Comments on: Do-Over

By: tdaxp

tdaxp — Sat, 22 Nov 2008 17:03:00 +0000

Recently, the news was talking about Iran’s need for $60/barrel oil. [1] Likewise, Russia’s currency and foreign reserve are under some stress [2]. I’m assuming most of these petro states are closed off enough that an honest accounting of all this would be hard to do.

Dan – cheapest for transportation – gasoline, diesel, jet fuel, etc.

If some sort of giant step in technology should arise, that would change. Short of that, it’s not going to change.

I’m not sure what a “giant step in technology” would be here. Certainly we’ve had a subsidy structure that made gasoline appear artificially cheap for many years as a fuel for transportation. A different subsidy structure would lead to different outcomes.

Infrastructure choices matter, and if Obama seizes the opportunity, we can create a transportation energy infrastructure that’s appropriate for a post 8/8/08 world [3].

[1] http://www.iranfocus.com/en/iran-general-/iran-says-oil-under-60-dollars-troubling-for-economy-16603.html
[2] http://www.guardian.co.uk/business/feedarticle/8057250
[3] http://www.tdaxp.com/archive/2008/08/10/8808-like-8290-and-91101.html

By: sonofsamphm1c

sonofsamphm1c — Sat, 22 Nov 2008 03:29:27 +0000

Dan – cheapest for transportation – gasoline, diesel, jet fuel, etc.

If some sort of giant step in technology should arise, that would change. Short of that, it’s not going to change.

Brent – looking at the article again, it appears to be saying Venezuela needs 102 in 2010. Even that, I think, is farfetched and typical of the distort US media take on Venezuela.

By: sonofsamphm1c

sonofsamphm1c — Sat, 22 Nov 2008 02:10:42 +0000

Needs $102 a barrel?

The average barrel price to date in 2008 is around $105. What they are claiming is simply impossible.

By: Brent Grace

Brent Grace — Fri, 21 Nov 2008 18:24:17 +0000

son
When oil prices were high there was a great deal of debate between economists as to whether record high prices were the result of increased oil demand or increased speculation. [1]

While I do agree that part of the drop in oil prices is the result of decreased economic growth, an implosion in the speculation markets also has something to with it. An economic recovery would drive demand up, but while the price of a barrel of oil will not drop forever, it probably won’t sky rocket to its petrol state empowering highs for a few years.

Also, I wouldn’t bet on the three amigos (Putin, Chavez and Ahmedenajad) all making it through the plunge unscathed. This article claims that Venezula needs $102 per barrel and Iran needs $83 per barrel to balance internal and external accounts [2].

Oil closed yesterday at $52.

[1] http://tpmcafe.talkingpointsmemo.com/2008/05/14/speculation_oil_prices/

[2] http://uk.reuters.com/article/businessNews/idUKTRE4AJ44420081120

By: tdaxp

tdaxp — Fri, 21 Nov 2008 16:31:32 +0000

Even with vigorously escalating prices, oil will remain the cheapest form of energy…

I doubt this is true.

If it was, it would seem to be irrational for any coal, natural gas, etc., plants to be built, when it would be more cost effective to have oil-fired power plants. I am not aware of any oil-fired power plants being built.

Do you have any reference for your claim?

By: sonofsamphm1c

sonofsamphm1c — Fri, 21 Nov 2008 16:04:53 +0000

Oil prices are down for one reason: we are in the midst of a global economic meltdown. It won’t last forever. It will be impossible for there to be global economic growth without vigorously increasing oil prices. The oil states will do just fine, and they will be huge winners when this downturn resolves. Even with vigorously escalating prices, oil will remain the cheapest form of energy, and the most profitable to have and sell.

Iran will not be injured by this downturn. Nor will Russia. Nor will Venezuela.