OPEC member suggesting that oil might be a bit too high

[Hirschof]

Also, a question for Hirschof. Do you know how much oil is, on average, extracted from a single well over it's lifetime? Also, do you know what the lifetime is? If there is any related information you believe would be useful, please share it.

I'll try to get you something simplified but there are quite a few variables. I won't be able to get back to you on this for a couple of hours.

Smilie - There have been debates about this country's abuse of oil for a couple of decades. I'm not saying we should have a strong alternative fuel source by now but that we should have taken some sort of precaution, like not being so wasteful with oil.

[Hirschof]

(Little faster than I thought)

I can’t find any exact numbers on it but the general consensus on the life of an oil well is 10-15 years. There are wells that have been producing for 30-40+ years and many that were only in production for a year or two.

The average is difficult to state because of the high number of wild cat wells, wells that were drilled in hopes of finding oil. There are a ton of these in Texas.

As far as production, I found this data in an EIA (Energy Information Administration) packet I have. It looks like their data is online as well. I’ll link it if I find it.

EDIT: Found it. Much more detailed than what I have on my desk.



I’d like to point out that production differs per well because of depth, pressure, type of well, quality of the oil, and legal contract/stipulations. (Different in every state/territory)

Of course costs figure into everything; the initial cost of the well (40-100 million dollar difference between on-shore and off-shore), the economic limit of the well, and maintenance. BPD per well can be increased to balance out costs. Wells are usually shutdown and plugged once it is no longer cost effective for them to continue production.

http://webapps.rrc.state.tx.us/DP/drill ... =484281774 - In case anyone wants to take a look at an oil well ticket/plat/permit.

[collegestudent22]

The amount of ANWR with oil on it is only 2000 acres. As opposed to the 19.6 million acres that the refuge consists of. Even taking into account room for pipelines to transport the oil, less than 10% of the area is at risk.

CS22, CHECK YOUR FRIGGING DECIMAL PLACES! You keep goofing up on your orders of magnitude. 2000 out of 19.6 is slightly more than 0.01% It is no where near 10%.

I know that, adciv. I was accounting for the fact that there is pipeline that must be built, etc. due to the fact that that section of ANWR is not out near the borders of the refuge. I also accounted for the fact that a spill would not be isolated to the drill site. But, as I stated, it is LESS THAN 10%. 0.01% is less than 10%, is it not?

[StruckingFuggle]

But, as I stated, it is LESS THAN 10%. 0.01% is less than 10%, is it not?

Yes, but you shouldn't say that. It's bad form, and somewhat misleading. You should say less than 1%, at the very most.

[collegestudent22]

True. I just didn't think about the exact amount that would be at risk. I just wanted to make sure I didn't say 1% when it was really something like 5% or so when it was actually figured.

[Martin Blank]

More information has been coming out recently about the terms under which speculation has reached the levels that it has.

Until about 1998 or 1999, the major markets (US and Europe) basically believed that oil was so strategically important that only those that actually used it or its derivatives were allowed to trade in it. For example, airlines, refiners, and trucking companies could trade in it, which kept the volume relatively low and helped to keep the volatility out of the market. They were also required to ante up a 50% margin on all purchases, meaning that they were betting some serious cash, so would only do so at the levels required to survive in the market. If an airline, for example, expected that oil would increase, it could buy up surplus contracts at current prices for delivery to refineries that would make jet fuel at prices that were reasonably low.

Around this time, several large banks got together and decided that they wanted a piece of this market. They set up an exchange in London, where Britain had loosened the requirements considerably. Afraid of losing out on trading to the London exchange, regulators at the Commodity Futures Trading Commission (CFTC) loosened the reins on this side of the Pond as well, eventually allowing everyone in, and reducing the margin to a mere 5%.

FIVE PERCENT.

You want to trade on a million dollar contract? You need only $50,000. Go ahead -- snap it up. The price will go up before the contract is due. That's insane.

There is an oil shortage compared to a decade ago, or even five years ago. Oil's natural price -- what it would be without adverse speculation -- is a lot higher than it was at the turn of the century. Most analysts believe that to be in the $60 range, give or take $10. But while one of the fixes is simple -- require all US traders to pony up 50% of the contract value for their margin placement -- there's hesitation on the part of the major parties to do so. Democrats don't want to do it because they see fuel consumption going down and fuel-inefficient vehicles coming off the road, something that meshes with their environmental platform. Republicans don't want to do it because they don't want to interfere in business and be accused of cutting into the profits that are being made.

But both parties are punishing the American people to a significant degree. A great many of them cannot afford to buy a new car -- even at $5 per gallon, it's still a lot cheaper to pay for that than a new car payment. Fuel prices for transported goods -- almost everything you use -- push up prices paid at the register. The airlines are bordering on bankruptcy right now because fuel has risen from less than a tenth of their costs to more than half, and that's hurting tourism. Fewer tourists mean fewer hotel rooms used, and fewer rental cars booked -- Avis reported lower profits today, dragging that whole sector down. Tourism is a giant portion of the service industry that makes up a sizable fraction of the US economy. We saw in 2002 what happens when that takes a hit.

The number one issue on the minds of the American voting public right now is not Iraq, or medical insurance, or the economy. It's the price of gasoline. The first presidential candidate to push through a bill reinstating at least some of the old limits and pushing down the price of oil is going to pick up 10 points easily. It will put enormous economic pressure on the Iranian leadership. It will boost the value of the dollar against the Euro. It will give the airlines a great deal of breathing room that they desperately need right now. It will help stabilize home prices in the suburbs from which some people are fleeing to shorten their drives to work. And it will have a marked public effect on the voter as prices drop from nearly $5 per gallon in many places back down towards the $2 mark.

Nothing's going to change on the vehicle front. Every auto manufacturer has already committed to gutting their pickup and SUV lines in favor of smaller, more efficient vehicles, and the public is going to stay skittish over this long enough that we're not going back to the old ways anytime in the next decade, by which time hopefully it won't be as big an issue as Brazil and others bring new deposits online and newer, more efficient vehicles are available. But it will make a difference in the pockets of every single person in the country that will be felt within a matter of weeks without unfairly taxing the oil companies or drilling into the coastal deposits. Everybody wins.

[Deacon]

That's very interesting stuff. I honestly had never heard about that before? Why haven't we? I think $60 for a barrel of oil sounds a helluvalot more reasonable and correct than $150...

[Martin Blank]

The oil market is a wild west. The regulations apply largely to the trading floors in New York and London, but no one knows how much oil is traded through other methods such as over the counter. For all its importance, there's a lot that is unknown about the market. A lot of people make assumptions that it works the way that most commodities work. It's hard to blame them -- anyone can trade in gold or orange juice. Not enough people looked at oil to know about the difference.

The regulations that I mention were not recent, or put into place by someone trying to cut things short in the 70s when prices spiked. That spike was a natural spike due to supply cuts; the limitations to which I refer went back to at least the 1950s, and perhaps back to the 1940s, so the prices then were reflective of real forces. Either Truman or Eisenhower was responsible for signing them into place, and it seems to have been a wise decision. The economy is shaky as it is, but with the false scarcity, even a collapse of the economy might not bring oil prices down by any significant margin.

[Martin Blank]

What is your fascination with Iran?

My personal fascination? Or the national fascination?

Personally, I find Iran an interesting political entity. It has certain democratic processes, but these are held in check by a theocracy. Ahmadinejad is a classic populist. He's trying to funnel money to the lower classes, impress the upper classes with his bravado against the evil imperialist West, and not doing an especially good job of either. Iran exports vast quantities of oil, and yet imports vast quantities of gasoline because the refineries can't supply enough and the national oil company isn't allowed to spend money to expand them. Meanwhile, gasoline is subsidized to a great extent, but when the subsidies slip a little to free up money for other programs, threats of riots occur. Over the last six months or so, there have been increasingly harsh words coming from the senior leadership about Ahmadinejad's rhetoric over Israel and the US, and parliament now has a make-up that has forced him to make changes that he doesn't want to his cabinet to shore up the economy.

Iran has been on the edge of a revolution for the last decade or so. The government balances that on a knife's edge, and is quite good at it. It keeps open just enough newspapers to allow the intellectuals the image of freedom while making the speeches and restrictions to keep the conservatives happy. During this, it looks the other way over the dress and music of the younger generations just enough to keep them from exploding while they put enough pressure on to keep that same group from going fully Western.

The US produces about a third of their oil themselves, can´t you force those oil producers to sell at $60? I don´t think so.

Nope. Oil is a commodity, and not subject to price controls. Even if it were, if we put a price freeze on it, foreign oil simply wouldn't be sold here because profits would be better elsewhere, and shortages would be generated.

And doesn´t anyone think that the oil prices are rising because the dollar is so weak?

Of course, but that's not the whole issue. The weakened dollar is certainly part of the reason for the increase, but the increase itself has helped to weaken the dollar. It's an ugly cycle that I've been watching for some time now. The dollar slips by a half a percent, and oil goes up by 2% or more. That's not value adjustments. That's sheer speculation.

All that makes me think that we just may be at the point where the euro will replace the dollar as key currency very soon.

It takes a lot more than a couple of years of a weak dollar to lead to a replacement. There are market issues to consider, many of them psychological, and the fact that pulling commodities off the dollar would have a detrimental effect on the US economy. And like it or not, the US economy is an anchor for the rest of the world economy -- that happens when you make up a quarter of it on your own. The European Central bank raised interest rates by a quarter of a point this week to head off inflationary pressures in Europe. This had a small effect against the dollar, though not what it could have as the move was expected. But it may have had a larger effect against the price of oil, which went up another percent or so today.

[Martin Blank]

The EU hasn't reached the unified status that distills its economic effects to the same degree as the US. In the US, if California changes some economic policy, its effects are fairly local, because California, despite its size as the sixth-largest economy in the world if it were independent, has no power to affect international trade or the economy as a whole to a significant level. It is tightly bound by the US Constitution as to what it can do (very little) and what it cannot do (almost everything) about trade.

The EU is quite different, and is more of an economic alliance at this point, as the EU Constitution was defeated in 2005 and the future of the Treaty of Lisbon has been put into doubt following its defeat in Ireland. Individual nations have a great deal of latitude in how they conduct trade, and the need to maintain unanimity to push significant points forward in the EU means that any one nation can tell the rest to go pound sand and derail significant progress. Even the currency hasn't become universal to all signatories of the Maastricht Treaty, with the UK, Denmark, and Sweden figuring out ways to avoid adoption.

The Euro is undoubtedly important, but the Eurozone doesn't encompass the entire EU. In fact, it barely covers half of it, with only 15 of 27 member nations using it at this point (not counting a few non-EU countries that also use it). That represents, for the moment, an underlying instability that adds another reason to not switch major commodities to the Euro. That may change in the coming decades, but in the short-term, I don't expect that any momentous new compacts will provide the basis required to move off of the dollar.

[Martin Blank]

What you have is closer to (but not quite the same as) we had while under the Confederation. The central government was relatively weak, and the state governments were strong. Each maintained their own military forces, with only token forces really under federal control, much like the EU. The economy was nominally united, but trade laws varied considerably.

You also continue to maintain separate cultures. French and German cultures differ considerably from each other, and will for some time to come. In the US, we have different cultures, but they're not separate, if that makes any sense. I think Germany itself has a similar situation, where each state has its own history and its societal quirks, but they are all German nonetheless. Getting most Europeans to think of themselves as European first and whatever nationality second is going to be difficult, especially during the World Cup.

[StruckingFuggle]

Getting most Europeans to think of themselves as European first and whatever nationality second is going to be difficult, especially during the World Cup.

I wonder if that's entirely not the case here.

Pick up some punks from southern california, some militants from montana, some hippies from cascadia, some good ol' boys from the deep south, a couple creeole from nawlins, and the stuffiest, wasp-iest wasps you can get from new england, and ask 'em all just how much they're alike and from the same sort of country. Maybe I don't see it, or miss your point, but I sort of don't see it at all. t seems to me we have different cultures but I don't see how they're "not separate".

And this election, along with the last couple (or maybe all of 'em, and I've only been aware of it in this century), seems to do a pretty good job of illustrating some broad divides and substantially different cultures.

Sure, we're all being invaded by the same mass-processed box-store fast-food fox-tv cultural downgrades, dilutions, and filtrations that seem to be moving us towards a monoculture, but I don't see this "not separate"ness beyond the parts that've been Borged by this superficial mass-produced corporate hegemony cultural machine.

[Martin Blank]

You're confusing regional variations with differences in culture. You should know better.

In every city, you're going to find people who consider themselves true patriots (unlawful militias), true Southerners (long live the Confederacy!), true Cajuns (what did he just say?), or whatever the local case may be. They are not representative of the American culture as a whole. Political differences also do not make for cultural splits, as any two people can disagree on any number of points and still profess true membership in a given culture. Even the Vichy French were still French, essentially just as much as French Resistance; the only real difference was whether they chose to cooperate with or fight against the Axis invaders.

[StruckingFuggle]

Hm. Maybe I should "know better", but it's always seemed to me like, other than 'mass-produced most-profitable-denominator-targeted fast-food fast-media industry', and possibly a love of beer, sports, and simple-minded pursuits (but those things seems fairly universal to man), we don't have much of a 'culture' beyond those 'regional differences'.

We may consider ourselves 'americans', but what does that really mean? We still seem to value 'us and ours and those like us' (our regional and familial cultures) more than we value 'american', and asked 'what we are, as a people', I'd bet most people would say the things they were raised with and that are from their culture, rather than ... something else.

/facedesk

I do feel like I'm missing something, but for the life of me, I don't see it; or see much in the way of overall culture beyond shared myths about 'americans' that doesn't seem to much hold up to reality.


As for the political things, I think my point was that with all this division, we have all these people with different priorities and ideas of what it even is we should be. Free market vs. social welfare. 'sink or swim on your own' vs. 'help those in need, even if it costs those in plenty'. Those seem, broadly, to be such different values as to be of different cultures, too.

[BtEO]

What the future will bring for Europe, well, will be interesting I think. While we have all the same driving licenses now, most things are not on the same level. Most, if not all, countries still have their official language instead of switching to english. They should bloody well change that, start now, give it 40 years, tada, problem solved.

You can try and get the French to do that. They're still pissed that English got made the official language of the EU.