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By Robert Rapier on Jan 10, 2011 with 36 responses

When Economic Recovery Collides with Flat Oil Production

A theme that I commonly discuss in articles and presentations is the problem of economic recovery when oil prices are high. If the market is well-supplied and there is ample excess oil production capacity, oil prices tend to be moderate and stable, and economic growth can proceed without much headwind. However, the world has now had essentially flat oil production for several years in the face of historically high prices. This implies — and I believe it is true — that there are serious supply constraints within the system. I believe that some countries do still possess spare capacity, but that the overall amount isn’t large. I think if there was much excess capacity, we would see countries taking advantage of current oil prices by putting more oil on the market.

In the case of supply constraints, prices will tend to be high (presuming open markets) and any increased demand just puts more pressure on prices. The way modern economies tend to work is that during recessions demand for oil falls, and during recovery demand for oil increases. In a supply-constrained market this will create a strong headwind that makes it difficult for economic recovery. In a nutshell, this describes the situation that I deemed The Long Recession. Or, as I sometimes ask “How do we recover from a recession when oil prices remain at recession-inducing levels?

Of course I am not the only one saying this. A few months after I wrote The Long Recession, CNN did a story that essentially covered the same theme, indicating that high oil prices could “complicate recovery.” More recently, a New York Times editorial by Paul Krugman discusses these issues:

The Finite World

Well, it still feels like a recession in America. But thanks to growth in developing nations, world industrial production recently passed its previous peak — and, sure enough, commodity prices are surging again.

This doesn’t necessarily mean that speculation played no role in 2007-2008. Nor should we reject the notion that speculation is playing some role in current prices; for example, who is that mystery investor who has bought up much of the world’s copper supply? But the fact that world economic recovery has also brought a recovery in commodity prices strongly suggests that recent price fluctuations mainly reflect fundamental factors.

Krugman also notes that Peak Oil has essentially arrived:

And those supplies aren’t keeping pace. Conventional oil production has been flat for four years; in that sense, at least, peak oil has arrived. True, alternative sources, like oil from Canada’s tar sands, have continued to grow. But these alternative sources come at relatively high cost, both monetary and environmental.

This is the theme I covered in my Peak Lite essays. We don’t necessarily need global oil production to peak before we begin to see peak-related problems. Oil production could even grow slightly, but as long as demand remains high the impact will be higher prices and strangled economies. How high might oil prices go? This is a topic I spend a lot of time considering. One train of thought is that the world already struggles with oil prices where they are now, and with the world still in recession it will be difficult for oil prices to advance quickly unless rampant speculation is involved. As economic recovery advances, oil prices will rise and put the brakes on the recovery.

However, over the long haul I consider the question of what people might actually be willing to pay for oil. During the price-spikes of 2008, I was living in Europe. Europeans were paying the equivalent (because of added taxes) of around $300 a barrel, and yet people continued to drive. So I think oil prices in the U.S. can ultimately rise to a very high level from today’s prices and we will continue to pay. I often ponder the question of how Americans would respond to $10 gasoline. Will we stop driving? No, we will start to reduce consumption where we can, but we will also just have to spend less on other parts of our budget.

There is another train of thought that I should mention, and that is that high oil prices could result in a severe economic depression. In that case, some believe that demand for oil will fall so far that prices will plummet back to the $30 range. If that were to happen, however, I believe demand would once again be stimulated and we would end up back where we are now, which is basically an era of permanently high oil prices — even if we do see some occasional sharp volatility on the downside.

So this is all well and good, you might think, but what to do about it? The best advice I can give to people is to minimize your exposure to significantly higher prices. Think of it like an insurance policy. Is it possible for gasoline to be $10/gallon in 5 years? Of course it is possible, and if not in 5 years then maybe 10 years. So if this is a real possibility, you have to consider what those kinds of gas prices might do to your personal budget. In my own life, I have chosen to minimize the risk by driving a fuel-efficient car and living close to my job. I also have the option to telecommute. Some will also have public transit options. Everyone’s situation will be different, but I believe it is a good idea to have a contingency plan for how you might deal with much higher prices. In fact, with oil and gasoline prices on the rise, that contingency plan can provide some relief for your personal budget today.

Krugman’s editorial noted the need to make changes, while also arguing against the notion of collapse:

“So what are the implications of the recent rise in commodity prices? It is, as I said, a sign that we’re living in a finite world, one in which resource constraints are becoming increasingly binding. This won’t bring an end to economic growth, let alone a descent into Mad Max-style collapse. It will require that we gradually change the way we live, adapting our economy and our lifestyles to the reality of more expensive resources.”

On a national and global scale, we have to work on both supply and demand-side issues. I think that consumers making personal choices will most influence the demand side, but it is government policies (or lack thereof) that will more strongly influence the supply side positively or negatively. Some level of biofuel production will help, especially those options that aren’t heavily reliant on oil or fungible fossil fuels. I think that continued expansion of tar sands production and eventual growth of coal-to-liquids (CTL) is inevitable, whether we are happy about the environmental implications or not. I also think we will continue to see growth of compressed natural gas (CNG) vehicles, particularly in fleets.

There will be no silver bullets. It is going to take contributions from many areas to traverse what I believe is going to be a difficult decade ahead; difficult largely because we will be coping with crushing energy prices. At times I think it will feel like we are being strangled, but there are choices that each of us can make to alleviate the economic burden.

  1. By Chris Nelder on January 10, 2011 at 8:00 pm

    I made my bet on that, Robert, in my March 2010 editorial, ‘Peak Demand,’ Yes, But Not the Nice Kind:

    The true import of peak oil, therefore, may not be sustained high prices, but economic shrinkage. Demand will be destroyed long before oil gets to $200 a barrel, but it will not be destroyed by improved efficiency.

    I believe that oil prices cannot be sustained for long above $150 a barrel, because it destroys demand in the world’s most oil-dependent and price-sensitive economies. I’m betting that whatever additional gains are made in production from tar sands, CTL, and so on will not be able to overwhelm depletion. Therefore, the global oil market will be (if it is not already) a zero-sum game, in which Asia’s gain will be the OECD’s loss. We have entered The Great Contraction.

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  2. By PeteS on January 10, 2011 at 8:37 pm

    I don’t think it’s as simple as saying that the US could survive with European price levels because Europe does. A large part of those European prices is tax which, however inefficiently, continues to hurtle around the economy. If increased crude prices forced Americans to pay the same as Europeans, the money would be exiting the country for what Benny would call “thug states”, and contributing to an ever increasing US trade imbalance. That’s not comparable to Europe where high prices both keep money in the economy, and lead to greater efficiency in barrels of oil per dollar of GDP. (I’m not suggesting Europe wouldn’t be crocked too if prices got to those levels, just that the US could expect to melt down long before reaching European pump prices).

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  3. By Rufus on January 10, 2011 at 9:02 pm

    Dupont just paid something like $5 Billion for Danisco.

    Now, Danisco has many products in the enzyme/food area, but their hot product is an advanced enzyme (used by Genera in their Vonore, Tn facility) that brings the cost of enzymes in cellulosic ethanol down to approx. $0.50 per gallon of ethanol.

    Butalco, BP, and others are feverishly developing yeasts that will more efficiently process cellulosic feedstocks.

    This would be my number one bet. I bought a flexfuel car, and I’m thinking that in about two years I’ll buy a smaller, more efficient flexfuel.

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  4. By gail-tverberg on January 11, 2011 at 11:29 am

    Thanks Robert. I pretty much agree with your observations.

    I don’t know if folks have noticed, but The Oil Drum now wants to stay mostly away from financial topics–especially posts that suggest the future may not be as good as the past. That means that your posts, and my posts, on financial topics are likely to stay pretty much on our blogs. 

    I have been writing about the economic situation on my blog, Our Finite World. In one recent post (The Oil-Employment Link), I looked at the relationship between oil consumption and number of people employed according to the Bureau of Labor Statistics. There seems to be a close relationship, with each job corresponding to a slightly smaller (0.5% per year) amount of oil consumed each year–the downward decline presumably corresponding to efficiency gains. This close relationship could correspond to the amount of goods and services people buy using oil, with the incomes they earn. But there is also a relationship the other way–if the cost of oil is too high, people don’t travel as much, and they don’t eat out at restaurants as much, so people get laid off from their jobs.

    I make some projections going forward, assuming the relationship continues to hold. If it holds, it does not bode well for future levels of employment, assuming US consumption continues to decline, because imports are becoming less and less available.

     

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  5. By rrapier on January 11, 2011 at 11:43 am

    PeteS said:

    I don’t think it’s as simple as saying that the US could survive with European price levels because Europe does. A large part of those European prices is tax which, however inefficiently, continues to hurtle around the economy. If increased crude prices forced Americans to pay the same as Europeans, the money would be exiting the country for what Benny would call “thug states”, and contributing to an ever increasing US trade imbalance. That’s not comparable to Europe where high prices both keep money in the economy, and lead to greater efficiency in barrels of oil per dollar of GDP. (I’m not suggesting Europe wouldn’t be crocked too if prices got to those levels, just that the US could expect to melt down long before reaching European pump prices).


     

    Pete, what you say is of course true, and because I expect oil and gas prices to rise this one reason I have long advocated that we manage this price rise ourselves to keep that money in the economy and away from strengthening regimes that wish to destroy us. My major point there is that people will pay much higher prices for gasoline than they do now, provided they have the means to pay for it.

    RR

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  6. By rrapier on January 11, 2011 at 11:48 am

    Rufus said:

    Butalco, BP, and others are feverishly developing yeasts that will more efficiently process cellulosic feedstocks.

    This would be my number one bet. I bought a flexfuel car, and I’m thinking that in about two years I’ll buy a smaller, more efficient flexfuel.


     

    Rufus, to be honest I think what you see in these situations is companies that are following the money. The U.S. has mandated cellulosic ethanol, and they have made money available. In some cases, they have singled out cellulosic ethanol as being the only recipient of federal money (I recently read a proposal for biofuels that specifically disqualified biofuels derived from gasification). This, in my opinion, drives so many of these announcements.

    But look around you. Where is the cellulosic ethanol? Do you know how much of the initially mandated 100 million gallons was produced last year? Zero, despite all these announcements and all these companies working on it. That should be a sign to you that these announcements don’t generally have much meat behind them, since we have been seeing breakthroughs announced for years now.

    RR

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  7. By rrapier on January 11, 2011 at 11:50 am

    Gail Tverberg said:

    But there is also a relationship the other way–if the cost of oil is too high, people don’t travel as much, and they don’t eat out at restaurants as much, so people get laid off from their jobs.
     


     

    Hi Gail, and thanks for signing up. I agree fully with that observation, which is the main reason I think the “recovery” is going to be unlike any recovery we have seen before. This recovery won’t have the benefit of low oil prices, and thus will struggle to move ahead.

    RR

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  8. By Rufus on January 11, 2011 at 12:41 pm

    Heck, I like what We’ve done. We’ve subsidized alternatives (BEV’s, Ethanol, etc) in order to wean ourselves off of some of our petroleum habits. This has led to lower prices at the pump, and, as a result, greater business activity.

    Between more efficient vehicles, and the 36 Billion Gallons of Biofuels called for in the RFS2 we might manage to survive this mess yet. (RBOB is over $2.48/gal on the NYMEX as we speak. That, if it holds, will translate into $3.18 at the pump.)

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  9. By Rufus on January 11, 2011 at 12:48 pm

    No one ever said it was going to be easy, Robert. :)

    Turns out it was about $6.3 Billion Dupont paid. That’s some powerful “follerin’,” there.

    We’ll see what gets started this year. I predict several serious projects will start construction, although money is hard to come by after Range, et al, making such a mess of it.

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  10. By rrapier on January 11, 2011 at 1:16 pm

    Rufus said:

    Heck, I like what We’ve done. We’ve subsidized alternatives (BEV’s, Ethanol, etc) in order to wean ourselves off of some of our petroleum habits. This has led to lower prices at the pump, and, as a result, greater business activity.

    Between more efficient vehicles, and the 36 Billion Gallons of Biofuels called for in the RFS2 we might manage to survive this mess yet. (RBOB is over $2.48/gal on the NYMEX as we speak. That, if it holds, will translate into $3.18 at the pump.)


     

    Rufus, how do you reconcile “has led to lower prices at the pump” with “RBOB is over $2.48/gal on the NYMEX as we speak?” One might think that this has not in fact led to lower prices at the pump; that prices at the pump are still high especially considering the recession. Further, we can test this by looking at countries that essentially have no ethanol policy. Are the changes in their pump prices over the past five years significantly different from ours in the U.S.?

    RR

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  11. By Rufus on January 11, 2011 at 1:33 pm

    Robert, are you claiming that 900,000 bbl/day Domestic, and close to 2.0 Million bbl/day global ethanol production are Not causing gas prices at the pump to be lower than they Otherwise would have been? I find that hard to believe.

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  12. By rrapier on January 11, 2011 at 1:55 pm

    Rufus said:

    Robert, are you claiming that 900,000 bbl/day Domestic, and close to 2.0 Million bbl/day global ethanol production are Not causing gas prices at the pump to be lower than they Otherwise would have been? I find that hard to believe.


     

    It is an assertion, Rufus, looking for proof. What I am suggesting is that if we look at countries with no real ethanol policies, it could give us a better clue. For instance, if their gasoline prices are 10% higher than they were five years ago and ours are 3% higher, it might be an indication that ethanol has had a real impact on prices.

    However, we know that this has come at the expense of higher corn prices, which trickles into everyone’s food budget. So no free lunch there.

    RR

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  13. By Benny BND Cole on January 11, 2011 at 2:36 pm

    Well, as a fraction of GDP, energy costs have trended down for decades.

    Remember, in the USA, worker productivity has been increasing by a couple percent or more for generations. Even if we have to devote more resources to energy, our living standard will likely still increase (unless held down by other factors, such as demographics or bad government).

    The adjustment to higher liquid fossil fuel prices could be easier than RR thinks. I hope so. I see many hopeful signs already (sheesh, even stodgy GM has the Volt on the road, a car that 20 years ago would have been received as an incredible visionary leap forward. Now we think little of it–a sign of huge progress, actually).

    I see CNG filling stations popping up around Los Angeles. I could, in fact, commute to my part-time job by CNG car.

    The bright spot for the USA in all of this is that we import liquid fossil fuel, at great expense. I would be danged happy to employ gas workers on the Marcellus or Haynesville instead of giving money to oil thug states.

    For the USA, the transition to a post liquid fossil fuel economy promises to be easy and give to us a cleaner future–although, who knows? Maybe we will use methanol for the next 100 years. At least we can get methanol domestically, at $1.25 a gallon ($2.50 a gallon, BTU equivalent).

    The price and profit mechanisms are wondrously effective.

    I think the future is brighter and cleaner than ever.

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  14. By OD on January 11, 2011 at 5:20 pm

    There seems to be a close relationship, with each job corresponding to a slightly smaller (0.5% per year) amount of oil consumed each year–the downward decline presumably corresponding to efficiency gains.

    It seems that peak oil will lead to a lot more bartering, which could lead to a higher employed population outside of the current system. So we could see very high unemployment within the current system, but a slew of employed working outside the system. This already seems to go on in a lot of countries.

    Hopefully, we don’t see too many idle hands, which would likely lead to great civil unrest.

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  15. By OD on January 11, 2011 at 5:23 pm

    I think the future is brighter and cleaner than ever.

    I believe if we were only facing peak oil, that would probably be true, but I don’t see how that happens with the debt levels of the developed world. This also completely ignores all the environmental issues that are on the horizon.

     

    I think Robert has it pegged about right.

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  16. By Optimist on January 11, 2011 at 8:10 pm

    I don’t know. For all this whining about “recession-inducing oil prices” I still see a lot of (new) SUVs, and 4×4 pickups, out there. If people are hurting for high energy prices, they seem too proud to let it show.

    It seems a bit early in the curve to get pessimistic: we haven’t even reached the point where CTL is a sure investment opportunity.

    And in terms of the big picture oil exporters will have to invest all those profits somewhere. Maybe Rufus et al will convince them to invest in ethanol. Or not. Despite all its shenanigans, Wall Street remains the investors’ favorite. FWIW.

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  17. By Benny BND Cole on January 11, 2011 at 8:52 pm

    OD-

    Debt is getting paid down. Capital is abundant–if anything, there is “too much money chasing too few deals.”

    Can you name any good promising energy technologies wanting for investment capital? Even bad ideas get financed.

    There will always be mediocre governments. If you live under a mediocre regime, count your blassings.

    Things could be worse, far worse, and have been many times.

    As long as we have a large private sector in the USA, and a free press, and a relatively good work culture, we will prosper.

    The only thing that could hurt is is bad government. Yes, there are days I am worried–but on more days I am optimistic.

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  18. By klr on January 11, 2011 at 10:37 pm

     

    Crude FOB to the US spiked to $ 36.93 in Feb 1981; 31 months later it was still at 75.71% of its original price, i.e., $27.96, in Aug 1983.  31 months is also how much seperates Dec 2010 from the July 2008 FOB peak price of $123.34; for a December price of $88.33 (a prelimiary figure I cooked up a couple weeks back) we are at 68.31% of peak, so are reaching parity with the original price decline pattern.  That original pattern deflated prices much more gently than the current one, despite crashing demand, enormous amounts of new supply coming online, and a massive stock overbuild.  Why this was the case I still haven’t figured out – GDP was more carbon intensive then, I’d guess.  Or the speculative element played a much larger part in this latest crash in price, overshooting the bottom as well as top.
    The early 1980s recession occured concurrent to that last price spike, from July 1981 to November 1982.  In terms of % from the July ’08 peak the price in Nov ’82 would have been $105.97/bbl.  I need to cram these numbers through an inflation adjuster of some kind – I’ve found online ones but they only handle a single input at a time.  Anyway if my supposition is correct you had economic recovery even with prices in triple digit territory.  
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  19. By Wendell Mercantile on January 11, 2011 at 10:39 pm

    Can you name any good promising energy technologies wanting for investment capital?

    Methanol as an adjunct transportation fuel made from domestic natural gas and coal.

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  20. By Kit P on January 12, 2011 at 7:50 am

    Methanol as an adjunct transportation fuel made from domestic natural
    gas and coal.

    Wendell you may want to learn the root cause of the failure of methanol to win customer acceptance in the past. 

     

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  21. By Wendell Mercantile on January 12, 2011 at 9:46 am

    Wendell you may want to learn the root cause of the failure of methanol to win customer acceptance in the past.

    Please be so kind as to educate me.

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  22. By rrapier on January 12, 2011 at 10:52 am

    Kit P said:

    Methanol as an adjunct transportation fuel made from domestic natural

    gas and coal.

    Wendell you may want to learn the root cause of the failure of methanol to win customer acceptance in the past. 

     


     

    You might also discuss the root cause of why ethanol failed to win customer acceptance. After all, if it had we wouldn’t have needed to subsidize it for 30 years, and when that failed to have the desired impact to then mandate its use. Those actions don’t describe a fuel that has been embraced by customers; it describes a fuel that government has decided that we need to use whether customers like it or not.

    RR

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  23. By Benny BND Cole on January 12, 2011 at 2:19 pm

    Wendell-

    I too am puzzled at the vacuum that seems to surround methanol, especially in light of global and huge strikes of natural gas (shale the least of it). Methanol was the fuel of choice at the Indy 500 for decades.

    There is, of course, the perennial chicken-and-egg problem. You can’t have consumers switching to methanol if there are no methanol filling stations, and you can’t have flling stations without customers….

    Ethanol “won” through being mixed into (by government mandate) gasoline, already distributed.

    You make an excellent point.

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  24. By David Johnson on January 12, 2011 at 2:40 pm

    With the economic and energy constraints coming, how do people see the airline industry fairing in the next decade and onwards? Sitting on the Hawaiian island of Maui visiting family I watch aircraft taking off and landing with some regularity and wonder just how this industry will play out.

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  25. By rrapier on January 12, 2011 at 3:11 pm

    David Johnson said:

    With the economic and energy constraints coming, how do people see the airline industry fairing in the next decade and onwards? Sitting on the Hawaiian island of Maui visiting family I watch aircraft taking off and landing with some regularity and wonder just how this industry will play out.


     

    David,

    My own view is that the outlook for the airline industry will not be pretty. We got a taste of this in 2008 when high oil prices caused a number of bankruptcies in the industry. There was once a time where only rich people could fly; I expect things will end up like that again.

    RR

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  26. By Wendell Mercantile on January 12, 2011 at 3:11 pm

    Benny~

    Both LPG and CNG powered cars are popular in Europe. (Why does it seem those Europeans always ahead of us?) There are upwards of 2,000,000 cars in Germany (mostly VWs and Opels) running on natural gas, and Italy — in particular — has an abundance of LPG fuel stations.

    It costs about half as much to run a car in Germany on natural gas than on gasoline, primarily because of their high gasoline taxes, and the emissions from burning natural gas are much lower.

    Instead of using natural gas to grow corn and make ethanol from it, we would have been better off using the natural gas directly as a fuel.

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  27. By Benny BND Cole on January 12, 2011 at 2:54 pm

    Wendell-

    Checkl this out on propane, from Wiki.

    Propane is also being used increasingly for vehicle fuels. In the U.S., 190,000 on-road vehicles use propane, and 450,000 forklifts use it for power.[citation needed] It is the third most popular vehicle fuel in America, behind gasoline and diesel. In other parts of the world, propane used in vehicles is known as autogas. About 13 million vehicles worldwide use autogas.

    I have seen LPG (liquified propane gas) cars in Thailand, and I guess they could work here too. LPG comes from natural gas also.

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  28. By Wendell Mercantile on January 12, 2011 at 4:27 pm

    There was once a time where only rich people could fly; I expect things will end up like that again.

    RR~

    And more and more of those rich people will be flying in corporate jets and charters. They hate going through the hassle of airport security (as do I for that matter), and corporate aircraft and private charters avoid security completely. Often they can drive right onto the airport, park next to their jets, and step from car to airplane.

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  29. By mac on January 12, 2011 at 5:11 pm

    Ben, Wendell—

    I just read Honda is going to sell its natural gas car CRX nation-wide, They were just selling it 4 states, CA, Utah, Oklahoma and someplace else. Worldwide, we don’t seem to be bringing much,( if any), new oil on-line.

    It’s going to get interesting as we begin to surf down the backside of Peak supply. In the far east they run a lot of their cars off “cooking gas” (LPG)

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  30. By Kit P on January 12, 2011 at 7:51 pm

    “Please be so kind as to educate me.”

     

    Ok Wendell, it is easy to makeup reasons to be against something that works like ethanol but if you want something to work, you have to figure out how to do that. Wendell you have to do the work yourself. As I said, figure out the root cause and then fix that. Or you can keep finding blaming and see how many times you can fail. For example RR writes:

     

    “why ethanol failed to win customer acceptance.”

     

    Ethanol has won customer acceptance. Ask either Rufus or me. I am very happy to be using E10. I am very impressed with the success of the ethanol industry. If you think something is a good idea study how the competition has improved. It is not like methanol has not had its shot.

     

    Wendell writes,

    “Both LPG and CNG powered cars are popular in Europe. (Why does it seem those Europeans always ahead of us?)”

     

    Really! Wendell you may want to pull out a dictionary and look up ‘popular’ and ‘ahead’. I would say LPG and CNG is unpopular and going backwards. I am not saying you can not do it but I am asking why you do not do it? I mean other than Pickens told you it was a good idea. 

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  31. By rrapier on January 12, 2011 at 10:25 pm

    Kit P said:

    For example RR writes:

     

    “why ethanol failed to win customer acceptance.”

     

    Ethanol has won customer acceptance. Ask either Rufus or me. I am very happy to be using E10. I am very impressed with the success of the ethanol industry. If you think something is a good idea study how the competition has improved. It is not like methanol has not had its shot.


     

    You have a funny definition of customer acceptance, where acceptance was based on customers having to be forced to accept it after years of not accepting it even though it was generously subsidized. I don’t think most people would agree that this is customer acceptance. The reason we have the RFS is simply that customers didn’t sufficiently accept ethanol; if they had the RFS would not have been needed.

    Further, if customer acceptance is based on you or Rufus being happy with ethanol, then I can declare that methanol has customer acceptance. After all, lots of people happily use it as a fuel additive. But the truth is, we both know that you have a silly definition of customer acceptance.

    The reason we have ethanol and not methanol in the fuel supply is purely political. Range Fuels found this out when they wanted to put their biomass-based methanol into the fuel supply: There was no mechanism that would allow them to collect biofuel credits that could otherwise be collected if the fuel was ethanol. So you don’t have anything remotely resembling a level playing field. As I have pointed out many times, unsubsidized methanol is cheaper on a per BTU basis than subsidized ethanol. But the reason that we have corn ethanol and not methanol in the fuel supply is farm politics.

    RR

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  32. By Kit P on January 13, 2011 at 7:05 am

    “You have a funny definition of customer acceptance, ..”

     

    Not me but the people of the United States through our elected representatives. Furthermore, no one is forced to buy gasoline or electricity. The Amish are an example of a large group that does not. However, most Americans choose to buy energy following the rules for the production and distribution of energy. More than half the states have some RPS for making electricity. It is pretty clear that the people have spoke, get over it.

     

    It is intersting that RR did not question Wendell’s concept of customer acceptance.

     

    “So you don’t have anything remotely resembling a level playing field.”

     

    Oh gee, we have violated RR’s fairness doctrine. I do not think it is fair that we can not get the same rate of return that some get for a cup of coffee or Bill Gates gets for a computer program. Of course I was free to become a lawyer instead of an engineer in the public service sector so maybe I should get over it and play by the rules that congress has established.

     

    The difference between the Pickens scam and the ethanol industry is the the ethanol industry was successful at producing a product in the system.

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  33. By Wendell Mercantile on January 13, 2011 at 10:07 am

    And then there’s this: World moves closer to food price shock

    “Stocks of corn and soyabean are at incredibly tight levels … and the markets are surging to incredibly strong prices,” Chad Hart, agricultural economist at Iowa State University, said.

    Dan Basse, president of AgResource, a Chicago-based forecaster, added: “There’s just no room for error any more. With any kind of weather problem in the upcoming growing season we will make new all-time highs in corn and soy, and to a lesser degree wheat futures.”

    That raises again the food v. fuel question for those who think corn ethanol shoudl be our transportation fuel savior.

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  34. By savro on January 13, 2011 at 11:42 am

    Kit P said:

    Furthermore, no one is forced to buy gasoline or electricity.

    Using this logic, one should never purchase an item that is taxed if they don’t like paying taxes. Heck, quit your job and avoid income taxes too.

     

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  35. By rrapier on January 13, 2011 at 6:51 pm

    Kit P said:

    “You have a funny definition of customer acceptance, ..”

     

    Not me but the people of the United States through our elected representatives. Furthermore, no one is forced to buy gasoline or electricity. The Amish are an example of a large group that does not.

     


     

    Is it asking too much to expect you to string together a few coherent thoughts in a row? First we have you suggesting that ethanol has customer acceptance, even though the “acceptance” was involuntary. Methanol, you say, does not have customer acceptance. Of course we are not forced to buy it. So you clearly have the oddball notion that if you your choice must be restricted in order to “accept” something, this is customer acceptance. But now we have the fact that the Amish don’t drive, hence none of them really has customer acceptance. Why don’t you pick a definition and try to stick to it? Would waste much less time that way.

    It is pretty clear that the people have spoke, get over it.

    In the case of ethanol, the special interests spoke. If you put it to “the people” via popular vote, ethanol would win the Midwest and be trounced in the rest of the country. So if that is your version of the people speaking, then I can fairly say that Kit elected Barack Obama president. After all, the people did, and you are one of the people.

     

    It is intersting that RR did not question Wendell’s concept of customer acceptance.

     

    If Wendell provided some oddball concept as you did, then I missed it. Could you quote him?

     

    “Oh gee, we have violated RR’s fairness doctrine.”

     

    You are losing the plot. We are talking about customer acceptance. I am pointing out to you why you accept ethanol and not methanol. It has nothing to do with free choice.

     

    Of course I was free to become a lawyer instead of an engineer in the public service sector

     

    You are also free to pretend that you are an engineer.

    RR

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  36. By rrapier on January 13, 2011 at 6:53 pm

    Samuel R. Avro said:

    Kit P said:

    Furthermore, no one is forced to buy gasoline or electricity.

    Using this logic, one should never purchase an item that is taxed if they don’t like paying taxes. Heck, quit your job and avoid income taxes too.

     


     

    Sam, if you haven’t noticed, “logic” has never been one of Kit’s strong points. He would simply declare your example as silly, because he would change up definitions as he considered that case. Or he would start rambling that it doesn’t matter because the Amish don’t pay taxes.

    RR

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