But the fact that supply is in a safe location, with easy access to pipelines and refineries, from a domestic source that cannot be taken away by the whims of OPEC does a lot to add to the certianty of there being oil there tomorrow which will have a larger impact on the price of Oil.  If we produced 80% of our oil domestically instead of 40% or 30%, then we would be able to exert better control over the price of oil we pay here because you are not having to ship that oil from overseas, be subject to the whims of terrorists blowing up pipelines and disrupting supplies or the expansionist desires of rulers of countries in oil rich nations.  All of these add a premium to the price of oil.  You cannot discount these factors.

Any oil that we produce here subtracts what we take from the global supply, which in turn mean less stress on the system.  That 1% that we would add would be used in the United States, which is 1% less that the rest of the world needs to provide.  At something like 80,000,000 barrels of oil consumed per day, thats 800,000 more barrels in supply for China, India, Russia, or any other country to buy.  By comparison, the Saudi's only have about 1,500,000 barrels of day excess capacity they can add to the system now, the other OPEC nations are already running at full production.  We simply cannot pull the oil out of the ground faster than we are doing now, and the competition for this finite source as much as anything is driving the price of oil

We cannot stay dependant on oil forever, this is true.  But we are going to have to deal with oil for the forseeable future while we develop technology's that will reduce our dependance on oil in general.  Better Batteries are definatly one way, improved solar panels, wind power, hydrogen fuel cells, all these are good ideas that will help when they become economical for people to use.  All will help reduce our need for oil to produce energy and for transportation.  The Oil problem is one that can only be solved by bringing several different angle of attacks to bear on the problem.  This will all take time to do the research, build the infrastructure to support it, and produce enough of it to where it will make an impact.  In the meantime we have to deal with the Price of oil, and do what we can to minimize the amount of money that it takes away from these other avenues.  Scientists need to drive to work to.

Think of oil like water.  Assume all the surface water on the globe was salt water.  There are countries with vast resources of underground fresh water.  They drill this water and sell it to the rest of the planet.  As the population rises, so does the need for water.  And so controlling these water rich locations becomes very important for any government.  Those who control the water, have the power.  Your country has massive amounts of underground fresh water that you have not drilled yet, choosing instead to buy it from the other countries that do.  

Now there are several ways of desalinating salt water, but they cost a lot of money, and you would have to build dozens if not hundreds of massive plants to do it, with will take a lot of time, money, and work to do.  While you are building these plants, you still need the water for today and tomorrow.  The countries where you are buying your water are in turmoil, there are uprising, insurrections, and a war or two being faught.  The water supplies are far from stable and certian, and could be disrupted severely in one of these skirmishes.  Since they are the worlds only real source of water, everyone is thinking the same thing, and wanting to buy as much water as they can because tomorrow there could be a disruption and no more water for a week or two.  

So you think, while we are building these plants, lets drill for some water for ourselves.  Because any water you pull out of the ground will already be here, is not in danger of being disrupted, and can easily be plugged into the water distribution network across the country.  So If the worst case does happen and there is a massive disruption in the other country, you will still have a supply of water.  Because of that, there is not as much need to pay whatever the asking price for water is, because you can always offset it with the water you pull up out of the ground for much less money.  Therefore, the price people are willing to pay for that water is less, because there are supplies that can offset any disruptions that may happen.

Post edited at 4:33 pm on July 9, 2008 by Themouser

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Quote: from Duke at 11:14 pm on July 8, 2008

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Well your question has no applicability to the problem you claim to be addressing.

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This outta be good.

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The Saudis scarcely have one barrel of oil in their inventory to put into play, and they are hardly without great influence on the rest of the world with what they can do, should they have a mind to do it.

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Care to reread the thread and repost? You seem to have completely failed to understand what was actually written. Please consult the dictionary for the myriad of terms you do not understand.  

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I don't know that the concession that Pres. Bush got from the Saudis is going to solve the crisis, but your analysis of why is flawed.

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Huh? Where did I even talk about Bush's trip to the Kingdom?

Please reread and this time pay attention.

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No, there's no reason to reread the topic. I stand by the position that your point is not germane. The issue you seem to be raising is that an increase in the supply of oil won't lower prices. You back that up with a limited and impractical analysis. To you, if the only introduction to the market is one more barrel of oil by a producer who has nothing further to contribute, then the price won't change. So all you're saying is that a temporary 10% one time increase in the oil supply by a supplier incapable of doing anything further won't affect downward pressure on the market. Duh, do you really think so? Well genius most anyone can figure that one out. My point is that the Saudis increasing their production is not so limited as your ill-conceived scenario. The Saudis are far more capable than that. They have the capacity to increase the world's oil supply on a far greater scale, and not just on a one and out basis. Therefore, their sustainable increased production can induce downward pressure on the current oil prices. The reference to Pres. Bush's efforts is to the fact that he just return from asking the Saudis to do just that. They declined to meet his full request, but did agree to increase production somewhat. But you may have missed that, as it only happened in the real world, not the nice simple, designed to support your flawed theory world that you seem to inhabit.

The problem however is not just a question of supply and demand. Until the world, the US being chief among the offenders learns to better utilize our reserves, the prices will continue to rise. However much oil there may be out there, it is nevertheless a finite resource. The Saudis' point is well taken, they have bailed the Western world out previously by increasing production, to the dismay of their fellow OPEC members. Rather than capitalize on that, and better administer what we have, we continue to deplete it. We Americans have been spoiled for many years by our artificially low oil prices, while most of the rest of the world has long grown accustomed to these high level gas prices. We cry when the pain hits, and point to the Saudis and other oil producing  countries and cry foul. Well, that's all nice and dandy, but we need to look a little closer to home. Last time I checked, the oil companies in the US that are reporting historic, record breaking profits are US owned. We can even take a look a little closer to home at each and everyone of us, and the way we squander our resources. I dare say that there is not a person on LW who cannot better use the resources available to them.

So no, no need to reread your topic. I fully understand what you had to say. As for any terms that I am simply too uneducated to understand, I had my mommy explain them to me, so I'm good. The fact that you apparently are incapable of understanding the flaw in your neatly contrived to reach your desired answer scenario, would cause me concern were I foolish enough to think that you had any idea what you're talking about or had any impact on the real world.

I'm just going to come out and say it.

Duke  = Idiot.

You failed to understand what the fuck my post is about and you even went to ridiculous strawmen in attacking what I never said. hell, you're STILL talking about shit I never even alluded to.

How is my analysis impractical? Explain to me how adding a tiny amount to the total market value is going to significantly change prices. You have failed to do this.

Discuss the Kingdom with someone who cares. Aka, yourself.

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Maybe God doesn't care how you say your prayers,
just as long as you say them- Jeffery Sinclair

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Fine. Think of it this way. There are 10 of you selling 11 exact same products apiece for a high price (meaning there are 110 units on the market). Another person comes in selling the same product but only has one of them for a lower price.  (now 111 total units on the market)

Do you lower your prices to compete with the guy who's selling low but only has one unit where you have 11?

And remember there is sufficent demand for all of the units being sold.

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Well, there are those (shale?) oil deposits they recently found in the US.  Are you including those, or just referring to what's in Alaska?

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wind and solar won't really be effective until battery technology gets better, and obama won't give a straight answer on nuclear.

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You wouldn't need (better) large batteries to store surplus energy from solar power at night.  You can simply fill up underground caverns with air pressure and at night release the pressurized air so it moves a turbine and you can generate electricity.

Ditto with wind power, except that if you install wind turbines in North and South Dakota and Texas -where the wind, I am told, is always blowing- you wouldn't worry about storage problems so much.

http://www.inhabitat.com/2007/11/26/super-powered-magnetic-wind-turbine-maglev/

There's also that behemoth that the Chinese allegedly just recently installed.

Drill in Alaska, the Atlantic, and the Pacific.  And we have to start investing in wind power, solar power, and nuclear power.  Drilling here is just the start.

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MAVERICK MAVERICK MAVERICK MAVERICK MAVERICK MAVERICK
MAVERICK MAVERICK MAVERICK MAVERICK MAVERICK MAVERICK
MAVERICK MAVERICK MAVERICK MAVERICK MAVERICK MAVERICK
MAVERICK MAVERICK MAVERICK MAVERICK MAVERICK MAVERICK

Understand, if you have 100 widgets and the demand is for 150, the price will go up until 50 of those people are priced out.    If the supply is 150 and demand is only 100, then the price will fall until 50 additional buyers are brought in.  

When both the supply and demand are at 100 widgets, and there is a threat of a factory exploding that would  cut your production down to 75, the price will appreciate  as those 100 orders anticipate the problem and scramble around for those first 75 widgets just on the potential.  The will spike even more if the factory does explode as the 25 who didn't get their order filled has to buy their widgets from the 75 who did, who are going to charge more than the premium amount they paid because they had the foresight and actually got their orders in.  

Think musical chairs, people don't panic when there are more chairs than people.  When there are not enough chairs, you get the competition for a seat.  The fewer the chairs, the fiercer the competition.  The less cushion, the higher price.  The appearence of cushion makes people think there are more chairs, and therefore less willing to pay a higher price for a seat.

Adding more wells and capacity to the system, even if it is just a little at a time, will help slow and eventually reverse the price of oil as the supply lines become more resilient to disruption.  A field getting shut down for whatever reason is not as big of a deal when you can up the production at other fields to compensate.  When everything is maxed out, there is no where to turn to compensate and supply gets cut, prices rise.

Its not about how much extra oil you are going to pump rather it is about your ability to pump extra oil.  Simply put, we need more chairs in the room.

Post edited at 9:25 pm on July 9, 2008 by Themouser

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*sigh*

I'm just going to come out and say it.

Duke = Idiot.  

You failed to understand what the fuck my post is about and you even went to ridiculous strawmen in attacking what I never said. hell, you're STILL talking about shit I never even alluded to.  

How is my analysis impractical? Explain to me how adding a tiny amount to the total market value is going to significantly change prices. You have failed to do this.  

Discuss the Kingdom with someone who cares. Aka, yourself.

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Being called an idiot by you is somewhat akin to being called a Catholic by the Pope! Your major fallacy is that you continually lock on to your 1% figure to support your argument, but you pulled the 1% out of your ass, so that it would support your argument. If you wish to continue to limit the reality to your artificially created number, then I guess your theorem works. However, I prefer to look at reality and the full situation, not just a derived number chanted like a mantra to support my argument.