Do you realize there is a law that gives people who purchase Hummers a big tax break? Not just people, only businesses can claim a light truck (>14000lbs) costs, or a portion of lighter truck costs (>6000lbs), or heavy truck costs like a tractor trailer, or farm equipment, or even a copy machine. Still, I'd go along w/ going the rest of the way and killing the business deduction for very light trucks intended for road use (leave the farmers alone).
http://www.bankrate.com/brm/itax/Edit/tips/Stories/sec179_deduction.asp
Then greatly increase spending for research and development in the energy sector.Greatly increase it to what? $500B/yr? $1T/yr? Why don't you believe this would have the same effect as the Arab oil price manipulation above? Suppose I start up an oil-shale company scrounging madly for investors along the way, and all the federal funding at $500B/yr goes into biofuels and nuclear ( a good bet). How much success would I have getting investors then? Nill. The point: there's a downside to having the government pick R&D winners in a big way. Also, crash R&D programs only work on very narrowly defined problems. That is, one can define an crash program to send 2-3 guys to the moon, one can not do the same w/ a program to lift everyone in the country, say, just to orbit. I'd go along with some moderate increases in govt. energy R&D spending, but just throwing money at the problem doesn't mean its being addressed 'seriously'. Finally, after all of this expense and no drilling you may still come up with zip.

...The problem with most of the "drill more" people is that is all they want to do. They don't want to finance research, they don't want to encourage conservation, they don't want to do anything but drill, drill, drill.
The problem with most of the "renewables" people is that is all they want to do. They don't want to drill, they don't want to explore for more reserves, they don't want to do anything but research, research, research.

[Gokul43201]

Some other opinions: $10-15/barrelDo you really think Don Young is a more reliable source than the DOE for doing this calculation right? Is there any other non-partisan/relatively reputable body that estimates anything like $10 per barrel?

[mheslep]

Do you really think Don Young is a more reliable source than the DOE for doing this calculation right?No I don't necessarily consider him more reliable, I recognize he's politician. I also recognize even professionals at DoE, EPA can also have agendas and be misled, though I have no reason to doubt them here.

[WarPhalange]

The problem with most of the "renewables" people is that is all they want to do. They don't want to drill, they don't want to explore for more reserves, they don't want to do anything but research, research, research.

I suggest you look up the word "renewable". Then you might have a better perspective on why they don't want oil.

Just a suggestion.

[Astronuc]

Speculators' are responsible for 70% of all crude trades, up from 37% in 2000, according to Wall Street Journal report! (http://www.marketwatch.com/news/story/speculative-trading-crude-oil-surges/story.aspx?guid=%7B2673C102%2D68E0%2D41D9%2D9C9A%2D10EE2E723948%7D)
. . . .

Congress, however, has grown increasingly concerned over speculative investors' role in the energy market in comparison with those buying futures contracts to hedge against risk from price changes. Lawmakers are expected to consider legislation to set strict limits -- or in some cases, an outright ban -- on speculative trading in energy futures in some markets, the Journal reported.
. . . .

In 1991, according to documents provided by the agency to the committee's investigators, the Commodity Futures Trading Commission authorized the first exemption from position limits for swap dealers with no physical commodity exposure, the report said. This began what Dingell said was "a process that has enabled investment banks to accumulate enormous positions in commodity markets," according to the report. No risk, yet big profits/bonuses or big losses, and the consumers pay. So increased cost and not added value - it's simply overhead.

[Astronuc]

Gas could fall to $2 if Congress acts, analysts say (http://www.marketwatch.com/news/story/gas-could-fall-2-if/story.aspx?guid=%7B2673C102%2D68E0%2D41D9%2D9C9A%2D10EE2E723948%7D)
Limiting speculation would push prices to fundamental level, lawmakers told

WASHINGTON (MarketWatch) -- The price of retail gasoline would fall by half, to around $2 a gallon, within 30 days of passage of a law to limit speculation in energy futures markets, four energy analysts told Congress on Monday.

Testifying to the House Energy and Commerce Committee, Michael Masters of Masters Capital Management said the price of crude oil would quickly drop closer to its marginal cost of around $65 to $75 a barrel, about half the current $135.

Fadel Gheit of Oppenheimer & Co., Edward Krapels of Energy Security Analysis and Roger Diwan of PFC Energy Consultants agreed with Masters' assessment at a hearing on proposed legislation to limit speculation in futures markets.

Krapels said it wouldn't even take 30 days to drive prices lower, as fund managers quickly liquidated their positions in futures markets.

"Energy speculation has become a growth industry and it is time for the government to intervene," said Rep. John Dingell, D-Mich., chairman of the full committee. "We need to consider a full range of options to counter this rapacious speculation."

The committee will likely consider legislation that would rein in speculation by imposing higher margin requirements, setting position limits for speculators, requiring more disclosure of positions, and preventing pension funds and investment banks from owning commodities.

If speculation is limited, commodities prices should drop and the stock markets should rise.

Meanwhile, Northwest CEO Glenn Tilton indicated that U.S. airlines to spend $61.2B on fuel in 2008, and the industry is likely to contract if fuel prices remain high.

[mheslep]

Gas could fall to $2 if Congress acts, analysts say (http://www.marketwatch.com/news/story/gas-could-fall-2-if/story.aspx?guid=%7B2673C102%2D68E0%2D41D9%2D9C9A%2D10EE2E723948%7D)
Limiting speculation would push prices to fundamental level, lawmakers told


If speculation is limited, commodities prices should drop and the stock markets should rise.
I fail to see how any such action by Congress will do anything other than put the Merc out of business as all its trading volume would simply pack bags and move to ICE and other exchanges.

[edward]

I fail to see how any such action by Congress will do anything other than put the Merc out of business as all its trading volume would simply pack bags and move to ICE and other exchanges.


ICE is a big part of the problem.

Intercontinental Exchange may be forced to limit the size of U.S. oil trades on its London energy market, U.S. Commodity Futures Trading Commissioner Bart Chilton said Friday.

Intercontinental, known as ICE, controls about one-fourth of the trading of U.S. West Texas Intermediate oil futures, with the New York Mercantile Exchange handling the remainder. ICE's London market operates without trading limits and is allowed to offer U.S. investors access to its U.K. exchange under a no-action letter from the CFTC. The letter may be revised to have ICE adopt trade limits imposed by Nymex, Chilton said.

"The issue is manipulation of oil prices," Chilton said. "It's critical we have as comprehensive as possible a view of all trading position in WTI."

The energy exchange's regulator, the U.K.'s Financial Services Authority, does not set limits on contracts held by investors on its London exchange, meaning those traders can build larger trades in U.S. oil than rivals on the Nymex, which sets limits. The position limits are aimed at reducing the ability of traders to influence prices near the expiration of futures contracts.


http://www.chron.com/disp/story.mpl/business/energy/5837165.html

[Astronuc]

I fail to see how any such action by Congress will do anything other than put the Merc out of business as all its trading volume would simply pack bags and move to ICE and other exchanges. That certainly would be a concern. I heard a few weeks ago that an exchange (bourse) in one of the Gulf States, IIRC Dubai, is looking to start trading commodities including oil.

The issue really is price manipulation. Some argue that supply is falling behind demand, and that would certainly put upward pressure on oil. But in some cases where demand had dropped and the supply is steady, the price of oil continued to increase.

[DrClapeyron]

Sellers set limits on contracts. Government saying you can trade more contracts than sellers are willing to sell is nonsense. Who would honor these nonsense contracts or buy them in the first place?

[B. Elliott]

Just saw this while checking me Yahoo e-mail....


House panel told curbing speculation could cut prices
Near-record oil prices could quickly fall by half if Congress were to rein in speculators, according to testimony Monday from a hedge fund manager and oil company adviser on Capitol Hill.

Michael Masters, of Masters Capital Management, told a subcommittee of the House Energy and Commerce Committee that - with greater regulation - oil prices could drop to $65 or $70 a barrel within about 30 days.

"That's half of where prices are today, and gas prices would reflect that," he said.

"If it is a bubble, then where is the evidence in the actual physical market?" asked Kevin Norrish, a commodities analyst with Barclays Capital in London. "There is an endless list of reasons why this argument is a very, very poor one - it will only make things worse."

http://biz.yahoo.com/cnnm/080623/062308_energy_speculation.html?.v=4

[Astronuc]

From businessmen outside of the commodities trading sector -

Leaders from the trucking, airlines and heating industries testified before the panel that speculation in the oil market has harmed their bottom lines. ref: yahoo article cited in previous post.

The problem is one of assessing/quantifying the portion of the cost which is actually based upon speculation.

[wildman]

The US is, now. Are you familiar with the sums of money being spent on renewable energy installation and research in the US?.[/I]

Yes and they are not nearly high enough. Fusion for instance is just barely limping a long. Given that 9/11 was basically a energy driven thing, I think we should be spending more.


I think the chief beneficiaries of that import tariff would be oil companies with domestic reserves and leases.[/I]

They wouldn't be the only ones, but considering that 40,000,000 acres of federal leases have not been developed because of fear of Arab price uncutting, so what?



The problem with most of the "renewables" people is that is all they want to do. They don't want to drill, they don't want to explore for more reserves, they don't want to do anything but research, research, research.

I guess that is a general fault of humans, no? However, look up peak oil. Exploring for more oil doesn't do any good after a point. My point is that after the Gulf shelf there ain't a whole lot more. The US and the World has been explored out. Yea there is a little field here and there but nothing like the Saudis or even West Texas (except maybe in Iraq).

[mheslep]

Yes and they are not nearly high enough.You did not answer my question. How much do you think should be spent and why that number?
Something to keep in mind before committing to an all renewables energy program with a Man-on-the-Moon, no money limit program: Israel imports every drop of oil and gas, has an advanced technical capability, and has far more incentives that the US to become independent. They can't do it. Similarly, Japan imports all of its oil and gas, has in some areas a more advanced technical capability than the US. They can't do it. Fusion for instance is just barely limping a long. Fusion has been funded for 50 years. NIF is still fully funded. Given that 9/11 was basically a energy driven thing, I think we should be spending more.I'd say 9/11 was basically a fanatical religion driven thing. Still, everyone likes the idea of depriving Middle East autocracies of funds; Im certainly for it. But before taking extreme steps consider two data points:
1. I read, 911 report I believe, that the entire attack cost AQ $500k, flight training and all.
2. Now in 2008, if the US stopped importing any oil whatsoever, the Middle East oil states would still export vast amounts to the rest of the world; the Sheiks would not go begging.They wouldn't be the only ones, but considering that 40,000,000 acres of federal leases have not been developed because of fear of Arab price uncutting, so what?Says who? The leases may not contain any oil at all - they are mostly unproven; what they are is promising. They are leased because some geologist thinks the area is worth exploration, and they are being explored as far as I can tell. They are listed as non-producing until they start producing.
I guess that is a general fault of humans, no? However, look up peak oil. Exploring for more oil doesn't do any good after a point. And that point might well be 70 years from now, use liquified coal and its maybe twice that.My point is that after the Gulf shelf there ain't a whole lot more.There has been no source presented in this thread even loosely demonstrating that there "ain't a whole lot more".
Recent finds:
20 trillion ft^3 gas in Louisiana near Shreve Port, probably.
http://uk.reuters.com/article/reutersComService_3_MOLT/idUKN1933908420080620
Tupi field of Brazil, expected output 500k bbl/day, 5B to 8B bbls w/ high confidence, possibly 70B bbls. Also note this discovery was in 7500ft water, total depth 29k feet. Most 'peak oil' analysis says there can't be any retrievable oil at these depths, so this find invalidates peak oil.
http://www.reuters.com/article/rbssEnergyNews/idUSN1231462720080612

[mheslep]

Here's an interesting debate between two energy authors, that nicely encapsulate some of the opposing camps on energy:
Robert Subrin, author Energy Victory. (Aerospace engineer, PhD Nuclear Eng w/ noted plans for manned Mars missions)
Robert Bryce, author Gusher of Lies, The Dangerous Delusions of Energy Independence
Audio Debate
http://www.thenewatlantis.com/publications/energy-debate-zubrin-vs-bryce
I'm more familiar with Bryce's arguments: 'energy independence', a silly cliche according to him, is impossible; the world is far to interconnected. Zubrin's big pitch is mandated flex fuel cars. I havnt thought that through, but it appeals to me far more than mandated CAFE standards. Other Zubin comments: "hydrogen, the fake solution for energy that can not possibly work"

[Gokul43201]

Are you familiar with the sums of money being spent on renewable energy installation and research in the US?

Greatly increase it to what? $500B/yr? $1T/yr?Wildman was talking about government spending on Renewable Energy Research, which is not particularly close to those numbers.

The FY 2007 budget for the DOE Office of Science was $3.8 billion. Out of that, Energy Science and Fusion Research got about $1.6 billion. In comparison, about $15 billion remains unaccounted for in Iraq spending that same year.


http://www.aip.org/fyi/2007/121.html
http://afp.google.com/article/ALeqM5ieRhHYX-NosV0VEguc06fs15a4Jg

[mheslep]

Wildman was talking about government spending on Renewable Energy Research, which is not particularly close to those numbers.He doesn't say government, he says only the 'energy sector'. And to consider only government R&D would be myopic. Industrial and private investment are quite large; venture capital is readily available for renewable energy companies.
-In house, for instance: General Electric's R&D budget was $5.7B in 2006, surely a significant part of that going to make better wind turbines, more efficient generators, gas and hydro turbines, etc.
http://www.ethicalshopper.com/electronics/appliances/ge-ups-green-r-d-budget.html
- VC dollars: "The overall numbers are up, though the mix is shifting. VC money pouring into clean tech rose to $2.2 billion in 2007, from $1.5 billion in 2006. The big winner? Solar power, which took $600 million. The big loser? Biofuels—VC funding dropped to $291 million last year from $462 million the year before."
http://blogs.wsj.com/environmentalcapital/category/alternative-energy/clean-tech/venture-capital/

The FY 2007 budget for the DOE Office of Science was $3.8 billion. Out of that, Energy Science and Fusion Research got about $1.6 billion. Well the entire DoE budget is ~$22B which includes other indirect research on issues like nuclear waste disposal. Im also fairly sure the NIF is not funded out of the Science office - the weapons modeling and test angle. Then there's the other government agencies, esp DoD:
-Navy alone, for instance, funded a multi-billion R&D project on batteries a few years ago for quieter subs.
-USDA R&D $2.3B with "increases funding for high priority bioenergy research aimed at improving the efficiency of converting cellulose to biofuels."
http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB?contentidonly=true&contentid=2008/02/0030.xml
-DARPAIn a move that galvanized biofuels entrepreneurs, the federal Defense Advanced Research Projects Agency (DARPA) in November launched a major research program to enable the cost-competitive production of military jet fuel from both cellulosic and algal feedstocks. The director of the program, Douglas Kirkpatrick, says he thinks major questions about algal fuels' technical feasibility will be answered in "the next three to five years."
http://www.biodieselnow.com/forums/t/20938.aspx
-And though its not direct R&D, lets not forget the colossal subsidies going into Corn and Ethanol.

In comparison, about $15 billion remains unaccounted for in Iraq spending that same year.However unfortunate and wasteful, note that is a one time loss, not a yearly budgeted item unlike these examples above. Its also good reason to be weary of crash government programs, which is basically what the Iraq reconstruction project amounted to.

[Gokul43201]

He doesn't say government, he says only the 'energy sector'.

Here's a more complete quote: Then greatly increase spending for research and development in the energy sector. This can come out of some of the money we are spending for defense right now.Sounds like he meant Government spending. Besides, we can't really tell the Private Sector what they ought to be spending money on.

The $24 billion DOE budget is split up roughly as follows:

Renewable Energy, Nuclear Power, Fossil Fuels & Energy Efficiency = $3 billion
Military budget = $9 billion
Environment & Radioactive Waste = $7 billion
Science = $4 billion
Corporate Management = $1 billion

[mheslep]

Here's a more complete quote: Sounds like he meant Government spending. Besides, we can't really tell the Private Sector what they ought to be spending money on.
Sure we do. When the government pours $B into ethanol subsidies, wind and solar tax breaks, a great deal of private R&D capital breaks lose to create businesses that can profit from those markets. And that is just R&D. Land and other assets are committed in a larger way. Further, one could argue that we can't really tell the Government exactly how to spend either, especially for the esoteric goal of 'cheaper, greener, more independent energy'. Many examples - the Congressional DoE cuts of the administration's budget for one; in sum much of the process is controlled by some Congressman out to get money for his district and the result is a drastic distortion of original intent.

[Gokul43201]

Finally! Iraq's oil fields open to bidders (http://money.cnn.com/2008/06/30/news/international/iraq_bids/index.htm). And I was beginning to worry that the war may not be worth it after all, what with the lazy Iraqi legislature unwilling to pass an energy bill that satisfies all parties. Go Maliki! Go Shahrastani!BAGHDAD, Iraq (CNN) -- Iraq's oil minister Monday opened international bidding on six oil fields that could increase the country's oil production by 1.5 million barrels per day.

But the oil ministry continues to negotiate short-term no-bid contracts with several U.S. and European oil companies -- a step recently criticized by two U.S. lawmakers.
...
Last week, Sen. Charles Schumer, D-New York, and Sen. John Kerry, D-Massachusetts, sent a letter to Secretary of State Condoleezza Rice expressing concerns about those no-bid contracts.

The senators, who released the letter, said they are worried that unfair distribution of oil revenue could inflame the violence between the warring religious and political groups of Iraq.

"We urge you to persuade the (government of Iraq) to refrain from signing contracts with multinational oil companies until a hydrocarbon law is in effect in Iraq," read the letter from Schumer and Kerry.

"At this time, the (government of Iraq) currently does not have in place a revenue-sharing law that could fairly allocate any revenue gained from Iraq's lucrative hydrocarbon fields between the three major ethnic groups in Iraq," read the letter. "We fear that any such agreements signed by Iraq's Hydrocarbon Ministry without an equitable revenue-sharing agreement in place would simply add more fuel to Iraq's civil war."Boo Kerry! Boo Schumer!

An extra 1.5 million barrels a day, in 5 years or less - that's twice as much as ANWR would give, and 4 times sooner! Surely this will drive down oil prices, as Rep. Don Young promises.Oil prices (http://www.msnbc.msn.com/id/12400801/) pushed back above $142 a barrel Tuesday on worries about tight supply and possible armed conflict between Iran and Israel. In the U.S., gasoline edged to a new record high.
Okay, obviously the silly speculators aren't reading the right news yet. It's just a matter of time...we'll soon be down to double-digit prices again.

[DrClapeyron]

You don't think this could have any adverse affetcs do you? The Iraq has not been under heavy scrutiny in the media because I think US has done a good job having tribes sign contracts to take certain concessions under their "jurisdiction". It would be an entirely different thing to have this new 1.5 million bbl/day flowing and creating cash money for tribes who have otherwise not been...the friendliest to American troops.

Of course, they had to fight for all this, so I have no doubt they will continue to fight if some kind of elected official is not brought in. Some tribes may be more powerful than others, but no one is bigger than the others combined, that's why Maliki must rule with an iron fist.