August 8, 2006
$77/Barrel - Test of Peak Oil Theory?
With the Prudhoe Bay oil field shut down for weeks or months, the price of crude spiked yesterday.
Peak Oil theory suggests that as it gets harder and harder to get oil out of the ground, the oil companies will have to put more and more effort into continuing to ramp production to meet ever rising demand. Which would imply that there will be very little spare production capacity to deal with temporary interruptions like this one.
The oil production system weathered Katrina last year. It will be interesting to see how it deals with this glitch.
Just as I'm getting ready to post this, I see there's an article in the business section of the Oregonian, suggesting that the refineries in Washington state have access to reserves of crude that might see them through this (the article does not appear to be online, probably because it was assembled from wire service reports).
August 8, 2006 11:11 AM
The Prudhoe Bay oil field shutdown is due to a leaky pipe line and really has nothing to do with the efficacy of getting the stuff out of the ground. That said, it is emblematic of how complicated and vulnerable our current energy infrastructure is. If terrorists ever figure out that by attacking oil/energy infrastructure instead of civilian targets that they will get much more bang for their buck, our economy is in huge trouble. All the more reason to start switching to an electricity economy with massive investment in distributed generation and smart grid technology along with conservation/efficiency at the tip of the energy plan spear. For anyone who thinks it's not possible to convert the majority of our transportation fleet to off-peak electricity via electric and PHEV cars, I challenge you to a duel. Coal will be a temporary bridge to tidal/wind/geo-thermal/ethanol/hydrogen/solar and many more. Nuclear is just a giant looser target for enterprising terrorists. Now if only we had leadership in D.C. that wasn't oil soaked or war mongers we might actually get somewhere.
August 8, 2006 2:36 PM
I seriously doubt that the Prudhoe Bay incident will change prices more than a mere 5-10 cents. If it does at all. Remember it's 8% of our native oil production, not 8% of our total intake. It only amounts to probably 1% or maybe 2% of our actual usage and intake.
As for Peak Oil, this has nothing to do with it. As for the economic supply demand curve, the price still hasn't changed enough to truly start drawing a change in usage to any correlation. Only a minimal 1-2% of the US population has been truly affected by the oil price increase. Thus the reason usage is still going up.
August 8, 2006 2:38 PM
Per Ron's comment.
The economic fact is the nearest energy provision besides oil is at least 2x the cost.
Thus the reason oil has become so prominent. Maybe we could figure out how to use salt water. It seems the ice caps are melting so we better start doing something with all that water. ;)
August 8, 2006 3:18 PM
I think what's perhaps a harbinger is the fact that oil markets reacted at all. I mean, if it's such a small amount, why all the fuss? That's the worry.