Good emails in response to yesterday’s doom & gloom post on the oil situation. Mark writes:
I work on the driling side of the industry. Rig counts have been going up for two years, domestically (primarily natural gas) and abroad. Our manufacturing backog is aproaching half a year’s earnings. We have work coming out of our ears.
BP has invested nearly 10 billion in Gulf of Mexico production in the past three years. All of which comes online end of this year and early next year. And another 5 bilion in Azerbaijan on some truly monster fields. And that’s just a minor, minor sampling of the activity happening globally.
Russian instability is part of the problem. The upcoming election in Venezuela is a problem. The current hurricanes in the GoM are a problem (shut in production). The price of oil and the futures market necessarily take this risk into account in pricing. Demand is the primary driver of oil prices. But risk has become a significant part of that price as well.
Oil prices may continue to rise, slowly, as many known reserves are only profitable at higher prices, but I don’t expect production to “peak” and drop off.
And this, of course, all assumes there aren’t any new large finds of cheap oil; given that new technologies are always in development, and that changes in the theory of crude ‘production’ (dead dino to the “new” deep-biopshere model) change where people are looking, that assumption may not hold.
(I’d also suggest that a big reason for a lack of new refineries in the US is state laws and environmental suits.
Refineries pretty much have to be built near the coast to be effective (if we’re talking about imported oil, and if we don’t want to build a crude-oil pipeline), and there’s plenty of resistance to new refineries in traditional places like California.)
Finally, Randman has the most sensible outlook:
The answer is simple. We need to kill more dinosaurs and get them buried straight away along with lots of organic plant matter. The Brazilian rain forests should do the trick for the plant material. Now, where to find dinosaurs? There are several in Congress. . .