Does this count as a new oil find? I thought there hasn't been a new major find since the 1970's? http://finance.yahoo.com/news/BP-ma...8.html?x=0&sec=topStories&pos=4&asset=&ccode=
and with this huge new supply of oil, someone will find an excuse to raise prices. It's a lose, lose situation.
Once again the media is taking a couple of blurbs and making a story out of it. BP has drilled one well about 250 miles SE of Galveston in water about 4000 ft deep, and have discovered oil. They have no idea if it's a "super" field or not. Even if it is the cost to recover is really expensive so it's not going to solve any of our depletion problems.
Exactly how does that work? There is no single organization or individual who completely determines oil and gasoline prices. Even OPEC is constrained by market forces and the individual actions of the cartel's constituent states. OPEC also can only affect the global supply of oil, and only to a certain degree. Besides supply and demand, oil prices are also hugely affected by the futures market. The main reason gasoline prices have been rising is because investors are fleeing from dollars amid fears of government induced inflation. Anyway, "peak oil" is just another example of failed Malthusian economics. There is no such thing, nor will it ever happen. As oil prices climb, demand will fall. Suppliers will also be incentivized to develop better and cheaper recovery technologies, as well as produce oil that was previously considered too expensive to extract. We'll eventually move most of our energy infrastructure off of dependence on oil, but as a result of market and political forces. Our civilization will never suddenly, magically run out of energy one day and devolve into a land populated by cannibals running around in loincloths. It's pure fantasy conjured by the anti-capitalists, anti-technologists and economically ignorant.
Commodities traders determine the price of oil...mostly based on speculation...and a desire to make huge profits. It's a shell game (no pun intended)
I specifically mentioned futures. You need to be careful in making absolute statements like these, or a statement that can be misconstrued as an absolute. Commodities traders have a huge influence on oil prices, yes, but their actions aren't the sole determinant of price, and they're still bound by the vagaries of supply and demand in the commodities market and the physical oil market. Yes, commodities traders are speculating. However, they were previously speculating on dollars and have now moved back into oil because of fear of rampant inflation in the dollar caused by our government's Keynesian policies. Oil is safer. Commodities traders want to make huge profits, yes, but they want to reduce their exposure to risk. I don't think another bubble in oil is likely to happen again until people forget how they were burned by the housing and commodities bubbles. Give it 10 years and assholes will again cause another asset bubble somewhere else and get burned. That is, if the US government doesn't manage to stifle market innovation for the next 30 years with their shitty policies.
Of course it's not an absolute...but IMO the traders have a bigger impact. If a hurricane is coming....prices go up....if a fish jumps near an oil rig the price goes up....if people drive more the price goes up. It's completely counterintuitive. Thats my point. As far as the rest of your post...be careful in placing opinion as fact such as you did in parts of the above post.
I don't see how it's counterintuitive. The market, when it's behaving rationally, is anticipating the change in price levels that will come from increased demand or decreased supply. Let's consider your examples. A hurricane in the Gulf of Mexico will disrupt oil production and gasoline refining in the United States, leading to decreased supply. Visually, this results in a leftward shift of the supply curve, and the new equilibrium price for a unit of oil or gasoline will be higher. It's the same if people are driving more and that has not already been factored into the current price. Now, say you're a commodities trader. If the new equilibrium price due to a disruption of oil in the Gulf will be say $80, and oil is currently trading at $75, it's to my advantage to as quickly as possible purchase futures of oil for $75. This in turn increases demand for oil futures as people try to buy cheap so they can make a profit. Eventually, and probably in a matter of minutes if not seconds in this computer-driven age, the price reaches the new equilibrium. As for a fish jumping near an oil rig, I can see why you would perceive the market to behave in such a capricious and seemingly irrational fashion. Bear in mind, though, that the commodities, stock, and other markets today aren't driven by hordes of traders screaming at each other on the floor of the New York Stock Exchange. It's largely happening in banks of computers crunching numbers, with some small level of human control. Things happen so quickly nowadays that firms pay extra for their computer systems to be located next to the exchange's computers, so they can avoid communications lag caused by bottlenecks and the lightspeed delay. Time, literally, is money. So yes, your hypothetical jumping fish's disruption of prices appears to be capricious and irrational, but if considered in context it isn't. That's when people are behaving rationally and prices are determined by supply and demand, however quickly it might happen it's still rational. Now, asset bubbles like the ones that occured last summer in the commodities market and the securitized mortgage loans that almost caused our total financial destruction are less rational. Those assets are appreciating because people see that other people are buying them, and driving up prices, therefore they'll buy those same assets so they can capitalize on the price inflation. This in turn leads to more people purchasing the assets for speculation and greater price appreciation. Then it comes crashing down. The reasons why institutions and people participate in asset bubbles are still logical, though, even if those worthies badly miscalculate the risk of their investments. Another issue with regards to what forces have the greatest effect on oil prices is timing. In the short run, traders appear to have the upper hand, hence the large variance in oil prices over a short period. However, I would bet that if we did an analysis ourselves or located an appropriate study, it would show that on a weighted basis, the supply and demand curves of the actual physical oil market have more much more influence on long-run oil prices. In my previous post, I did present some of my opinions as fact, you're correct. I will be more careful in the future. However, my opinions are formed on a solid factual foundation, and I'm quite willing to research and provide independent support for my opinions should anyone wish to refute their validity. Anyway, don't think that with my admitted longwindedness that I presume to lecture you on supply and demand and basic economic theory, but they form the basis of the opinions that I espouse so extrapolation is critical.
Not 4000 feet. 6.2 miles (35,055 ft) deep. http://www.fox6now.com/news/nationworld/sns-ap-us-gulf-oil-discovery,0,5517065.story
Anywhere else if customers are buying more price goes down. Yes demand goes up every year during holidays and summer. So do supplies. They have some new interesting spin every few years...blending...a seagull farted in the Gulf of Mexico...whatever. With fuel when demand goes up price goes up, when demand goes down price goes up, when season's change price goes up. It's counterintuitive, Walmart et.al have shown that with larger qtys. price goes down.... I'm sure when a barrel of sweet crude reached $120 it was due primarily to speculation. I really enjoy when a storm or pipeline or seagull farts on Monday morning, prices go up Tuesday morning. The crude they are talking about is far away yet. It's bu!!shit.
The well is 35,055 feet deep. The water at that location is 4000 feet as Orvis stated. The Mariana trench is only 36k plus change. The Gulf is nowhere near that depth.
I think you are confusing sales tactics for individual sellers to individual buyers, and the market as a whole. The link below has a good explanation of the oil market and how the supply and demand curve shifts effect prices: http://www.theoildrum.com/node/2899 I right now can't think of a single product that will be cheaper if demand increases. I would appreciate it if you provided an example so I could understand what you are actually talking about.
As a 20+ year trader on the floor of largest futures exchange.... Blame it on the speculator is nothing new. From farmers picketing the CBOT and CME to policitians blaming the futures markets and traders on high oil prices. Its a open free market. When NYMEX crude went from $147 bbl to $32 bbl last year, was it the traders fault? Should we have fixed prices? You people crack me up.
What goes artificially up, must come barrelling down to reality. The answer is then 'yes'. Can you give a rational explanation (as in supply vs. demand) for the fluctuation?
The IEA (International Energy Agency) and EIA (Energy Informational Administration) (US) will both disagree with you on the use of the term "Peak Oil." It's simply a term describing the fact that major oil production will never attain the levels that it did at first. Production is tied to demand and "peak" production simply means that production is falling closer to demand now, and continues to fall toward that demand level. You are right when it comes to how oil will play out. It will become so expensive to produce that we (the world) will be forced to find other energy sources, and oil will be reserved for drugs, plastics, lubrication, and other necessary uses besides transportation. The internal combustion engine is far to inefficient to keep using a precious commodity in it. I don't know, running around in a loin cloth might be pretty good since the women will be doing it also. :up:
Yes. The total depth is 35000 ft however, the water depth is about 4000 ft. Drilling in water that deep is pretty new technology, and just a year or two ago, it wasn't possible to do that. It is also really, really expensive. If I'm not mistaken, the bore hole is about 31000 deep.
I just read an article explaining a bit more about the oil find by BP in the Gulf. The bore hole is 35055 ft deep not including the 4000 ft water depth. This is stated to be the deepest well in the world presently. It's called the Tiber project and BP thinks that it contains somewhere in the 4 billion to 6 billion barrels of oil equivalent. (including gas) It could possibility produce about half as much per day as all of the North Slope play. (Alaska) They are not sure yet as to how much they can actually extract from it though. There are three major oil plays in the Gulf. Tiber, Kaskida, and Thunder Horse. Thunder Horse produces approximately 300,000 barrels per day which is half of what comes out of the North Slope. Kaskida is three years into development and they haven't pumped a single barrel of oil yet so Tiber will be a few years before it starts producing. The largest oil play in the world is the Ghawar field in Saudi Arabia which presently produces about 5 million barrels per day. This is down some from it's high production rate and is slowly playing out. From what the Energy and Capitol newsletter that I get weekly says, Ghawar is now pumping about 25% salt water. (They are pumping salt water into the field to raise the oil levels so that they can pump the oil out.) Even with these major finds (Tiber, Kaskida, Thunder Horse, and the Baken play in North Dakota) we are just barely keeping up with the depletion rate of existing oil fields. Our infrastructure is old, and limited in size, so we can't get much more oil to market than we what we ever could, and since oil is a finite product that is beginning to wind down, there are not many oil producers willing to sink the billions necessary to improve that infrastructure. It's gonna get expensive guys.
Yes, it is. But I still think that any alternative will still come from the Currrent Producers. The Oil/Gas Companies, the Big Ones are not here to bring oil or gas, they are here to provide energy and their knowledge and experience in matter of delivery and infrastructure, coupled with the cash flow will bring rise to the new wave of energy. But that is just my simple opinion.
