what if the price of oil declines significantly?

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Permalink Reply by David Harrell on July 18, 2008 at 1:59pm

I think the only way that we see $80 a barrel anytime soon is if the dollar does an about face and gains strength.

While I certainly would love to see $2 a gallon gas again, the reality is that I believe those days are over. I'll be pleasantly shocked if we can get it down to $2.50 or $3.00 a gallon.

You are correct that OPEC isn't stupid, however, people that are far more knowledgeable than me have said that this current situation isn't OPEC driven. It isn't like the 70s when they limited production to drive up prices. Per TBP, they are at full production and even if they wanted to push out more oil, they are pushing the physical limitations of their delivery systems.

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Permalink Reply by Robert D. Jones on July 18, 2008 at 2:07pm

As I read your posting, you believe my supposition is unlikely. Perhaps, but my posit remains that IF something happens to drive down the price of oil, the incentive to pursue alternate power sources will simply disappear. If that should happen would we not simply be in worse shape the next time the price escalates? Should we not be prepared with a contingency plan to keep the issue on the front burner?

If you agree, my question remains. I think we should talk about alternative motivation factors in order to identify the best combination to keep the Nation on the trail to alternative power sources that would remove the threat posed by our existing dependence on outside sources for a vital resource.

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Permalink Reply by NKYCarbon on September 2, 2008 at 12:40pm

For wind the key is a long term law to support it. Currently they expire every 2 years or so. Even if 10 year was implemented this would not prevent congress from ending it early. It just makes it more difficult than simply letting it expire. Someone with more familiarity with aid programs would have to comment on that.

Natural gas cars and filling stations can rely on short term support. Support similiar to existing hybrid vechicle should suffice. For the filling stations support with an exact expiration date speeds things up. "If you build in year one you save "x". Year 2 half of "x""

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Permalink Reply by Robert D. Jones on September 5, 2008 at 10:13am

First, having had a lifetime of experience inside and outside government service, I can state emphatically that getting something like a decade or two committment from what is essentially a two-year Congress is almost impossible. It is the "almost" that keeps us still in the game -- remember "... the Moon and return within this decade" was more than just a slogan -- it was full presidential backing, plus considerable Congressional assistance and a lot of public support for what was essentially a "romantic" project.

Natural gas is a good thing -- I have relatives that converted vehicles to run on LPG a couple of decades ago. The system was similar (allowing for the operating pressure differences and the computer controlled engine parameters). However, the cost to convert (where I live the closest authorized conversion agent is something like 200 miles away and the nearest commercial fueling station is about 100) is substantial. Unfortunately, the refueling station that was less than a mile from my house ten years ago was removed for lack of interest. So, to actually convert a vehicle here requires something like a ten-fifteen grand (estimated with minimal data) investment, plus considerable do-it-yourself skills (vehicle, plus the at-home re-fueling station) to get it all working.

The lot of information, plus the fuel savings data you want can be determined by using the calculator found at www.cngnow.com. But, looking at the numbers above, the amortizion of the investment will probably take longer than the vehicle will last. Also, if my recollection is correct, CNG is something like ten or fifteen percent less efficient than gasoline. Therefore, when running CNG you will lose power and "gas milage" and the cost advantage factor must also be reduced.

All that being said, I am seriously considering taking the plunge. I've got a bunch more investigating to do -- but, if I do, I'll report the events (good and bad) on this forum.

Regards to all,

Bob

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Permalink Reply by H-Tom on July 29, 2008 at 12:34pm

Price will never drop below $3.00 ever

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Permalink Reply by David French on July 30, 2008 at 10:09am

I paid $3.619 over the weekend, down from a bit over $4.00, and oil is still above $120. If oil were to drop to under $85, I see sub-$3.00 gasoline as a distinct possibility. In other words, never say never.

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Permalink Reply by Dr Mark on August 14, 2008 at 4:54am

In reality, business investors are not so sure oil will stay above $80 a barrel. In fact the oil companies know that the Saudis spend less than $5 to pump a barrel of oil and at that price they could depress oil prices pretty far as OPEC did in 1984-85 when the drop from $38 to $22 killed the U.S. Synthetic Fuels program. And I think that's why Exxon-Mobil doesn't drill in the U.S. (those wells would be much more expensive to operate than overseas sources).

Alternative energy especially needs a price support. An oil import tariff that guaranteed imported oil would never fall below $80 would go a long way to making alternative energy investments a stable risk (what's that you say,"You want OPEC to continue having a Free Market to plunder with its price fixing cartel?" "You want America to continue protecting the rights of OPEC over the rights of the American people?").

Say you are an investor and want to put $2 billion into a Fischer-Tropff coal gasification plant and you know the break even point is $75 a barrel and your payback period is 10 years. Would you invest that $2 billion knowing that you have ABSOLUTELY ZERO customers if oil drops below $70? Now you see that it IS a very real concern.

Dr Mark

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Permalink Reply by Kurt Stiffel on July 18, 2008 at 2:04pm

we'd be screwd... but I heard a popping sound around $4- a gallon, i think it was America collectively pulling its head of its rear-end... now maybe we can keep it out and stay focused, but you are dead on , OPECs people are brilliant and we cant be lulled into complacency ever again,,, Peace and power to the sheeples.

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Permalink Reply by Robert D. Jones on July 18, 2008 at 2:12pm

Ah, you must have heard the story of the sheep, wolves, and the sheepdogs. Well, we need a bunch of sheepdogs in this arena, just as in the area where direct application of force is needed to protect those that can't seem to protect themselves.

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Permalink Reply by Leon D'Souza on July 18, 2008 at 2:10pm

A good question, although I doubt we'll see the price of crude slip substantially below $100/bbl; certainly not if U.S. demand remains constant. Peak Oil is not so controversial when you factor in the staggering rate at which fossil fuels are being consumed, both in the developing and industrialized worlds. And even if countries like China do dump their overages, as you suggest, for how long might we continue to deplete natural resources so rapaciously?

Oil is a non-renewable commodity. There's only so much of it to go around. We have a moral responsibility to use this resource judiciously and to bequeath future generations a reliable and sustainable energy infrastructure.

So, to your question, we might explore artificial controls to keep prices at a certain level. Columnist Thomas Friedman of The New York Times supports the idea of a "price floor" for gasoline: "...$4 a gallon for regular unleaded, which is still half the going rate in Europe today."

Friedman argues that responsible politicians ought to "guarantee people a high price of gasoline — forever." The point, he says, is that "we need to make a structural shift in our energy economy," ultimately transitioning to something revolutionary.

"The only way to get from here to there is to start now with a price signal that will force the change."

I endorse this position. The money collected from such a “floor tax” could be invested in developing alternative power sources.

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Permalink Reply by Robert D. Jones on July 18, 2008 at 2:35pm

Afternoon Leon,

I must respectfully disagree with the concept of price controls (either artifically high or low). I lived through the artificial price control on US oil and the reaction of Congress (the first Windfall Profit Tax) when US oil prices were allowed to float with the world market. There was no thought about the years where the price was held down (to ensure that the pump price was low) and the loss in real income that resulted. It was simply a new source of revenue that didn't cost them votes -- you know, oil-men and oil companies have always been easy targets.

One other result of the price control "experiment" was that US companies diverted effort (exploration and production) from US sources to foreign sources. There were a number of other adverse results from that activity -- but that should be enough to support my position that artifical price controls are rarely viable in either the short or long haul. The rule of unintended consequences always applies.

I think that a concerted approach combining education (in the form of paid commercial messages) coupled with some tangible results in vehicles that are both price and efficiency competitive with gas powered vehicles is the only method to achieve long-term success (meaning popular support). There are a number of problems that have to be solved before any alternate fuel becomes common-place, of course. The first is the simple profit incentive for the distributor. There was a natural gas fueling station less than a mile from my house a couple of years ago. It was taken out for lack of interest about a year ago. I have relatives that regularly converted their vehicles to run on propane because it was significantly cheaper, even when gas was less than a dollar a gallon. They don't do that any more -- for the obvious reasons -- some of which are mentioned in the posting on converting a vehicle to run on natural gas. As in the past, the cost and availability of the supporting infrastructure adversely impacts PickensPlan viablity today. Where is the incentive for the major oil companies to provide natural gas fueling stations? Seems like Catch 22 all over again, to me. I believe it is incumbent on we, the people, to make the case. I just don't know how to do it.

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Permalink Reply by Raj on July 18, 2008 at 2:59pm

If we can get conversion kits for both carburetor and fuel injection makes, as they do in Argentina for a reasonable price, instead of the ungodly prices, due to EPA certification fee (reported to be ($40000+), then I think that would provide an incentive for someone with money to setup conversion kit installation/filling stations.

But as long as the EPA has a stranglehold on this, there is no hope for CNG becoming a good alternate fuel for automobiles.

This also brings up another interesting subject I recall reading somewhere(don't remember verbatim) that they use CNG converted cars in some of the oil producing countries in Middle east; Are they using it because it is cheaper, or because it is cleaner, or both.

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