Off-Topic: My thoughts exactly....
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Name:
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MartiniMan
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Subject:
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My thoughts exactly....
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Date:
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3/6/2011 8:44:13 PM
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Here is the problem with reserves, the amount of time that it takes to move them from the reserve category to being gasoline pumped into your car is too long given our current inventory of available crude oil. Our reliance on imported oil is a huge national security issue. I don't disagree with what you are saying conceptually. It has always been appealing to me to hold onto our reserves and use the rest of the world's oil but we should only do that if we have the infrastructure in place to take advantage of domestic sources in a very short period of time. Right now that is not even close to being the case.
What has driven my change in thinking on this is our work for oil companies that explore for, transport and refine oil. I had not realized just how little there is in reserve for refining. Think of the concept of just-in-time manufacturing where they receive the necessary parts right when they need them for assembly. Saves tremendous costs not having unproductive inventory on hand but puts you at the mercy of even one supplier. Same is true for oil refining, especially with all the special blends they have to create for different states and different seasons. What this means is that if crude oil supplies are disrupted, because of the very limited quantity of crude oil and refined petroleum products in storage we would run out quickly. Recall what happened with Hurricanes Katrina and Rita in the south where a couple of week shutdown in the refineries resulted in no gasline or diesel all over the south. Not a spike in prices, but no availability That would happen across the country and frighteningly quickly.
So if you could figure out a way to have readily available sufficient crude oil reserves that are sufficient in quantity to carry us through to the point where our ramped up production can fill the gap then this might be workable. Our current strategic reserves don't even come close.
As to you point about $3 gasoline being here to stay that is simply not correct. Every time we have a spike in prices everyone assumes that it will never go down again. I can tell you with 100% certainty that the prices will drop again. They always have and they always will until available production cannot keep up with demand which is nowhere near the case in the foreseeable future. The current spike is due to traders betting that it will continue up for a while with all the turmoil in the Middle East and they can make a quick buck. It will go down, you can bet on it.
As for renewable alternative sources, they will happen when the price of petroleum becomes so high for a sustainable period of time that they become financially viable, and not before. We have seen all the negative consequences of government intervention trying to promote alternative sources. The only way anything happens is for the government to distort the markets by taxing or giving tax credits or cash. As we have seen with the ethanol house of cards as it comes tumbling down, only when the underlying economics are there to drive long-term innovation will anything happen. We are simply not there yet but we will some day. But with the enhanced recovery methods coming into the marketplace we will have plenty of oil, not to mention natural gas and coal to cover us for decades if not centuries.
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