RE: [asa] $4 gas is here to stay

Hi Burgy, you wrote:

> -----Original Message-----
> From: asa-owner@lists.calvin.edu [mailto:asa-owner@lists.calvin.edu] On
> Behalf Of j burg
> Sent: Thursday, June 05, 2008 9:52 AM
>
> On 6/4/08, Glenn Morton <glennmorton@entouch.net> wrote:
>
> > Last month there was a discussion of $4 gasoline and is it here to
> stay. Way
> > back in 1999 I wrote an article entitled "The Coming Energy Crisis,
> which
> > was eventually published in the ASA in 2000.
>
> FWIW, Glenn, I did not think you "nutty" back then or now.

My broker, who went and checked with other people in the oil industry, all
of whom said we didn't have a problem, thought me batty when I told him what
I wanted to do.Even today the talking-heads on TV will often say things that
can't possibly be true. Steve Forbes said the other day that 80% of the rise
in the price of oil was due to the falling dollar. Since the dollar has only
fallen about 30% since 2001 and oil has nearly quintupled, that can't
possibly be true. Sean Hannity citing a USGS report which claims that there
are huge volumes of oil in the Bakken formation of North Dakota thinks that
we have enough oil there to run our nation's cars for several years. He
doesn't seem to understand the difference between oil in place and what can
be gotten out and moved to market. George Soros thinks oil is a bubble. I
sincerely hope that guy goes short on oil. Daniel Yergin, of The Prize,
founded a company which advises oil companies. I once asked a vice president
and Kerr-McGee why on earth we paid for his advice since he was wrong all
the time. For the past many years, he has been predicting a decline in the
price of oil (see http://home.entouch.net/dmd/cera.htm). Only in the last
month has he actually predicted that the price would rise--it then fell from
$135/bbl to $120/bbl!

>
> Using some of your thinking, I added an article on my web site
> predicting $4 gas by last summer. Later, I revised it to this summer.
>
> Now where are we going? There are suddenly all sorts of alternative
> energies and auto-propellents being developed. I see these --
> eventually -- having an effect, even as conservation and car pooling
> have an effect. But slow -- and the ramp getting there will be
> painful.

I would be interested in what 'auto-propellents you are thinking of. I can
think of none that will work. You are a physicist, Burgy, surely you have
run the numbers comparing the amount of energy burned each day in oil vs the
rate of rise of wind and solar. There is a huge disparity.

>
> My guess is $6.00 gas next summer -- and this is independent of what
> candidate wins in November.

Agreed. But, if we pull our troops out of Iraq precipitously, and Iraq
descends into chaos, it will remove 2.1 million barrels per day of oil from
the world markets--2.5%. Now, if you think gas prices are high now, just
try doing that and see what happens. Same thing goes if Israel becomes
convinced that Obama won't protect them from Iran and they decide to nuke
Iran first, then the price of oil will look fantastic today. If any of that
happens be ready to lose your job.

>
> Here is another perspective though:
>
> I keep records a lot. Recently I found my auto records from 1962-1964.
> An analysis of these may be of interest. All numbers rounded.
>
> 1. My primary car during these years was a simple sedan, getting 13
> mpg on 32c gas.
> 2. The inflation factor 1963 to 2007 is about 7.
> 3. So I really paid $2.24 for gas. 17c per mile.
> 4. My daughter today also has a simple sedan. It gets on average 26 mpg
> 5. You can do the math. She pays less per mile today than I did in
> 1962-64. At $4.00, 15c per mile.
>
> Her car has A/C, and a host of gadgets that mine (in 1962) were
> luxuries or only pipe dreams. .
>
> In 1963 I bought a Chevy compact -- 19 mpg. Now my cost was 12c per
> mile. But I had to pay (in 2007 dollars) about $20,000. Still no AC or
> other amenities though.
>
> I think my daughter might be able to buy a 32 mpg economy car -- that
> would get her per mile cost down to 12c also.
>
> So -- $4.00 a gallon is "OK." At least for now.

Yeah, but, even in Houston now, I can walk into restaurants on a Saturday
night which used to require an hour's wait and be seated immediately. People
aren't eating out as much as they used to. I suspect that it is gas and food
which are causing this change.

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Received on Thu Jun 5 20:52:39 2008