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Who Wants The Highest Crude Oil Price? Presenting The OPEC Cost Curve

Tyler Durden's picture





 

With the presidential elections fast approaching, the last thing the incumbent wants is for the one thing that can spoil the party - a surge in oil, and thus gas prices - to happen. Which is why despite a sharp return in Iran/Syria war rhetoric, we doubt that the trade off between a "wag the dog"-type transitory war euphoria and $5 gas will be an accretive one for the administration at least in the short-term. Others who certainly would prefer to avoid the record $140 WTI prices seen just before the Lehman collapse are the majors, where margin contraction can only be offset by very finite end-demand destruction. Yet there are those who not only would like to see a surge in oil prices, but in fact need it, to preserve their viability. Chief among them: Iran. Because according to a just released analysis by the Arab Petroleum Investments Corporation, the price at which oil (read Brent) must trade for Iran's budget to balance has soared to $127/barrel, the highest among all OPEC members, $20 higher than 2 years ago, and about $17 higher than the Friday closing price. And far more dangerously, the APIC study has also found that the cartel (which after last year's fiasco in Vienna is anything but) breakeven price has soared from just $77 two years ago to a whopping $99/barrel. Which means that any and every deflationary plunge in oil prices will inevitably be met with a supply collapse or else OPEC members are in danger of pricing themselves right into fiscal insolvency, and economic collapse.

Visually, the breakeven price for every OPEC member country.

And while those with a sense of humor can see why it is, perversely, in Iran's favor to start a contained war which will not destroy the country but merely lead to surge in oil prices, the danger is that even Saudi Arabia - a critical long-time ally of the US in the region - has gradually seen its interests align increasingly against those of the US, namely in that its breakeven price has risen from $80/barrel to $94 currently. While the Kingdom itself claims it can "cope" with a price of $75/barrel, this is obviously for posturing purposes.

Which begs the question: with all OPEC members implicitly in favor of a big jump in Brent prices, even at the risk of demand destruction among the developed world, how will all this factor into the latest Nash Equilibrium in which the world can forget about "sustainable" double digit Brent prices for ever.

Some other observations from the report:

  • OPEC proven hydrocarbon reserves have been revised upward to 254 billion tons of oil equivalent (toe), at the end of 2011. These reserves are 66% crude oil and NGLs and 34% natural gas. Yet-to-find would raise proven reserves by 25%.
  • The R/P ratio (proven reserves over production) is about 113 years at the end of 2011. As it is static, this ratio is not used to indicate a time to depletion but to justify the long-term timeframe for the analysis up to 2100.

On this basis, Figure 3 illustrates a baseline scenario, tuned to current OPEC’s ‘Reference Case’. Combined oil and natural gas production profile reaches a maximum of 3.715bn toe in 2035, beyond which aggregate hydrocarbon exports start to decline. The falling off after a 10?year plateau is moderated by the greater weight of gas production in the long term. Another critical time occurs when domestic demand exceeds production around 2065 and, as a consequence, hydrocarbon rents dry out. Obviously, some member countries would face declining exports much sooner than 2035.

Then again, by 2035 the world will certainly have bigger problems to worry about than just peak oil.

Full APIC study here, h/t ldt0

 


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Sun, 08/12/2012 - 11:58 | Link to Comment Seize Mars
Seize Mars's picture

I actually read the Mighty Koch Brothers' book, (can't remember what it's called) in which they draw a graph like the "cost curve" above. I thought it was pretty cool. Think of it as the "supply" part of a supply demand diagram. Then, if you overlay it with your forecast of demand, you can model a price forecast. Pretty cool.

Sun, 08/12/2012 - 13:17 | Link to Comment engineertheeconomy
engineertheeconomy's picture

7 Billion Sold (Enslaved)

http://www.youtube.com/watch?v=akc99rDuGy0

 

Sun, 08/12/2012 - 14:26 | Link to Comment Benisprintingqu...
Benisprintingquintillionsbehindourbacks's picture

Dude, bummer Tyler kicked you off Zerohedge... guess you're getting a little too close to the truth with this one lol

Sun, 08/12/2012 - 13:06 | Link to Comment SWRichmond
SWRichmond's picture

If anyone wants to understand why oil can't stay below $85.00, the graph shows why.

Sun, 08/12/2012 - 23:50 | Link to Comment Deo vindice
Deo vindice's picture

Here's how I see it. TPTB want oil to go higher. Much higher.

First the USA gives support covert or otherwise to the Muslim Brotherhood throughout the MidEast to topple the governments there. All under the guise of democracy.

Then they drive up the price of oil. When it hits a certain amount, they will open up their own reserves (Alaska, etc.) and sell it at 2 or 3 times the current price.

You know it will be close when the uprising starts in Saudi Arabia.

The oil-money men are mad with an insatiable desire for money and power.

Sun, 08/12/2012 - 13:41 | Link to Comment trebuchet
trebuchet's picture

@SiezeMars: even cooler is to think about what happens when someone like saudi plays a capacity withdrawal game: 

 

Cut production by 10% pulling the supply curve to the left, automatically raise prices as the marginal producer is at a higher price. 

 

Nash equiibrium is to supply at or below the price of the marginal producer, for all players. 

you don't need a cartel to influence oil prices, just a big chunk of capacity control. Gets even better if you also control the marginal production capacity that will be doing the price setting

 

US oil firms in EYE-RAQ will be doing this since many times they are the marginal producer :) and they can stick the political fallout to the EYE-Rani boys for their bad behaviour and unstable oil prices

Sun, 08/12/2012 - 12:07 | Link to Comment tom a taxpayer
tom a taxpayer's picture

One of the U.S. Navy's guided-missile destroyers was damaged when it collided with an oil tanker early Sunday just outside the strategic Strait of Hormuz.

http://www.dailymail.co.uk/news/article-2187303/USS-Porter-Mid-sea-drama...

 

Sun, 08/12/2012 - 12:48 | Link to Comment yogibear
yogibear's picture

Too much partying on that Navy guided-missile destroyer.  The son of the captain that grounded Exon-Valdez was steering the Navy's guided-missile destroyer?

Sun, 08/12/2012 - 19:11 | Link to Comment Sandmann
Sandmann's picture

USS Porter Navigation Officer drunk at post looking for icebergs

Sun, 08/12/2012 - 14:37 | Link to Comment jonjon831983
jonjon831983's picture

Here is a nice comment from Bloomberg's:

 

http://www.bloomberg.com/news/2012-08-12/u-s-navy-ship-collides-with-oil-tanker-near-strait-of-hormuz.html

 

"Ok, how the heck does US destroyer with its sophisticated weapons systems not see an oil tanker heading straight or it? There is something not being told."

Sun, 08/12/2012 - 14:46 | Link to Comment jonjon831983
jonjon831983's picture

Interesting comparing the Bloomberg and DailyMail's headline:

 

DailMail: "Mid-sea drama as tanker rips huge hole in side of U.S. Navy ship in late-night collision"

Bloomberg: "U.S. Navy Ship Collides With Tanker Near Strait of Hormuz"

 

DailMail's headine makes it clear the Tanker hit the Destroyer.

Bloomberg's headline is perhaps towards a more neutral stance, but leans more towards the Destroyer hitting the Tanker.

 

And from DailyMail's pictures, it looks like something plowed into the destroyer, don't see any burn marks at least to my untrained eye, so doubt it was anything else... unless tanker aimed for it?  OR if the destroyer tried to block the way (instead of shooting it up) of a conveniently Panamanian flagged tanker?

 

So the question is: Whose oil was in the tanker?  Iranian?

Sun, 08/12/2012 - 12:09 | Link to Comment Camtender
Camtender's picture

What is a balanced budget?

Sun, 08/12/2012 - 12:14 | Link to Comment old naughty
old naughty's picture

That's when you can match .gov spending to tax revenues.

Oh, never mind. We'll never see that for the decade head.

Sun, 08/12/2012 - 13:08 | Link to Comment SWRichmond
SWRichmond's picture

The reason they don't have to balance the budget is because of the legal monopoly on the use of force.  They can steal as much of your shit as they want to.  All of it is then backed up by the central bank.

Sun, 08/12/2012 - 17:06 | Link to Comment scatterbrains
scatterbrains's picture

and this is why more and more countries rich with natural resource will see the game for what it is, and while they may fear world CB's backed by the USSA, I'm sure they are finding ways to escape the paper ponzi..(gold etc.) or are we to presume they are all retarded and filled with glee to accept shit paper for their hard assets?

 

Sun, 08/12/2012 - 12:35 | Link to Comment derek_vineyard
derek_vineyard's picture

a balanced budget is something that solvent and sane corporations, entities and people live by  (these sane entities also understand building a surplus and the freedom it gives them)

it really is that fxxking simple

Sun, 08/12/2012 - 12:57 | Link to Comment Meremortal
Meremortal's picture

What is a budget?

-Harry Reed

Sun, 08/12/2012 - 13:06 | Link to Comment LoneStarHog
LoneStarHog's picture

Balanced Budget in the U.S. Goobermint Operations Manual:  Spending (minus) Tax Collections (minus) Printing/Inflation (aka theft) (equals) Zero (Balanced Budget)

Spending in the U.S. Goobermint Operations Manual:  Pork Projects, Congressional Raises, Junkets (taxpayer-funded vacations), Sexual Services, ... anything/everything with no limits.

Sun, 08/12/2012 - 13:54 | Link to Comment OneTinSoldier66
OneTinSoldier66's picture

What is a dollar?

Sun, 08/12/2012 - 12:16 | Link to Comment LMAOLORI
LMAOLORI's picture

 

 

Iran might get it's wish that's the thing about DICKtator's they don't care how many lives of the citizens they lose if it keeps them in power.

 

Decision by Netanyahu, Barak to strike Iran is almost final — Israel TV

 

Sun, 08/12/2012 - 13:40 | Link to Comment JR
JR's picture

One of the characteristics of dictators in the last 100 years is that they are also mass murderers. This definition does not fit the ruling authority in Iran. But it does fit Benjamin Netanyahu, who has the blood of millions on his hands – the innocents of Iraq, Libya, Syria, Lebanon and occupied Palestine. And the jury still is out on those workers in the World Trade Center.

Make no mistake, if Israel should ignite WWIII, the conflagration will sweep the United States.

Sun, 08/12/2012 - 12:20 | Link to Comment hardcleareye
hardcleareye's picture

When you read the report on the link the first thing that jumps out is the the definition of "Break Even" for the purpose of this report is defined as "... the oil price that balances the government's budget."

This is NOT production cost or EROEI.

 

Sun, 08/12/2012 - 12:32 | Link to Comment Amish Hacker
Amish Hacker's picture

Yes. A rising oil price would certainly help balance the budget, but so would cutting spending. Meanwhile, letting deficits run looks like the short-term fix that has been chosen, purely for political reasons. Longer term, I think oil prices will be determined by the metrics you suggest.

Mon, 08/13/2012 - 04:52 | Link to Comment Dr Benway
Dr Benway's picture

I thought the article made pretty clear its definition of fiscal breakeven? Anyhoos.

 

I think the point the article was trying to make was that there are two outcomes for these countries: either high brent prices or spending cuts bringing potential social unrest and destabilization.

Sun, 08/12/2012 - 13:07 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Correct.  Oil companies don't give a shit about the government's budget.  For them, if the energy and capital invested is greater than the energy and capital that is being recovered after the oil is delivered then things get unprofiteable really quickly.

Sun, 08/12/2012 - 15:45 | Link to Comment AustriAnnie
AustriAnnie's picture

Yet, unprofitable companies subsidized by or taken over by their governments can survive a lot longer than one would expect.

Politics is every bit as much a driver of oil prices as physical constraints.

I doubt we will simply see producers go banktrupt and die without massive gov't intervention/takeovers/rationing/price controls and wealth transfers from populace to oil producers, all so the elite can keep their energy needs met just a little longer.

Eventually, the laws of physics win, but politicians will distort reality as long as they can.  They will continue to incentivize production even beyond the point where it becomes unprofitable, because gov'ts love to prop up unprofitable enterprises.

Mon, 08/13/2012 - 06:21 | Link to Comment Dr Benway
Dr Benway's picture

LOL. Yeah oil companies don't, but the people on the street do, especially when their handouts disappears.

 

There's more to articles than the bolded parts.

Sun, 08/12/2012 - 13:06 | Link to Comment LMAO
LMAO's picture

I concur,

According to the Saudi "Oil Chief" their production costs are about $ 4 a barrel.

From 60 mins.:

http://www.cbsnews.com/video/watch/?id=4653139n

 

They need about $100 a barrel to keep the sheeple appeased.

Sun, 08/12/2012 - 13:35 | Link to Comment disabledvet
disabledvet's picture

So what's the US price for same effect the?

Sun, 08/12/2012 - 14:28 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

A veritable avalanche of things wrong in the article and in the comments.

1) Iran needs $XXXX per barrel price if and only if any of the numbers floating around about their exports (and used in the article) are correct.  Those numbers are political almost surely not correct.  Obama forces want to demonstrate how effective his sanctions are.  Iranians want to show they are not.  Bottom line, there's no evidence that anyone in Iran is starving, there are no riots in the streets, and both India and China are still buying Iranian oil.

2) Price of production of oil means several things.  If you just put a price on the oil flowing out of a pipe, the price is low.  You already paid for the pipe and pumps and all you have to do is hook it up to a tanker.  But if you want to MAINTAIN your flow rate, you have to drill new holes to offset the falling flow out of the old holes.  That's big money and big joules.  That drives up the overall average cost, measured in dollars and more accurately, measured in joules.  It takes energy to drill a hole, especially when you miss the target 3 out of 4 times.

3) The price of gasoline in oil exporting countries is very low because the government subsidizes it.  Why shouldn't they?  It's their oil.  Their people deserve it cheap.

4) Cheap gasoline in exporting countries ALWAYS results in growing consumption of gasoline in those countries.  As their oil production falls, as it inevitably will, the amount available to export falls faster.  There is some excellent analysis saying that indeed, the US will stop importing oil in 5-10 years.  This will not be because US production of oil increased.  It will be because there is none any longer available for export from exporting countries.

Sun, 08/12/2012 - 13:30 | Link to Comment dirtbagger
dirtbagger's picture

Exactly.  with this type of reasoning there would be no reason for any one to start a business or to produce anything.   It has been a while since business school, but production decisions used to be based on marginal revenue exceeding marginal costs.    The articles on this blog are going downhill very fast.  The assertions of the authors are not credible under even the most basic scrutiny.  Are they paying to post? 

Sun, 08/12/2012 - 12:34 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

What an interesting article, thanks for posting it Tyler!  I had thought that the break-even price numbers were considerably lower.  I guess this means, among other things:

1)  Cost of producing tar sands in Canada must be MUCH higher than advertised

2)  Cost of oil will be going up, up and away in the coming years

3)  Maybe green energy technologies have a chance after all

Sun, 08/12/2012 - 13:58 | Link to Comment chipworley
chipworley's picture

Green energy technologies can never replace fossil fuel technologies.  Cost is too high and don't have near the volume of energy required.  They may be a small niche in nano implementations (ie a single family home)....

Sun, 08/12/2012 - 14:24 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

I just saw a short article in Popular Mechanics that they are building a wind turbine farm in Oregon where the turbine blades are each as tall as the Statue of Liberty.  The article did not say anything costs though.

In terms of energy density you are correct.  But, there are probably other niches where wind & solar may help us lessen dependence on foreign oil.

Sun, 08/12/2012 - 12:37 | Link to Comment FreeSlave
FreeSlave's picture

Is this the beginning of a creation of  "Greater Israel"?

Israeli military occupies parts of Egypt’s Sinai, reports say

http://www.presstv.com/detail/2012/08/12/255872/israel-occupies-parts-of...

 

Sun, 08/12/2012 - 12:50 | Link to Comment francis_sawyer
francis_sawyer's picture

Are you sure the article is not confusing the "City of London" as the occupying force? [rolls eyes]

Sun, 08/12/2012 - 12:56 | Link to Comment FreeSlave
FreeSlave's picture

and the US is being, and will be sacrificed in order to create a “Greater Israel”.  When will you wake up???

US police forces being Israelized: Gordon Duff

http://www.presstv.com/detail/2012/08/11/255710/us-police-trained-by-israeli-groups/

Sun, 08/12/2012 - 13:17 | Link to Comment otto skorzeny
otto skorzeny's picture

Israelis have been training the local goon squad cops here in Will County IL in the yid "hand to hand combat" stuff here lately I have read in the paper. probably throwing in healthy dose  of "how great Israel is"  and the old"us cops against them" propaganda to the weak minds of the cops. next up in US-Gaza style checkpoints manned by paramilitary cops demanding your papers while they demean the women, kids and old men.

Sun, 08/12/2012 - 14:34 | Link to Comment francis_sawyer
francis_sawyer's picture

 "City of London" I tell you... City of London... The Apartheid state of Israel is just a victim of circumstance... Poor blokes never could catch an honest break...

~~~

http://www.youtube.com/watch?v=Cd2_LKoTYKw

Sun, 08/12/2012 - 13:52 | Link to Comment JR
JR's picture

Bloomberg is the voice of the police state.

News item:

In an interview with CNN in late July, New York Mayor Michael Bloomberg told the commentator that police officers should not protect Americans who oppose gun control. “I don’t understand why the police officers of this country don’t stand up collectively and say: ‘We’re gonna go on strike. We’re not going to protect you unless you, the public, through your legislation, do what’s required to keep us safe [through more gun control],’" he said.

The latest:

Mayor Bloomberg Turns NYC Into a Microsoft Surveillance State : Everyone will be watched.

The New York Daily News reports:

August 9, 2012 -- The Domain Awareness System designed by the NYPD and Microsoft Corp. uses data from a network of cameras, radiation detectors, license plate readers and crime reports, officials said…

“We’re not your mom and pop police department anymore,” Mayor Bloomberg crowed. “We are in the next century. We are leading the pack.”...

http://www.economicpolicyjournal.com/

Sun, 08/12/2012 - 12:40 | Link to Comment FranSix
FranSix's picture

Actually, a cost decline in oil prices will have the same effect as a copper price decline,  namely that hoarded supplies will be dumped summarily on the market resulting in a glut.  Thus ends the inflation story.

They speculated that the same will happen to gold, but not so fast.  There is a peak in bond prices for the moment, thus bullion will be under greater demand.  I believe this will come out of the intense need for short term monies, which the gold market can provide, but at a higher price.

Sun, 08/12/2012 - 13:02 | Link to Comment qqqqtrader
qqqqtrader's picture

something has to give soon,

gold and crude trading below the polynomial trend...

 

gold-crude-silver trend

Sun, 08/12/2012 - 13:07 | Link to Comment FranSix
FranSix's picture

We saw a peak oil price in July, 2008 and a sell-off, maybe the same will occur again.

Sun, 08/12/2012 - 13:32 | Link to Comment malikai
malikai's picture

Don't forget what comes after the ending of "the inflation story"..

Sun, 08/12/2012 - 12:43 | Link to Comment Sandmann
Sandmann's picture

Isn't is also true that US and EU Obsession with Biofuels driving up food prices is causing budget problems for countries that import grain such as in the Middle East ? So Iran has to increase food subsidies which currently consume 30% GDP and Saudi has to increase food subsidies and China and Indonesia have to increase fuel subsidies for cooking.

Surely it is Western Stupidity in tying food prices to oil with the Biofuels Lunacy that is driving everything in a circular upward spiral.

http://uk.reuters.com/article/2012/08/10/uk-food-biofuels-fao-idUKBRE879...

http://www.indexmundi.com/iran/economy_profile.html

 

 

Sun, 08/12/2012 - 13:50 | Link to Comment Tom Green Swedish
Tom Green Swedish's picture

Jump on the lunatic bandwagon.  We can make it a permanent bubble of mass proportions.  Malnutrition is much worse than going to buy some Chinese crap at the store or going for that joyride.

Sun, 08/12/2012 - 12:44 | Link to Comment LMAO
LMAO's picture

"breakeven price has soared from just $77 two years ago to a whopping $99/barrel"

I assume that's the price the OPEC mobsters need to keep their countries running. I wonder, do they truly believe they can outrun austerity? Even OPEC members must start to cut gov't spending somewhere down the line.

.....and maybe, they should just consider stopping trading their oil for paper fiatsco's........

 

Sun, 08/12/2012 - 12:51 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Oil, in many ways is already a reserve currency of sorts.  FYI, the BRICs have already started avoiding dollars.

Sun, 08/12/2012 - 13:28 | Link to Comment LMAO
LMAO's picture

 

I am well aware of the fact that the BRIC's are in the process of implementing their own fiatsco's for international transactions.

Still, apart from Iran, bulk Opec is still a Dollar business.....and I can't see the house of Saud saying no to $$ anytime soon.

EDIT:

BTW serial junker on the loose? Some weird and random down-arrowing for stating facts or expressing an opinion.

Sun, 08/12/2012 - 12:49 | Link to Comment yogibear
yogibear's picture

With Benny Bernanke and the Fed's printing expect higher oil prices.

Sun, 08/12/2012 - 12:58 | Link to Comment JohnKozac
JohnKozac's picture

<<With Benny Bernanke and the Fed's printing expect higher oil prices.>>

 

I am. I bought more of USO last month. Oil price increases ( and probably PMs) will refect the Feds inevitable expansion of the money supply/swaps/etc, and loss of purchasing power.

Sun, 08/12/2012 - 13:27 | Link to Comment Red Raspberry
Red Raspberry's picture

If nothing else it forces the American consumer to consume.

Sun, 08/12/2012 - 13:49 | Link to Comment disabledvet
disabledvet's picture

This is actually a VERY radical idea...one I happen to agree with however. In other words "there is in fact trillions of barrels of oil" thus the "only" thing that matters is that it be priced in dollars. The issue arises...indeed has arisen!...with how to pay for "mere trillion dollar deficits." back in the 90's when the money was just rolling in they called a solution to problems such as this "where the rubber hits the road." of course back they could "put some lipstick on that pig" and sell the business. I'm not sure how to do that with our Federal Government however. For the record "I've got top minds working on a solution."

Sun, 08/12/2012 - 12:51 | Link to Comment haskelslocal
haskelslocal's picture

This post demonstrates why the tactic of sanctioning Iranian cannot work.

Iran has the oil and either they sell it to any player willing to circumvent sanctions today or they just wait it out and sell it to world players tomorrow.

Strategically, whomever "owns" Iraninan wells wins this battle. Hence the saber rattling for inevitable war.  

Sun, 08/12/2012 - 12:51 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

The mpg for America's car fleet could be doubled over a 5 year period using existing technology, thus slashing domestic oil demand.  The US simply has not made this a priority.

Sun, 08/12/2012 - 13:12 | Link to Comment Tom Green Swedish
Tom Green Swedish's picture

Obama has made this an initiative.  Unfortunately, it requires 80 barrells of oil just to produce a car. It would take 8 years to reproduce all those throw-aways.

Sun, 08/12/2012 - 14:09 | Link to Comment chipworley
chipworley's picture

Free markets will make it a priority when it is profitable.  We don't need Government intervention in any of the markets.  Smaller Government NOW....

Mon, 08/13/2012 - 15:27 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

We don't have free markets, regardless of the size of government.

Sun, 08/12/2012 - 12:52 | Link to Comment boiltherich
boiltherich's picture

Unleaded regular here went up to $4.059 this morning though wholesale is still $3.00, but the distributor that raised the prices is a greedy republican that wants to make sure the region does not vote Obama.  And there is no excuse for wholesale gas to be that high anyway because at $92 a bbl wholesale RBOB should be in the $2.35 range.  America seems to just love getting reamed at the gas pump because they do nothing about it. 

Sun, 08/12/2012 - 13:56 | Link to Comment disabledvet
disabledvet's picture

Maybe he's an alien. "they need hard currency to get their spaceship up and running." and "they don't mind doing experiments on humans as it is their way anyways."

Sun, 08/12/2012 - 14:11 | Link to Comment chipworley
chipworley's picture

Truely nebbish and partisan post....

Sun, 08/12/2012 - 18:10 | Link to Comment boiltherich
boiltherich's picture

Truely nebbish and partisan post

 

Dude? LOL!!!!!!!!!

This is ZH and you think you have to comment on MY post as nebbish and partisan? As if you never saw one of those here before? ROTFLMAO!

The ironic thing in fight club is when morons pass judgment on your posts not realizing that judging the posts thus is the really nebbish and partisan thing to do. But, I notice you do not disagree with the VALIDITY of my post, only that YOU don't like what you believe (wrongly) my politics are.

By the way, you want nebbish? There is no e in TRULY.

Sun, 08/12/2012 - 15:30 | Link to Comment CrazyCooter
CrazyCooter's picture

Use a distributor owned by a Democrat?

Here is a map to help find those "evil price gouging Republicans".

Regards,

Cooter

This message brought to you by Empirical Data, "Making ignorant people look stupid since the advent of papyrus."

Sun, 08/12/2012 - 18:02 | Link to Comment boiltherich
boiltherich's picture

CC: That map is not right, or at least not up to date, the county I live in is shown to be in the high $3 range when it is really now over $4 (third county to the right of the Pacific in Oregon on the state line with California). And the distributors in question are HQ'ed in the redder county next door, redder in every sense of the word. The owners and ranking employees of the company are big contributors to republican causes and candidates. Meanwhile they are charging $4.059 at their stations when Friday it was still $3.639 at Costco, and $3.779 at Fred Myer and Slaveway this morning. Of course I do not have a Costco membership so I can't use their pumps. And Slaveway gas starting in June made my gasoline mileage drop by almost half, from 21 MPG to 13.7 mpg. One day I was doing OK on fuel consumption then you could tell when they got their summer blend in because my car smelled like a fart and my mileage plummeted in a single tankful. What is the point of summer blend gas? It was supposed to keep pollution down during hot weather, but if you are burning half again to twice as much to go the same distance the volume used swamps the benefit of lower emissions.

 

 

Sun, 08/12/2012 - 12:53 | Link to Comment kill switch
kill switch's picture

Netanyahu finalized war plan on Iran....$275.00  oil

Sun, 08/12/2012 - 12:55 | Link to Comment loveyajimbo
loveyajimbo's picture

Problam is... the moronic sheep and blacks and illegals and welfare/foodstamp bums do not care about economic numbers or anything else, as long as they get their benefits form Barry.  they do get a little restive if the price of Cheese Doodles or cheap beer goes up... What a Dear Leader BO is!

Sun, 08/12/2012 - 13:01 | Link to Comment Atomizer
Atomizer's picture

 

 

When the cunts raise prices again, the economy will tell them to fuck off. The end result can be shown in this chart

 

I will never trade in my gas guzzlers for a clown car, Why?

  • Automobiles are paid off
  • Hell, my worst car gets 6-8 mpg, who cares? It’s a joy ride that I can afford driving on a daily basis. Key word—CAN AFFFORD DRIVING IT.
  • Don’t plan on helping broke US union pensions.
  • Enjoy driving in lite traffic when others cannot afford to fill up their new 40 mph car.
  • How does it feel to be a debt imbedded slave? I call it hook, line, and sinker.

 We live on this planet for a very short period of time. I really don’t worry about someone telling me what car I should buy or purchase.

Sun, 08/12/2012 - 13:16 | Link to Comment hardcleareye
hardcleareye's picture

Sociopathy is the result of social conditioning which leads to a lack of natural human values. It refers strictly to a social condition where a person knows, yet has been socially conditioned to disregard, the intrinsic human values which are believed to be universal.

http://en.wikipedia.org/wiki/Sociopathy

Mon, 08/13/2012 - 08:07 | Link to Comment falak pema
falak pema's picture

Oil barons tend to be sociopaths, I can vouch for that. They have a propensity to consider sheeple in countries where they rule the roost, as extractive empire czars feeding the bank accounts of local potentates on the take, as expendible material; especially the local women. 

Huge consumption of feminine flesh and cocaine on the quiet. 

This characteristic is true both for Euro/US oil czars as for Opec third world czars.

The only intrinsic value these guys adhere to is "greed is good and your ass is toast!" 

Lovefraud.com > Inner Triangle helps you understand sociopaths

They are truly on this page. Power corrupts and oil power not only corrupts, it pollutes! 

Seems like this sickness has now spread to the Banksta clique big time as the Squid culture is now universal. 

Anything to make a fast buck even if it sinks the Titanic! 

Sun, 08/12/2012 - 13:24 | Link to Comment otto skorzeny
otto skorzeny's picture

from what I have seen- the bigger the SUV/pickup-the smaller the intelligence level. thanks for supporting my theory

Sun, 08/12/2012 - 13:37 | Link to Comment qqqqtrader
qqqqtrader's picture

wtf??

so I'm smarter when I drive my Honda Accord and more stoopid when I drive my Ford Expedition... hmmm

Sun, 08/12/2012 - 13:25 | Link to Comment Tom Green Swedish
Tom Green Swedish's picture

If only the USA / Non-Opec could do this with food.  We could manipulate the price to "balance our budget".  We have Peak Oil / They have Peak Wheat.

 

 

U.S. farmers produce 46% of the world’s soybeans, 41% of the world’s corn, 20.5% of the world’s cotton and 13% of the world’s wheat.

 

We can do it to.  Just make the food prices here cheap like the Opec nations do oil and sell the food to the at whack prices.  Take a look at their prices per gallon.  Hell we already have 50 million on SNAP cards.  Shouldn't we make the rest of the World pay?  I'm good with that.  It appears the USA middle class is subsidizing the entire fucking world.  I'm sick of this shit being a god damned slave. If only the clowns in DC would take note.

 

Check out the price per gallon for our OPEC buddies. Gas at 91 cents or 12 cents a gallon. Thats cool. 

USA - $3.68

Saudi Arabia Riyadh $0.91

Kuwait Kuwait City $0.78

Egypt Cairo $0.65

Nigeria Lagos $0.38

Venezuela Caracas $0.12

 

ANd just for kicks here's a price of a Big Mac in some of those countries versus the USA.  Something is seriously fucked up in this country (besides Mitt's Dad with his free McDonalds SNAP card)

 

USA - 3.15

Saudi Arabia - 2.40

Venezuela - 2.15

Eqypt 1.61

Qatar - .68C

UAE - 2.45

 

Sun, 08/12/2012 - 13:27 | Link to Comment LMAOLORI
LMAOLORI's picture

 

 

Tom Green Swedish If only the USA / Non-Opec could do this with food.  We could manipulate the price to "balance our budget".  We have Peak Oil / They have Peak Wheat."

If?

They already have ethanol increases the cost of our food!

"The increase in ethanol prices helped spark a 16-cent jump in the national average gasoline price in July"

 


Sun, 08/12/2012 - 13:36 | Link to Comment Tom Green Swedish
Tom Green Swedish's picture

Ethanol prices just jumped because of the drought.

 

We have two options here:

Sell the corn to them at increased prices we can eliminate ethanol. 

Ethanol is 3.49 a gallon where I live and gasoline is 4.10.

Or:

If we starve the food supply and just use ethanol we'll be fine.  Fortunately for us, Corn is renewable. Up to a point.  Water and soil will be a problem.

Sun, 08/12/2012 - 14:17 | Link to Comment chipworley
chipworley's picture

"Ethanol prices just jumped because of the drought."

Bullsh!t!!!  Ethanol in gasoline is a FARCE and waste of resources....  Do the math...

Sun, 08/12/2012 - 14:53 | Link to Comment Tom Green Swedish
Tom Green Swedish's picture

Don't get so pissed I'm not in favor of it either, but for some reason its commercially viable.  I like algae based bio-diesel.  Chill out its all in good humor.

Sun, 08/12/2012 - 14:18 | Link to Comment chipworley
chipworley's picture

"Ethanol prices just jumped because of the drought."

Bullsh!t!!!  Ethanol in gasoline is a FARCE and waste of resources....  Do the math...

Sun, 08/12/2012 - 15:27 | Link to Comment JR
JR's picture

You can’t subtract food prices from energy prices.

Food production and energy costs are the same thing. Growing food and feeding meat animals requires energy (diesel, fertilizers, tractor manufacture, tires…everything) and to take on either food prices or fuel costs you are taking on Banker Big Oil, which, btw, is not OPEC, it’s the international bankers. OPEC doesn't make these decisions: Big Oil uses OPEC to keep the price up.

If you want to take on OPEC you’re taking on Big Oil. You can’t do that, IMO; they’ll beat you every time.

Regarding food price input, an Analysis of the Relationship Between Energy Prices and Crop Production Costs May 2008 states:

“Energy prices are a major factor in the cost of pro­duction for major crops. Growers use significant amounts of diesel fuel, gasoline, electricity and pro­pane to prepare the land, plant and care for the grow­ing crops, harvest the grain and move the products to market. But the impact of energy prices goes well beyond those direct costs, impacting prices farmers pay for many other inputs, especially fertilizers. Ris­ing prices for energy, regardless of the cause, will drive up production costs for farmers and cut into farmers’ profits…

“The impacts of the high energy prices on production costs… are substantial. However, the actual impact on agriculture would be even greater….”

http://epw.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=913e8327-06c5-45be-8ca3-c1d587786b0c

Sun, 08/12/2012 - 13:06 | Link to Comment Father Lucifer
Father Lucifer's picture

 

Downtown L.A. last night Chevron,

regular $4.87

super $5.08

Sun, 08/12/2012 - 15:25 | Link to Comment CrazyCooter
CrazyCooter's picture

LMAO, that is higher than in AK!

Regards,

Cooter

Sun, 08/12/2012 - 18:02 | Link to Comment monad
monad's picture

CostCo

Sun, 08/12/2012 - 18:19 | Link to Comment boiltherich
boiltherich's picture

I joined Costco for the gas prices in 2006, cost me fifty dollars for their membership card but after three tanks of gas I quit going because the lines were always at least a 20 minute wait to get to the pumps.  So, the 20 or so gallons of gas I bought there cost me about $5.70 a gallon compared to $3.20 at competing stations when you add in the cost of their membership fee.  I would have only had to buy 333 gallons per year to make that card pay for itself at apx. 15 cents per gallon savings.  Not worth it at all.

Sun, 08/12/2012 - 13:13 | Link to Comment Cloud9.5
Cloud9.5's picture

When chaos rears its head, the flow of spice is interrupted.  Without the spice, the empire collapses.  We will pay the necessary price to prevent the chaos.

Sun, 08/12/2012 - 13:21 | Link to Comment hardcleareye
hardcleareye's picture

The "necessary price" in this case will be a war to remove the government and reduce the "native population" such that the resources can be "put to better use" <sarc>.

Sun, 08/12/2012 - 13:23 | Link to Comment otto skorzeny
otto skorzeny's picture

this bullshit post is brought to you by AIPAC/US Congress Committee to Start Another War in Mid-East

Sun, 08/12/2012 - 14:02 | Link to Comment disabledvet
disabledvet's picture

I read it as the exact opposite actually. "the gig is up" as the Political Classes really have hit their "I drink your milkshake" moment.

Sun, 08/12/2012 - 13:42 | Link to Comment orangegeek
orangegeek's picture

$99 per barrel to break even?  Really?

 

Ref: Alberta Oil Sands

"... a few years ago most firms thought the break-even price was $75 per barrel, but now companies such as Shell say new developments are economical at $50...."

Economist, January 2011.

 

Maybe Saudi says $99 in the belief that their oil still runs the planet - not as true anymore.

Sun, 08/12/2012 - 14:01 | Link to Comment Tom Green Swedish
Tom Green Swedish's picture

OPEC has no industry besides Oil yet they want to purchase all of our stuff.   The government there has to provide for their people too. Same thing as the USA but in reverse.  It's just they are doing a much better job of manipulating the prices.  After all the oil runs out one day for them, and they know it, before the price go parabolic just like the human population, unless we can invent a viable alternative (impossible?  only algae has a chance).  We can produce most of our things for a much longer time; besides the cheap plastic crap and oil based things like paints and chemicals, but there are alternatives to that.  The problem is the whole world and all our population growth has been tied to cheapo oil.  1 barrell of oil is equal to 25,000 hours of man work. For 85 bucks.  Its a steal. Try to convince somebody to pull your car a mile for .30 cents and you'll see what I mean.

Sun, 08/12/2012 - 14:07 | Link to Comment disabledvet
disabledvet's picture

And of course there must be payment for War in Syria...let alone throughout the entirety of the Middle East. "A Great Battle for Dollar Reserves" underway?

Sun, 08/12/2012 - 15:36 | Link to Comment orangegeek
orangegeek's picture

OPEC is dying and oil is headed below $50 per barrel.  Peak oil isn't the problem.  Peak debt and peak government is.  Say hello to deflation.

Sun, 08/12/2012 - 14:02 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Right, I'll believe it when I see it delivered.  These are still TAR sands to folks in the know.

Sun, 08/12/2012 - 19:35 | Link to Comment Wolferl
Wolferl's picture

Spot on. I´m pretty sure they still get crude oil out of the sand on the arabian peninsula for about 10 $.

Mon, 08/13/2012 - 04:08 | Link to Comment falak pema
falak pema's picture

the average historical price in CURRENT USD for conventional onland and shallow water oil fields is in the range of 20-30 USD/bbl including all R&d and infrastructure overheads. Its been on this plateau since the 70s when the well head price was 2-5 $/bbl and selling at 13- 15 usd/bbl. The tundra Russian fields break even today at around 70 usd/bbl because of bad infrastructure investment. Good field housekeeping is necessary to keep production costs low as the oil has an ecological component cost price which can get horrendous if there are huge production disasters. The oil companies have got very negligent on this in their rush to profits by drilling more and more in hi-risk zones. They are now the dinosaurs of the fossil energy age but they do have very powerful claws.

Don't believe these COST figures as posted. 

Sun, 08/12/2012 - 14:07 | Link to Comment Tom Green Swedish
Tom Green Swedish's picture

The United States Department of Energy estimates that if algae fuel replaced all the petroleum fuel in the United States, it would require 15,000 square miles (39,000 km2) which is only 0.42% of the U.S. map,[11] or about half of the land area of Maine. This is less than 1/7 the area of corn harvested in the United States in 2000.[12] However, these claims remain unrealized, commercially. According to the head of the Algal Biomass Organization algae fuel can reach price parity with oil in 2018 if granted production tax credits. 

 

It's not so bad is it?  Nobody is trading in their F150 for a clown car.  Sorry.

Sun, 08/12/2012 - 14:48 | Link to Comment francis_sawyer
francis_sawyer's picture

Are you a fucking moron or do you just play one on TV?

Sun, 08/12/2012 - 14:57 | Link to Comment Tom Green Swedish
Tom Green Swedish's picture

Solazyme is one of a handful of companies which is supported by oil companies such as Chevron. Additionally, this company is also backed by Imperium Renewables, Blue Crest Capital Finance, and The Roda Group. Solazyme has developed a way to use up to 75% percent of dry algae as oil .This process requires the algae to grow in a dark fermentation vessel and be fed by carbon substrates within their growth media. The effect is the production of triglycerides that are almost identical to vegetable oil. Solazyme’s production method is said to produce more oil than those algae cultivated via photosynthetically or made to produce ethanol. Oil refineries can then take this algal oil and turn it into biodiesel, renewable diesel or jet fuels. Part of Solazyme’s Maersk Line was a test, in collaboration with the U.S Navy, which placed 100% algae fuel into 300- meter Maersk container vessel . This 100% algae fuel was used in a test to sail from Northern Europe to Indonesia. This voyage was highly successful. Using 300 tons of algae based fuel, these carriers made the one month voyage. The next test would be a 50/50, gasoline and algae biofuel, mix for a "Green Strike Group" that should be in operation by summer 2012

 

Yes a container ship 1 month voyage entirely on algae based fuel.  This is on a very very small scale.  If we have an area the size of Maine producing this stuff we would never need a drop of petrol ever again. 

 

Have a nice day fucking moron.

Sun, 08/12/2012 - 15:18 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Finding space to grow algae isn't the problem.  Flux is the problem, how fast can you grow the algae.  In addition there are still problems with getting the algae to make more of the right fatty acids.  funny how the algae still need to make other things like proteins, nucleic acids etc.  Moreover, you still need to provide the algae with other nutrients like magnesium, sulfur, nitrogen etc.

I have worked with people on metabolic engineering projects before at Genentech, Genecor, and Novazyme.  How long, how much capital, and how much energy went into growing, harvesting, and isolating the right oils?  Moveover, how much energy went into the carbon sources the were fed to the algae to begin with?  I know this work very well, and the answer is a huge amount of energy, more than 100x the amount you got back.  Part of the problem was having to perform the fermentation in the dark in order to get the right compounds.

You want a truly green fuel, the reaction has to be driven by sunlight, period.  Anything else is robbing 100 Peters (or more) to pay one Paul.  funny how the government can force things to "work" when they can steal the resources they want.  Yes Solazyme and many others recieved government grants to do this.  FYI- the "carbon sources" that were used to complete this project came from agriculture. good plan sparky, starve 100 pauls too.  Like I said the process has to be light driven, which means the growth (hence production) will be considerably slower and require considerably more area (which is okay, we do have oceans).

Sun, 08/12/2012 - 17:07 | Link to Comment Tom Green Swedish
Tom Green Swedish's picture

Then whats wrong with growing in with the Sun?  We seem to have plenty of that.  Secondarily why is Chevron investing in this technology?  To take it away?

Sun, 08/12/2012 - 15:27 | Link to Comment Flakmeister
Flakmeister's picture

Keep track of the inputs and yields....

http://www.consumerenergyreport.com/2011/10/23/visit-and-conversation-with-executives-at-solazyme/

The fact that they feed algae sugar is a tell re: the viability of the process...

The following was posted over at TOD by Carnot whose opinion I respect:

AS part of my job I have to evaluate bio-feedstocks for petrochemical production and biofuels. I would be very, very cautious about the europoria over Solazyme. It simply does not add up.

Feeding algae sugar or carbohydrates is not a panacea. Some very simple maths will demonstrate the folly of this so called approach.

Using sucrose as the feed (a hexose sugar) the yield of algae oil could be estimated as follows:

Hexose (C6H12O6) -> 2 Ethanol 2(C2H6O) + 2CO2
MW 180 46 44
Weight 100 51.1 48.9
Energy 17 MJ/Kg 29 MJ/Kg

I have chosen this route as it would be similar to what would be needed to feed the algae i.e the sugar would have to be metabilised.

The above yeild is the theoretical yeild to ethanol. The ethanol would have to be dehydrated. The dehydration of ethanol would yield ethylene which is effectively the Ch2 repeating unit of fuel hydrocarbons.

Ethanol (C2H6O) -> Ethylene (C2H4) + H2O
MW 46 28 18
Weight 100 60.8 39.2
Energy 29MJ/Kg 48 MJ/Kg

The algae oil would be roughly repeating Ch2 units with a fatty acid group and some olefinic bonds. Converting the ethylene units into this structure would invove a further reduction in mass, as the algae would metabilise some of the hydrocarbon to survive as respiration. Thus the yield on algae would be even lower than

1 x 0.51 x 0.608 = 0.31. Theoretical maximum.

A realistic yield, allowing for losses and matabilism would be about 0.2 of the starting weight.

So 1 kg of sugar might produce 0.2 Kg of algae oil which would have to be further refined. The algae oil would have an energy content similar to biodiesel at about 39 MJ/Kg

Efficiency so far

Sugar 17 MJ/Kg

Algae Oil 39 Mj/Kg

39 x 0.2/ 17 = 45%

But the algae oil is not usable and would need further processing. The best option ( not Kior) would be mild hydrocracking to crack the algae into the jet and diesel range. This might produce about 65% of middle distillates and the rest light material, including CO2. The light material could be used a fuel gas(absolute necessity).

The finshed jet/diesel would have an energy content of about 43MJ/Kg

So 0.2 x 0.65 = ~0.13 Kg finished fuel

0.13Kg x 43 MJ/Kg = 5.59 MJ

5.59/17 = 32.8%

Cost of Sugar $460 pmt

Cost of Jet $980 pmt Dec 2011

Very roughly 8 Kg sugar = 1 Kg Jet

8 x 460 = $3680

Hmm. No wonder it has been slow to take off.

Of course the use of pure sugar would not the the route. Sugar cane juice could be used, but the producer would expect an equivalent net back as if he were producing sugar, ethanol or Solazymes algae. Only the US Navy is s dumb that is ploughing million into this type of crackopot idea.

Solazyme will then shift the question over to cellulosic sugars. Great. The biomass will contain something like 50% sugars but you will have one hell of a job getting them out. So far it has not be done on a commercial scale, only a comical ssale, and is nver likely to be done.

Sun, 08/12/2012 - 15:43 | Link to Comment orangegeek
orangegeek's picture

Hundreds of alternatives out there.  Only one problem - cost.  That's why oil and natgas win everytime.

 

More government debt/tax credits - your comment - isn't the answer either.

 

 

 

 

 

 

Sun, 08/12/2012 - 17:02 | Link to Comment Tom Green Swedish
Tom Green Swedish's picture

You think spending 1 trillion on the oil deficit over the next 3 years is a better solution?  Algae is the only viable solution to petroleum.  All others would cost more.

Sun, 08/12/2012 - 14:18 | Link to Comment FieldingMellish
FieldingMellish's picture

The Saudis are the only swing producers big enough to affect the market and with inflation running at 5% in a currency pegged to the dollar, oil has only one way to run.

Sun, 08/12/2012 - 14:25 | Link to Comment lolmao500
lolmao500's picture

One thing people don't talk about when talking about oil is THE PRICE OF GETTING OUT OF THE GROUND... it keep rising up and up and up...

Sun, 08/12/2012 - 14:38 | Link to Comment Sutton
Sutton's picture

Raise rates to 1-2 percent and the whole Commodity Complex will utterly collapse.  

Sun, 08/12/2012 - 14:40 | Link to Comment kennard
kennard's picture

"Total Hydrocarbon Demand" in Figure 3 should be reduced substantially starting in 2040 to allow for LFTR (Thorium) energy production. Further, the chart does not anticipate shale gas, shale oil, oil shale and Fischer–Tropsch synthesis production.

This Arab study is sticking its head in the sand, figuratively.

Sun, 08/12/2012 - 18:44 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Fortune telling should be left to the pros.  Wake me when that shit delivers for a reasonable cost.

Sun, 08/12/2012 - 15:17 | Link to Comment DUNTHAT
DUNTHAT's picture

 

For Those interested in the COT reports.....

https://docs.google.com/open?id=0B16Nxp5pgJBzUllsUUUxQnJWVWc

Sun, 08/12/2012 - 18:32 | Link to Comment q99x2
q99x2's picture

People in Brazil must be shaking their heads when they read an article like this. Their cars run on ethanol. But the Oil elites definitely are more on the Republican side of things and if they want more military and oil industry favors from a Republican president then oil will go higher in an attempt to shift the power somewhat away from the banks which have more Dempcrat interests.

Gary Johnson for President.

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