What a $200/Barrel World Looks Like

Jack, You might be talking about geology, whatever that means, but you didn't step onto a geology thread. And you engaged me in a conversation about the oil market, not plate tectonics. I made the point that Saudi Arabia is not pumping to its capacity. You challenged that for some reason. It's just a fact. An inarguable fact. The Saudis are capable of producing at least 11 million barrels a day (and that capacity is increasing). They are only producing 9 million barrels a day. Yes, there is a limit to how much oil they can get out of the ground. And Saudi Arabia, the UAE and Kuwait are not drilling to capacity. It's just a fact. And I'm still not sure what your point is.

Boom, nope, there is not unlimited refining capacity. But refining capacity is not limiting the worldwide supply of refined oil to the market right now, and in fact, we are seeing an enormous growth in refineries worldwide right now. It's a meaningless point. Refining capacity isn't a limiting factor to the supply of oil to the worldwide market. Drilling quotas are a limiting factor.

 

Jack, capacity simply refers to drilling capacity and the output it yields. The Saudis say they will have the capacity to produce 12.5 million barrels a day by 2009. Today they can produce 11 million. Their drilling capacity is increasing. That's not a fantasy. It's what they are telling the world.

EROEI ratios have gotten lower, as you pointed out, and will continue to, and that means that drilling is more expensive, as you pointed out. A century ago 100 units of oil could be produced with one energy unit. Today, the ratio is anywhere from about 3-1 to 17-1.

But the earth isn't running out of oil, even if it is harder to get out of the ground than it used to be. And the expense of drilling is NOT what has made oil go from $35 a barrel to $130 a barrel in less than three years (Worldwide demand is a MUCH more significant factor).

EROEI in a vacuum is a misleading way to evaluate the cost of energy, because it doesn't take into account the time value of energy, namely that a unit of energy today is a lot more valuable than a unit of energy produced 30 years from now.

The world is much more concerned with how soon we can get energy than it is with how much energy we have to use to get energy.

 

Iron, Care to wager that a barrel of crude will not be falling to $100 anytime in the next two years?