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

"...People DO try to predict this stuff."

Yes, and it occurred to me that it's easier to predict the collective behavior of millions than the behavior of a single individual. But if your idea of "average" is off, your prediction can still be way off. And then there are the unpredictable effects of innovation, as you say.

Previously I wrote, "Saudi Arabia asserts that it can raise production to 15 million barrels a day but that demand is not adequate to justify such rise." I thought I was accurately representing (from memory) a recent article in BusinessWeek (June 9), but a quick check showed I was a bit off: The 15 million number came from a retired Aramco chief of reservoir management, not directly from the Saudis.

Of interest in the article is a table that shows Aramco intends by 2011 to increase output capacity by almost 3 million barrels a day from five different oil fields. Of course, as Glenn would be quick to point out, it doesn't say anything about effects of declining production from other fields.

Saudis do contend that raising their output would not lower prices. They're in effect saying that the law of supply and demand is being abrogated. That's not surprising as long as it's temporary; but it raises the question of how far prices are out of synch with reality. Given the historically wide fluctuations in the price of oil, IMO it's too early to say $4 gas is here to stay.

Nevertheless, it's safe to say $10 gas lies somewhere in our future.

Don

  ----- Original Message -----
  From: j burg<mailto:hossradbourne@gmail.com>
  To: Don Winterstein<mailto:dfwinterstein@msn.com>
  Cc: Glenn Morton<mailto:glennmorton@entouch.net> ; Jack<mailto:drsyme@cablespeed.com> ; asa@calvin.edu<mailto:asa@calvin.edu>
  Sent: Monday, June 09, 2008 12:31 PM
  Subject: Re: [asa] $4 gas is here to stay

  On 6/9/08, Don Winterstein <dfwinterstein@msn.com<mailto:dfwinterstein@msn.com>> wrote (in part):

> Time may eventually prove that our current civilization rests on a hydrocarbon bubble that's soon to deflate. I say deflate, not pop, because market forces will almost certainly lead to a less precipitous drop in hydrocarbon supply than Glenn considers: When supplies drop, prices will rise to the point where they will force behavioral changes that will lead to diminished usage. No one can predict the overall consequences, partly because the consequences will come from millions of individuals making their individual adjustments. >

  Generally, I agree, except that people DO try to predict this stuff. I
  have a fascinating DETAILED report from Bernstein published in Jan
  2008 called "Abating Climate Change." They focus, of course, on how
  to make money as the new technologies come on stream. Plug in hybrids
  are seen as the road transport solution. Biofuels might get a small
  share -- but plug ins, getting the equivalent of 75 mpg or better,
  will prevail. The time frame, of course, will not be swift, for only
  7% or so of the auto fleet is replaced each year.

  They expect 50 hybrid models to be available by 2010 and by 2030 the
  global fleet to consist of 365 million conventional cars and 924
  million hybrids.

  What we all may be missing in this discussion is that of
  "technological breakthroughs." There are hundreds of thousands of
  folks working on the problem today. To assume "status quo" in solving
  the problem (which is very real and not going to go away soon) seems
  to me to be myopic. Postulate, for example, a real battery
  breakthrough next year -- and all bets today on plug in hybrids seem
  wimpy. I know -- "betting on the come." Well, it is fun to speculate.

  I like the Bernstein report because (1) it has numbers and (2) it
  addresses the obvious limitations (like electric power for all those
  plug in hybrids). They also address ALL energy sources, wind, fives
  different photovoltaics, biofuels, nuclear plants, etc., making them
  all fit together.

  The next decade is going to be interesting!

  Cheers

  Burgy

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Received on Tue Jun 10 08:15:08 2008