heating oil demand and supply theory

[Weird tolkienish figure]

The point I was trying to make is that companies want LESS regulation. How many times have we heard that oil would be cheaper if the Obama administration would just LET US DRILL?

But that's a false dichotomy. We can let companies drill and put in place common sense regulations to make sure they do so responsibly. Those who make this an "either or' proposition are merely fishing for votes.

On both sides.

 

[Bigjim13]

The point I was trying to make is that companies want LESS regulation. How many times have we heard that oil would be cheaper if the Obama administration would just LET US DRILL?

But that's a false dichotomy. We can let companies drill and put in place common sense regulations to make sure they do so responsibly. Those who make this an "either or' proposition are merely fishing for votes.

On both sides.

I understand that, my point is that the companies DON'T WANT the regulations in place. They only adhere to those regulations because they are forced to, if they didn't have to they woudln't. If they weren't forced to, they woudl just drill with no concern for anything other than max profits.

 

[Weird tolkienish figure]

I understand that, my point is that the companies DON'T WANT the regulations in place. They only adhere to those regulations because they are forced to, if they didn't have to they woudln't. If they weren't forced to, they woudl just drill with no concern for anything other than max profits.

Yeah, it's a "tragedy of the commons problem" and I agree, we have regulations that will inevitably have to be enforced by the government. But we still need to allow oil companies to drill. If they don't, who will? The government?

 

[1Dtml]

Yeah, it's a "tragedy of the commons problem" and I agree, we have regulations that will inevitably have to be enforced by the government. But we still need to allow oil companies to drill. If they don't, who will? The government?[/quote]

+1,

No problem, just put it on our tab.

 

[bbfarm]

I remember 17 years ago when we bought our house and our budget plan was $25 for fuel oil to heat. Now it is over $350 a month. I don't know what we would have done for heat this year if our friend hadn't loaned us money for our pellet stove.

I think fuel oil and gas prices are ridiculous! I truely believe this been a major part of our poor economy.

 

[Weird tolkienish figure]

I remember 17 years ago when we bought our house and our budget plan was $25 for fuel oil to heat. Now it is over $350 a month. I don't know what we would have done for heat this year if our friend hadn't loaned us money for our pellet stove.

I think fuel oil and gas prices are ridiculous! I truely believe this been a major part of our poor economy.

I bought my house over the summer, it was $730 to fill the oil tank, and then next month (before I regularly started relying on the pellet stove for heat) the bill was $287.

$1000 down the drain in the first 6 months of ownership. Thank God for the pellet stove. It's been colder this month and the oil gauge has barely moved.

I will on occasion (and my GF thinks I'm nuts) go grab a handful of pellets and take a whiff. I love the smell of them. Try doing the same to oil. I've never heard of someone scooping up a cupful of oil because they like the smell. Plus the fire creates ambiance too. The thought of spending Christmas gathered around a baseboard radiator just doesn't have the same magic to it.

 

[Bigjim13]

I remember 17 years ago when we bought our house and our budget plan was $25 for fuel oil to heat. Now it is over $350 a month. I don't know what we would have done for heat this year if our friend hadn't loaned us money for our pellet stove.

I think fuel oil and gas prices are ridiculous! I truely believe this been a major part of our poor economy.

This was the main reason we bought our pellet stove. In the spring of 2008 we were kicking around the idea of buying a pellet stove with the "stimulus" check that Bush gave most people. We were on the fence until we talked to our Oil company and they quoted us almost $5 per gallon to heat our 1100 sq ft ranch house. We were looking at just under $2500 to heat our house for the winter at 66* on the thermostat.

The next week we were giving a CC number to the stove shop to hold our Harman. We got one of the last ones that shop got in that spring, after that they were taking orders but weren't getting or installing stoves until well into the next year. We spent $3800 on the install and another $900 on pellets and have since almost made that money back in savings. In that 4 years we have filled the oil tank once and have used roughly half of that tank.

 

[smwilliamson]

Home heating oil is actually low suffer diesel fuel. So if they have excess supply, the price will stay or drop, and produce accordingly.

with blue die added.

 

[Bigjim13]

I remember 17 years ago when we bought our house and our budget plan was $25 for fuel oil to heat. Now it is over $350 a month. I don't know what we would have done for heat this year if our friend hadn't loaned us money for our pellet stove.

I think fuel oil and gas prices are ridiculous! I truely believe this been a major part of our poor economy.

I bought my house over the summer, it was $730 to fill the oil tank, and then next month (before I regularly started relying on the pellet stove for heat) the bill was $287.

$1000 down the drain in the first 6 months of ownership. Thank God for the pellet stove. It's been colder this month and the oil gauge has barely moved.

I will on occasion (and my GF thinks I'm nuts) go grab a handful of pellets and take a whiff. I love the smell of them. Try doing the same to oil. I've never heard of someone scooping up a cupful of oil because they like the smell. Plus the fire creates ambiance too. The thought of spending Christmas gathered around a baseboard radiator just doesn't have the same magic to it.

Depends on the pellets, I took a whiff of Freedom Fuels from HD once and almost choked. They smelled like ground up cardboard. On the other hand I opened a back of Vermont wood pellets and wow, the fresh pine smell was awesome!

Any the ambiance is definitely nice!

 

[jharkin]

I always get a chuckle at these threads... everyones got a theory... everyone thinks they no better than the experts or is convinced its a giant conspiracy because their favorite candidates ad said so.

Fact of the matter is the law of supply and demand IS still in force folks. Speculation plays a role... but much smaller than our politicians would have you believe. See its easy to say "its those speculators, elect me and I will regulate them". Thats a story folks can understand - it puts the blame on somebody else - a tangible entity who can be punished. Somebody who is not ourselves.

OTOH, if politicians were to tell us the truth, that oil is getting expensive because every day there is less and less of it left and it gets harder and harder to find - well people don't want to hear that. Because their is no easy fix that doesn't require sacrifice. We don't want to sacrifice so instead we shoot the messenger.

I encourage everyone here who still thinks oil is as common as water to ask yourself - if it is, why are we drilling 10,000ft down on the bottom of the ocean? Why are we digging up the tar sands in Canada? Why are countries lining up to fight over the Arctic once we melt all the ice?

Better yet, go do your research. read the BP statistical review, the EIA production reports, etc. What you will find will probably surprise you. Fact is that world production of conventional crude - the good stuff from Saudi Arabia - the "cheap" oil that keeps gas at $1.50 - really maxed out in 2005 and is actually on the decline. Overall production is slightly up, but the difference is being made up with deepwater, tar sands, and biofuels. As we go forward we have to ramp those up faster and faster to offset declining conventional oil and that is EXPENSIVE. And its doubtful that they can grow at a rate that can keep up with population growth and even modest economic expansion.

Pipelines..
another interesting subject. Its easy to point to evidence of pipelines as evidence of a conspiracy, but again a little knowledge goes a long way. The fact is, pipelines are built with design capacities, both maximum AND minimum. If the flow rate falls below a certain minimum you can no longer pump oil through the pipe and it HAS to be shutdown. The Alaska pipeline is a prime example, when it was built in the 80s it handled 2 million BPD. Today its only flowing something like 500,000 barrels becuse all those wells dried up. Soon it will reach a minimum and they will have no choice but to close it, then what little oil is left has to travel by ship - but only if the price of oil is high enough to justify.

And then their is Keystone. I'm torn on this one. Would it be better to not build it and instead move more consumption to renewables? Sure, in an ideal world. But in the real world sadly that wont happen. What will happen is that we wont change and we will just import more oil from South America (Which means our best buddy Hugo C... since Mexico is on the verge of turning into an oil importer) Meanwhile the Canadians will still produce and sell that oil, but to China instead of us. In this case I think its the lesser of two evils and we really have no choice but to build it.

The "drill baby drill" mentality...
This whole idea just makes me want to laugh. Forget the fact that its based on the fallacy that there is magically oil everywhere. Fact of the matter is that if you do the research you will find there already are millions of acres of drilling leases outstanding that the oil companies are not working.. Reason is simple, they get the lease and do the seismic analysis and some test wells and ..... no oil. Giving out more permits to drill on land that doesn't have oil is nothing but a feel good vote getting scheme.

 

[Weird tolkienish figure]

I always get a chuckle at these threads... everyones got a theory... everyone thinks they no better than the experts or is convinced its a giant conspiracy because their favorite candidates ad said so.

Fact of the matter is the law of supply and demand IS still in force folks. Speculation plays a role... but much smaller than our politicians would have you believe. See its easy to say "its those speculators, elect me and I will regulate them". Thats a story folks can understand - it puts the blame on somebody else - a tangible entity who can be punished. Somebody who is not ourselves.

OTOH, if politicians were to tell us the truth, that oil is getting expensive because every day there is less and less of it left and it gets harder and harder to find

Hi Jeremy.

It's a combination of factors. While it's absolutely certain that oil prices should increase, as demand increases and supply decreases, that does not necessarily mean that oil prices at a given point in time are rational. Look at the housing bubble, we were told that several "truths" existed at that time too... God wasn't making any more land in areas that are in demand! Land is finite just as oil is. THe housing prices were "rational" too at that time. Anyone who tells you anything in economics is due to a single factor is either probably looking to get elected or sell you something.

I encourage everyone here who still thinks oil is as common as water to ask yourself

I've never heard anyone say that. There is loads of oil in the world... most of it is tied up on shale oil. The kerogen needs to be extracted and then heated, we need to burn oil to extract it. This is where technological advance comes into play, hopefully.

But oil as common as water? I've never heard that.

The "drill baby drill" mentality...
This whole idea just makes me want to laugh. Forget the fact that its based on the fallacy that there is magically oil everywhere. Fact of the matter is that if you do the research you will find there already are millions of acres of drilling leases outstanding that the oil companies are not working.. Reason is simple, they get the lease and do the seismic analysis and some test wells and ..... no oil. Giving out more permits to drill on land that doesn't have oil is nothing but a feel good vote getting scheme.

I happen to like "drill baby drill"... but I think you're taking a too literal translation of the argument. There is oil tied up in politically sensitive areas such as coastal California, ANWR and such. It doesn't mean you just drill somewhere randomly and strike oil, Beverly Hillbillies style.

If we got the oil and it's tied up somewhere politically sensitive, lets look at how we may responsibly extract it. The "green argument" seems to be no drilling, no where, no how, never. Why? Because it's a fossil fuel and fossil fuels are "evil". Never mind that the country... and world, runs on fossil fuels. And will for the foreseeable future.

 

[DneprDave]

I had an old farm tractor that burned kerosene. I found that stove oil lubricated the valve guides better, so that's what I bought for it. About fifteen years ago, when I would go to buy my stove oil for the tractor, I noticed that they weren't getting it from a large storage tank, but from a much smaller tank. Finally, about ten years ago, they told me that they didn't have stove oil in our area anymore and that none of the local refineries were making it, only kerosene and diesel. I asked what they were delivering to homes, for heating oil. They said it is all red dyed #2 diesel now, that is delivered to home with oil furnaces.

There is no reduction in demand for # 2 diesel, so we won't be seeing a supply and demand price reduction. The price will just rise and fall, the same as gasoline.

Dave

 

[jharkin]

WTF (interseting choice of initials he he) and I actually go back a long way, we we can poke some fun at each other....

Ok, I'll stipulate I may jump to some conclusions or put words out there nobody said... There have been a number of threads on this in the green room and prior in the ash can and I get pretty passionate on this stuff.


Back to drill baby drill... Sure there is oil in ANWR... about 10 billion barrels worth. But that's only 4 months of world consumption. I would ask, is it really worth developing one of the last untouched wildernesses just to buy us 4 more months of happy motoring?

And the oil sands... ugh I know at this point we don't really have a choice.. but rather than be excited that there is so much potential there I find it sad that as a society we had so little forethought to back us into this corner. Those sands are vast resources for sure, but what is the ROI on that stuff - something like 4:1 or 5:1 energy return? Vs. something like 40:1 for big conventional fields like Ghawar and Cantarell, and close to 100:1 for Texas in its heyday pre-WWII. Seems to me pretty obvious that prices have to go up to make that economical. I wont even get into the environmental/climate question.

Sure there are a lot of factors involved in the price but I think the speculator argument is over hyped. If you look at graphs of oil production, oil price, and economic activity there are some erry correlations. In 07/08 you see oil production start to flatten... then the price rockets, then BOOM the crash happens. Prices go down , so then demand and production - but now we are setting up for a repeat. Sure the housing bubble was bound to bust a long time ago but I have read good arguments that the oil market acted as the pin prick to set it off. Ive read some interesting theories that postulate the serious of bubbles (IT, housing, banking, soverign debt) are all a sign that population growth has outstripped physical resource growth and the only way left to keep growing the economy is by inflating financial bubbles.

Im not expecting to change anyone's mind, but I hope that maybe I inspire somebody to go read more... all sides of the argument... and decide for themself.

Ok I'm sure Ive taken us waaaaaay of track now so I will give it a rest.

 

[jharkin]

Oh one other point I just thought (and then I will let it go honest!)..

Ive read in some news articles, Aramco has stated that their current break even price for production is around $80 a barrel. There may be other fields that are cheaper, and there are certainly fields that are more expensive. But lets say for arguments sake that the real supply and demand price of oil should be around $80-100 right now. This translates into ~ $3/gal at the pump I beleive.

Ok, so having said that, the current rise and predictions of hitting $150 probably is driven somewhat by speculators, taking advantage of fears that the Iranians will do something dumb.

But even if that "bubble" pops, the price has to eventually settle back in around $80-100 range to keep production up, and the bigger question is can our economy still grow with energy that expensive?

 

[Weird tolkienish figure]

WTF (interseting choice of initials he he) and I actually go back a long way, we we can poke some fun at each other....

My name was originally "Weird Tolkienish Figure", my usual forum name of choice, I missed the "k". Someone pointed out to me that the initials were "WTF" and I like to pretend it was intentional.

Back to drill baby drill... Sure there is oil in ANWR... about 10 billion barrels worth. But that's only 4 months of world consumption. I would ask, is it really worth developing one of the last untouched wildernesses just to buy us 4 more months of happy motoring?

The point is probably moot nowadays as shale oil gets better known... but, I mean where does it end? Why can't you make the argument about any of the other oil fields? This is the "Garden of Eden" view of nature that I just find so abhorrent. That it's a "pristine, virgin" wilderness until humans get involved, when humans have been altering the landscape of North America and the world for millennia. The argument isn't scientific, it's ideological. If we can get in there and extract the oil without doing any lasting damage, other than aesthetics, why not go for it? It will provide some needed employment and revenue for the state and government.

serious of bubbles (IT, housing, banking, soverign debt) are all a sign that population growth has outstripped physical resource growth and the only way left to keep growing the economy is by inflating financial bubbles.

Economically this makes no sense, otherwise we'd have close to full employment and far more expensive commodities. Research jobs into alternative energy would be the highest paying, most in demand out there, instead of begging for government subsidies as they are now. All remaining unemployed could get employment by scavenging our landfills for the precious remaining resources we have left. All sectors of the economy would be geared towards energy and little else.

And we'll never run out of energy, now that the technology is feasible to extract energy from the sun, wind, tides, nuclear and geothermal, we have essentially limitless energy. All that is necessary is for the price of oil to rise, and some remaining technological hurdles. No doubt we will run out of *cheap* energy... eventually, as you've said.

If anything, I would be most worried about topsoil, nutrients, and arable land. Those are resources that are far harder to find alternative forms of.

Ok I'm sure Ive taken us waaaaaay of track now so I will give it a rest.

yes... let's get back to on track...what is this forum about? Ah yes, pellet stoves, lol.