No Relief from $120 Oil Anytime Soon -- or Ever, says Energy Expert

people will say anything to get media coverage and sell books these days

The following letter is in response to an editorial by John Brinson "Another View - Blame a Foolish Congress for High Fuel Prices" appearing in the Allentown Morning Call, Saturday 3/22/08. Mr. Brinson says to blame congress for high fuel costs because environmentalists prevent drilling in certain protected areas of the country. Certainly congress can be blamed for a lot of things, but one of them is not high gasoline prices. Price is set primarily by global supply and demand. Drilling in the US protected areas will increase the oil supply somewhat, but this relatively small supply increase would be spread out globally and the price effect would be minimal. In other words, the entire world would see a very slight price decrease. Mr. Brinson says there are 3 trillion barrels of crude oil reserves in the world. The reality is that there are only 1 trillion barrels of oil remaining and much of this is unproven. The world started with about 2 trillion barrels when oil drilling began in Titusville, PA in 1859. Since that time 1 trillion barrels have been pumped out and consumed and 1 trillion barrels remain in the ground, so we are at the halfway point. Now, I might also add that the easy half, the top half, has been consumed, leaving the bottom half which is more costly to recover. In 1956 Dr. M. King Hubbert predicted that US oil production would peak in 1970 which at the time was just 14 years away. His prediction proved to be correct and the peak year for oil production in the US was 1970! Sometime later he predicted that World oil production would peak around 2010. Many experts believe we are there now! A book written several years ago by Stephen Leeb entitled "The Upcoming Economic Collapse" describes what the world would be like with $200 per barrel oil. At the time this book was written oil was more like $50 per barrel, now at over $100 per barrel, so we are right on schedule for $200 per barrel (about $6-8 a gallon for gasoline). A key point to remember is that the oil does not just simply run out one day, but rather the world is unable to keep up with the ever-increasing demand. A very small difference between supply and demand will generate huge price increases (as happened in 1973 and 1979), perhaps doubling or tripling, on a worldwide basis. Driving this demand are the emerging economies of China and India primarily, plus other developing countries. Oil and gas companies worldwide are working at a breakneck pace to keep up with this ever-increasing demand. This cascades down to the oil services and equipment companies and everyone else in the oil and gas supply chain. This struggle for world supply to keep up with the demand is the primary reason for the price increase, but the weak US dollar caused by the Bush administration's budget deficits is an aggravating factor. The fact that the oil is getting harder and more expensive to pump is also contributing. Oil in the earth is the exception and not the rule. If you drill at random you will not hit oil. A trillion barrels of crude oil will fit into a 3.36 mile cube. This sounds like a pretty small volume compared to the diameter of the earth which is about 7,500 miles. One of these cubes represents all the oil removed from the earth since 1859, and a second cube represents the oil remaining in the earth. In the grand scheme this is not a lot of oil. The "abiotic theory" mentioned by Mr. Brinson, where oil somehow self-replenishes, is just a wild theory. Nobody ever went back to an old oil well and retrieved any oil that wasn't already there. Sure, with the cost of oil so high it now pays to revisit old wells and pump them some more, but this oil was always there and didn't magically "grow back". Finally, an argument can be made that oil is actually quite cheap, even at today's price. The energy value of a barrel of crude oil is roughly equal to 100 man-years of physical labor (based on a 40 hour work week and 1/10 horsepower which is the maximum sustainable by a normal man). Now, oil is about $100 per barrel. This equates to about $1 per man-year. Can you hire a man to work for just $1 per year? Not even in China! Mr. Brinson does a disservice by trying to present the picture that there is plenty of oil. This just is not true and in fact we are running out. The Bush administration should be promoting conservation and alternative energy development.

Just someone else trying to justify unreal pricing and price gouging. They have sucked the middle class down and now that the disposable income has withered, they tell us to tighten our belts and grab our ankles so they can live off of the profits they made speculating!

It is obious that there are big money people you and I will never know who control these volital changes in oil along with ultra rich more or less day trading with information that is never seen by the average trader.

Yeah, right...dump an extra million barrels on the market, see what happens to the price. Fact is, while we (USA) depend on other countries for our Oil, we are screwed. Fact is, while the IDIOTS in Congress play politics and won't open up domestic drilling/refinering because of the Environmentalist wackos, we are screwed. Don't even mention "global climate change"...China and India aren't going to do a damn thing about that, they are pumping out as much carbon as they want to build their Economies, in a few short years, they will be pumping out twice the carbon as the US and they won't stop. Only the IDIOTS that run our country would rather dump us back to the stone age.

get this punk off this show, its jerks like this who are trying to make it seem alot worse then it is so he & his fellow crooks can profit off the inflated oil price's!!!!!!! This is the oil industries version of the mortg. criminal dealings & melt down!!!!!!!!

Ed, that's a heck of a long post. Back to the original article, there's clearly a 'floor price' due to costs of pumping, shipping, refining. Beyond that, demand is clearly also keeping the price up. What HASN'T happened is the demand increasing so dramatically from last year to account for the surge in prices. Those 'geopolitical forces' are clearly at work here - speculation also could have a factor, but I wonder how many people are going to be losing money with the price drop this past week....

The dollar collapse will continue unabated until we drill off the coasts and in ANWR. Oil has been substituted for gold as a haven for money for protection against inflation. The pain will be increased until our religious green friends cry uncle and allow drilling.

Do OIL Experts consider the fact that the US MILITARY fight 2 seperate WARS in BOTH IRAQ & AFGHANISTAN is consuming HUGE AMOUNTS of OIL & JP5 & JP6? Hummers, M1 Tanks, MPAR & BRadleys do NOT GET the BEST GAS MILEAGE no matter what the situation the MPAR requires 1 gallon of ful for 1 Mile, THe M1 Tank requires 2 gallons per mile. Our Consumption also includes this UNNECESSARY War started by the current administration.

I'm with Rachelle. Also, Ed you seem to have alot of knowledge on the subject but I can't seem to notice you say other people's opinions are not factual and they are not proven numbers because they can not be proven yet you seem to think your numbers are accurate.Why is your information more reliable then everyone else

The news media doesn't know which end is up. First they tell Americans, were not officially in a recession, then they tell us consumer confidence is at its lowest in 28 years, then they say gas prices are coming down below $4.00 then they tell us consumer confidence is back up...you wanna know the truth The media especially printed media, is made up of the lowest paid people in the country.. Most journalist are underpaid..to a tune of $25,000 to $40,000 a year They suck at wrting and they want evryone to be miserable, wouldnt it be nice if they lost thier jobs and we didnt have to read this bullshit everyday?

Considering how hard the Democrats in Congress are fighting to not increase our oil supply (and how hard they are fighting to drill for oil in places where it does not exist), they must be profiteering from the oil industry, bigtime.

FACT is, the world is AWASH in OIL. Price Manipulation and gouging, political power-mongering and such are 100% responsible for the price of OIL. A Couple hundred years ago, there was a huge investment market for TULIPS. The whole thing is staged. The whole thing is rigged. When Americans start driving ultra-efficient vehicles then watch the saudis run for cover, watch the chinese and indians gag on their own fumes. DRILLING is NOT the ANSWER, though the congress and senate are IDIOTS, even THEY are not THAT stupid. Only an IDIOT would think we can drill our way out of this mess.

remember somewhere around a year ago when oil was about $70 and that guy from bear sterns projected $120/b oil; the media and everyone ripped his head off. Well...now we're at $120. Honestly, I don't see it getting much lower soon if ever. This article seems to be pretty right-on.

The news media doesn't know which end is up. First they tell Americans, were not officially in a recession, then they tell us consumer confidence is at its lowest in 28 years, then they say gas prices are coming down below $4.00 then they tell us consumer confidence is back up...you wanna know the truth The media especially printed media, is made up of the lowest paid people in the country.. Most journalist are underpaid..to a tune of $25,000 to $40,000 a year They suck at wrting and they want evryone to be miserable, wouldnt it be nice if they lost thier jobs and we didnt have to read this bullshit everyday?

Aaron Task, writer of this story is a MORON who can't even spell "speculation" right (get spellcheck Aaron). His support of the "supply/demand" arguement only lists one of these two fundamental components, demand. He fails to mention anything about supply. Here's a clue Aaron, if you try to make a logical arguement concerning supply and demand you must list BOTH supply AND demand statistics. The reduced demand he mentioned in his 3 bulleted points are simply resulting from outrageous speculative oil prices creating demand destruction. Look at the timeline Aaron. you will see oil prices rose outrageously FIRST, then demand destruction occured for derivitives of oil. The simple fact remains that oil prices rose from $64/barrel one year ago to a high of $147 recently with only a small overall demand increase and no supply issues anywhere during that same timeframe. No logical, rational human being could possibly make the case that $147 oil (or even $124 oil) is today the result of supply demand issues.

The extent that people are uninformed is scary... whats worse they can vote...Remember the idiot in the office was put there by you and then not removed by.....drumroll......you again!

So tell me. A Computer Engineer and a self taught energy Expert studied "Oil Peak" for five years. Come out said, OIL PEAK. Do I listen to him? WTF..

Right, which is why it still costs around $34.00 to produce a barrel of oil and we're paying $124.00-134.00. How stupid do these "economists" think we are?

Regardless of the actual concrete reasons, there is a HUGE and historic price spike in oil during the 100% correlated with the 8 years of W's presidency, an oil president. For whatever the real reasons, the price will collapse with his exit. Period. Look for $50 oil in one year.