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The Specter of Gasoline At $5 a Gallon
Hugh Pickens writes "The NY Times reports that gas prices are already at record highs for the winter months — averaging $4.32 in California and $3.73 a gallon nationally. As summer approaches, demand for gasoline rises, typically pushing prices up around 20 cents a gallon. But gas prices could rise another 50 cents a gallon or more, analysts say, if the diplomatic and economic standoff over Iran's nuclear ambitions escalates into military conflict or there is some other major supply disruption. 'If we get some kind of explosion — like an Israeli attack or some local Iranian revolutionary guard decides to take matters in his own hands and attacks a tanker — than we'd see oil prices push up 20 to 25 percent higher and another 50 cents a gallon at the pump,' says Michael C. Lynch, president of Strategic Energy and Economic Research. A sharp rise in the prices of oil and gas would crimp the nation's budding economic recovery would cause big political problems at home for President Obama, who is already being attacked by Republican presidential candidates over gas prices and his overall energy policies. On the other hand, environmentalists see high gas prices as a helpful step toward the development of alternative energy. Secretary Treasury Steven Chu notably said in 2008 'we have to figure out how to boost the price of gasoline to the levels in Europe' to make Americans trade in their 'love affair with the automobile' for a marriage to mass transit. In the meantime President Obama is in a bind because any success in tightening sanctions on Iran could squeeze global oil supplies, pushing up prices and causing serious economic repercussions at home and abroad."
we already top that in the UK:(
who where what when now?
Largest GDP per capita? More like 7th (nominal) or 15th (ppp) depending on how you count.
What is it with you having to believe you're the best in everything?
How often do you need to drive from Dundee, Scotland to Poole, England?
646 km seems to be about as far as one can drive in the UK --- that's just 400 miles --- not a terribly long trip by U.S. standards and for me, located in a town which takes advantage of its central location as an argument for businesses to locate here, or do business w/ businesses here, won't get one to more than a small portion of the U.S. (and part of Canada --- New York, Pennsylvania, New Jersey, Delaware, Virginia, West Virginia, Connecticut, Massachusetts, Rhode Island and most of Ohio, Vermont, and parts of Kentucky and North Carolina --- there are 50 states, and that's not even the original 13 colonies (but includes parts of territories and subsequent additions).
I've hopped in a car and made a solo trip of 900 miles one way in one 18 hour haul (had to finish a shift working, then appear at a conference and there wasn't a convenient airline connection) --- even that wasn't half-way across the country.
When I was stationed in Texas we'd get students in from Europe and the Middle East and they'd have purchased 30-day Greyhound bus passes thinking that they'd be able to see the U.S. on the weekends --- had to explain the reality that if they hopped on a bus Friday at 5:00 p.m., they'd reach the boundaries of Texas just in time to have to turn around to return for class Monday morning (that same 400 mile radius doesn't quite cover all of Texas (but does most of Oklahoma, almost half of New Mexico and small bits of Arkansas and Louisiana (and a portion of Mexico)).
William
Sphinx of black quartz, judge my vow.
I'm a Murican. Gas is now about $4.00 in my area, the northeast. This summer I went to Germany, where gas is $10.00 per gallon, both due to cost and the useless dollar. We rented a BMW 320d, which got a verified 49 mpg on diesel, and still ran hard at autobahn speed that would get me jail time in the US. Most cars in Germany are diesel, 2.0 liter with a manual transmission. We even saw the Chrysler minivans outside a school picking up kids, just like here at home. They all had a diesel. I'd love to buy a modern turbodiesel instead of a Hybrid. There aren't any for sale, save VW/Audi, backordered to 2014, or very expensive MB/BMW. You can get 50 mpg...it can be done...they don't sell those cars here.
You're correct that the price rise is artificial. It used to be that while unleaded gasoline and oil were traded as commodities, there were limits on the exchange that prevented the sort of out-of-control prices we're seeing. When those regulations were removed, traders were free to drive up prices, and here we are.
The solution to this isn't necessary drilling more. Any undeveloped lease has a lag time of 10 to 15 years before stable production is reached. The tar sands and shale oils in Canada and the Dakotas are amazingly difficult to produce. You don't simply drill a hole and dance around like an 1870's prospector when the oil comes raining down on your head. To get oil from tar sands you have to strip mine the sand, then heat it to a couple hundred degrees until the tar liquifies. Once liquid, you run the tar though the distillation and cracking process like any other crude oil. The kicker is that tar sand oil is mostly heavy ends and is amazingly high in sulfur.
When you talk about ends in oil, that is a measure of quality and viscosity. Light sweet crude from the wells in the Brent North Sea fields is far easier to refine than West Texas crude because the Brent oils already have a low viscosity, are low in sulfur, and have a naturally occurring percentage of light and medium end products like petrol and diesel. In fact, Brent Light Sweet crude is so light that it can be used as six oil, also called bunker fuel which is the main form of liquid fuel for large ships, right out of the ground. This means that Brent North Sea crude requires fewer steps to distil the product you want and will leave less residue products. Less steps means cheaper refining means higher profits.
Tar Sand and Shale Oil require a massive amount of refining. At room temperature, both products are about as viscous as glass and need to be run through the coking process to even get up to the status of a heavy fraction. From there, additional cracking (adding heat and hydrogen to chemically change the oil) is required to produce medium and light ends which are then distilled to diesel and kerosene which can be distilled or hydrocracked to produce petrol, naphtha, octane, or natural gas.
This is why tar and shale are usually left alone until per barrel prices reach a certain level. They simply aren't profitable to extract and refine without massive investment. You've also got all of the sulfur to deal with, and that stuff recombines to form all sorts of nasty products that tend to be highly corrosive and acidic and require a whole new set of industrial processes to convert in to useful products.
The real kick to the testicles in all of this is that the tar sands oil that Canada produces is already on contract to China. The Keystone XL pipeline that is in the news would connect the tar sand fields of Canada to the refineries at the Port of Houston and the Port of Houston would be shipping all of the refined products to Asia.
Should we have laws that say domestic oil stays domestic? I'm not sure, but I do like the idea. The problem with that is that Canadian oil isn't domestic and they produce more than the US. The other problem is that cheap oil is only going to encourage the kinds of things we should be working to prevent. Namely, I hate being able to see the air I breathe.
What I'd really like to see is all of this drilling technology and know-how be re-purposed for harnessing geothermal energy. Less pollution and it all stays domestic.