The price of oil will fall again...

[Ed Garrett]

Wow! What a response to my last post about cheap gasoline. I didn’t think I was being that inflammatory… I sure enjoyed reading your points of view on this topic. I wish I could respond to all your responses.

I have one additional observation to share:

As a regulator I have seen the irresistible effect high petroleum prices have on oil companies: They go to war. They hire each other’s experts. They bid up the price of rigs, subcontractors, and most of all mineral leases. If you think car salespeople are aggressive, you should see how oil company “landmen” compete to lease or buy mineral rights when the price of oil is up.

As the price continues to climb: drilling permit applications begin to pour in, broken production equipment gets fixed “yesterday”, construction of offshore platforms and tankers accelerate, OPEC members start cheating on their production quotas, investment in new infrastructure such as LNG terminals picks up, and lo & behold the supply starts creeping toward demand.

Meanwhile the high prices start changing the perspective of petroleum consumers: SUV sales plummet, lighter more efficient cars gain popularity, businesses begin to reexamine how they use energy, petroleum alternatives like coal and nuclear power gain ground, congress of course jumps on the bandwagon with subsidies and tax breaks for the latest fads like ethanol, and much to my chagrin state agencies in Florida cut back on air conditioning.

Sooner or later hot economies turn to recession, companies of all types reduce output (and therefore energy use), unemployment climbs, demand (or at least demand growth) for oil begins to drop, and the price per barrel begins to fall.

Sound like fantasy? This cycle has repeated itself for as long as oil has been pumped out of the ground. The oil business is notoriously boom and bust. Who among you in 1973 would have predicted that big station wagons would go extinct and little cars from Japan would invade? Who in 1981 would have predicted that four years later the price of oil would drop by 75% (to $10/barrel)? How many proud owners of Suburbans and F-250’s in 1998 expected gasoline to triple in price? Who among you now say that the price of gasoline can only go up from here? Hang on to your Suburbans, boys, the price will fall again.

[Mike Cutler]

Ya' know Ed.. You and the CEO of Exxon have to get together. What was his quote in Money last month? Something like "Exxon is not in the business of making oil/gasoline. We make money at Exxon, and oil/gasoline is our product". Oh yeah, and "Exxon is not a fun place to work". Parapharased a bit.
As for the predictions. They are ineveitable. As early as the 60's it was postulated that oil would do the things it does,and that car designs would have to become more aerodynamic and fuel efficient in the future. All we ever had to do was look at Europe to get a gauge of where we were headed, taxes or not.

Gas/oil might drop in price, but to once again paraphrase the oil industry. "The cost per barrell of oil is not the only thing that effects the price of gas at the pump". I think I'll hold off on that Suburban for now.

I also see that Condelezza Rice has made a first favorable reference to Cuba recently. Could we begin to see a re-establishment of trade with Cuba to allow the US Oil concerns the ability to legally bid on access to the Oil fields off Cuba?

Of course I do find it interesting that over the last two years the only "political" solution to the problem has been to open up drilling in Alaska and other fragile enviorments, If we can't refine enough oil right now, what good does it do us to open up even more drilling If we're not be able to refine? If that truly is the reason for the price increase as stated by the oil industry.


Don't let folks give ya' too much guff for working for the Oil industry. I work for the electric utilties industries, and if anyone thinks "Smart Meters" are for the consumer. Think again.
Wait until you see what happens to electric rates in the next 10-15 years.

PS.
I'll still keep driving Toyota's. ;)
I'm not too terribly interested in "protecting the share holder's interest".( I hate that expression.)

[Ed Garrett]

Hey Mike,

Do you work for the nuke power industry? Perhaps you've received more guff than me???

I remember your response to me last week about Florida's weather. Ironically, I lived in Connecticut for just a few years and loved the weather. I appreciate your comments...

[Mike Cutler]

I've worked in the nuclear power industry for about 25 years now. I've taken a few "shots on goal" over the years, but I really enjoy what I do. I'm very lucky in that respect, I've seen some amazing technology used over the years to perform work in the plants.

I'd like to see the US move to nuclear as a primary stategy for electic production, similar to France. Not because I work in the industry, but because the cost is fairly predictable over the life of the plant. Fuel contracts aren't subject to the volatility of gas,oil and coal market prices. It's hard for a utilty to justify double digit rate increases, when the baseline fuel cost isn't increasing.

I wish I could state that "prices will fall" for electricity, but they will not. They are only going up. As the price of gas can change daily at the pump, so will the cost of electricity.

[Ed Garrett]

Mike,

I feel the same way about things I've observed in the oil industry. I've inspected offshore rigs, refineries, seismic exploration, and all kinds of drilling. The scale of this machinery is much bigger than people think and the engineering is mind boggling. There are some pretty high IQ's behind it all. I haven't met the president of ExxonMobil, but I've worked with many of his staff over the years. These are really capable and hardworking people who often put in a 50 or 60 hour week. Ironically, many of them would disagree with thier president. Many of them think it's a great place to work. They're as fascinated by the technology as I am, but I wouldn't want to be one of them. I enjoy working a mere 40 hour week and having some time at home for such things as woodworking.

I also share your opinion of our need to more fully exploit nuclear power. I've been pro-nuke since I was a kid. My dad worked at Los Alamos. I consider it the cleanest of fossil fuels. The emissions are negligible compared to oil, gas, and coal. Another great emission reducer would be to charge electric car batteries with nuclear derived electricity.

Here in Florida we're moving the other direction. Coal is our biggest source of electricity here while we've turned our backs on vast proven natural gas reserves just offshore. Our politicians release proclamations about cleaning up our air/water and fighting global warming. Meanwhile our coal plants spew CO2 and mercury. And they're building more here in Florida! And they're telling us how clean they are! Lipstick on a pig if you ask me.

I have a feeling I'd enjoy talking energy with you more than with the president of ExxonMobil. Keep up the good work.

[Pat Germain]

I went to high school in rural Oklahoma. I witnessed the boom and bust in the oil business first hand. One day my classmates could get a job as a roughneck and make good money. The next day they couldn't buy a job. The newspaper classifieds were filled with expensive trucks and cars for sale or "To take over payments". There's still a lot of oil in Oklahoma. Many thousands of oil wells sit capped off. This is because it's usually not profitable to pump it. I've heard OPEC is well aware of when it becomes profitable to pump in the US. They make sure sucha situation doesn't last very long.

As India and China continue to become more industrialized, they will require more and more petroleum. Therefore, I expect oil prices will go down some, but not much.

I very much want to protect the environment, but I just don't understand the protests about drilling in ANWR. The area under consideration is absolute wasteland. Seriously, it's just mud-flats. Yet, whenever the media do a story about it, they show Bambi and his friends frolicking about in a forest wonderland.

[Mike Cutler]

Mike,
Here in Florida we're moving the other direction. Coal is our biggest source of electricity here while we've turned our backs on vast proven natural gas reserves just offshore. Our politicians release proclamations about cleaning up our air/water and fighting global warming. Meanwhile our coal plants spew CO2 and mercury. And they're building more here in Florida! And they're telling us how clean they are! Lipstick on a pig if you ask me.

I have a feeling I'd enjoy talking energy with you more than with the president of ExxonMobil. Keep up the good work.

Florida does have a very strange approach to baseline power. I know the state is full of idling peakers just waiting to be started when the price is high enough. I have a friend that used to run around and start them up. It's a kind of penny wise, pound foolish situation if you ask me. Eventually they will get caught short. it's just a matter of time.

I think they have to be careful in Florida about raising the price of electricity too much. It wouldn't take many years of year round solar production to make "going off the grid" cost effective for the residential rate payer. A combination of passive and active solar components, either retrofited, or built at new construction could well earn a profit to the residential rate payer over the life of a home system. It's close in the southern climates, and if they raise rates in the north much more it may become a viable alternative. The upfront cost is big though, $30-50K per residence.

As for the emmisions from a Nuke Plant; We primarily worry the most about effluent waste, specifically water. The last 10 years or so have really seen a dramatic increase in regulatory scrutiny considering discharges.
I wish I could prove to folks how much cleaner they are now, versus 20 years ago. It's difficult though. Most folks don't have the math and science background to allow us to speak the same language.

[Christopher Stahl]

I totally agree with Ed, I believe the price will fall again as it did in the past, for all the reasons Ed state. Back in the 70s and early 80s, people didn't believe the price would drop, and it did.

What I do hope for is, that when prices do fall, alternative energies will still be explored. It would be fantastic to have a choice of which energy source will be used to power my next vehicle.

I'm all for more nuclear facilities, but when will we see another built. Just let me know when I can put in my own pebble bed reactor. :)

[Mike Cutler]

I'm all for more nuclear facilities, but when will we see another built. Just let me know when I can put in my own pebble bed reactor. :)

Sooner than you may think. More than a few utilities have applied for siting permits. The company I work for has already submitted bids for the larger components with long lead times for construcion,and has gone through the site approval process.

When construction resumes the plants will all be of the same model, or models. No one off, custom designed plants any longer. This will streamline the approval process, construction and liscensing by the NRC.

The sticking point is that the utilities want absolute guarantees that if they begin construction, of an approved standardized design, they will be allowed to finish regardless of changes in policy or politics at the federal and state level. These are multi billion dollar investments. Post TMI( Three Mile Island) A lot of utilities were left with partially built, and some near complete faclities that left the industry with 10's of billions of dollars in stranded, non recoverable assets due to politics alone.

I don't think you will see the fluid bed reactors in the US during the next phase of building. The regulatory body is slow to adapt to new technologies and designs. The new designs are a known quantity and the design very well understood. They are bult off existing designs already in service.

[Randy Denby]

I work for the electric utilties industries, and if anyone thinks "Smart Meters" are for the consumer. Think again.
Wait until you see what happens to electric rates in the next 10-15 years.



Mike, this statement caught my eye. Since I'm in the HVAC field, i get complaints from customers all the time regarding their electric bill. So I check their systems, duct, insulation, etc and sure there are problems, but sometimes not. I started noticing these new digital meters mounted on the homes, and got me to wondering someabout it. Got busy and basically never resolved my questions. Lo and behold, my electric rates went up almost double overnight. Walked around the house, and sure nuff...they had installed a new dig. meter. My stepson was with me (master electrician) and he said that that was one of their biggest complaints from customers.. Have you any injput on these new meters? Are they running higher averages or something? If a load is not phase balanced will it affect the reading? 'Preciate any input
I have not done anything different to raise my usage, matter of fact, should be less, but the bill still shows an increase in kw used from last year. Checked all circuits, no stuck contactors or switches .Thanks

[Lee DeRaud]

When construction resumes the plants will all be of the same model, or models. No one off, custom designed plants any longer. This will streamline the approval process, construction and liscensing by the NRC.(scratches head) Seems like you and I had this conversation awhile back (look here (http://www.sawmillcreek.org/showthread.php?t=26766)) and you were much less enthusiastic about the idea of standardized designs. Has something radical changed since then?

[Mike Cutler]

(scratches head) Seems like you and I had this conversation awhile back (look here (http://www.sawmillcreek.org/showthread.php?t=26766)) and you were much less enthusiastic about the idea of standardized designs. Has something radical changed since then?

IIRC. We arrived at the point that we were both closer in agreement than indicated.

By standardized design, or model, I am referring to the design basis criteria for each reactor, and subsytems required for safe operation and shutdown.

If we had one reactor design, there would be one set of operting guidelines that the reactor(s) would be operated under, and one set of design basis liscense criteria that the regulatory agency(s) could hold as the standard and audit to. Two designs would have two sets for the regulator. This is for the operational envelope of the reactor only. Currently there are a more than few designs, with each reactor having it's own seperate operational envelope, and parameters of safe operation and shutdown. Each had to be seperately analyzed and liscensed.
I still don't think that each and every plant needs to be exactly the same down to floor plan and locations of systems, supports, structures and components, and unfortunatley if there is too much goverment involvement this is what would happen. Equipment would be "Administratively Engineered",and we would have $500.00/gallon buckets of "Clipper Blue" paint.

I still would want the ability to modify the plant, not the reactor or it's operating envelope, as dictated by geographical location and enviormental considerations, and to be able to upgrade based on technology, and the capital risk assesment of an individual utility, and not to have standardized upgrades, implemented "fleetwide".

There are still pitfalls to the standardized design concept. I still see that a flaw in design, or material selection could lead to a problem that would migrate across all plants of the same design or vintage, and cause early shutdowns, and big$$$ modifications and material replacement. This is currently a problem with the plants we have. Some of these design flaws took years,and newer technologies to discover, and were addressed as they arose. The problem doesn't go away, even with a standardized design. We may find the problem quicker due to the standarized concept, but the effective resolution may be much more difficult to effect, and not every utility would have the necessary capital available to absorb the cost of these changes outside of rate hikes.

In order to move forward though there needs to be a streamlined process for liscensing and regulation to ensure that capital investments are allowed to be recovered, and costs can be more closely predicted so as to not have a long term negative effect on rates, or the earnings per share. I hate to bring this down to the $$$ aspect, unfortunately though it's an economic reality.

The "technogeek" in me likes the flexability of individualization, but the realist part understands that the standardized design concept is most economically viable solution to re-kickstart the nuclear power program in the US.

I know, wishy washy eh. We all capitulate on some level though.

Mike

[Mike Cutler]

[QUOTE=.



.


I work for the electric utilties industries, and if anyone thinks "Smart Meters" are for the consumer. Think again.
Wait until you see what happens to electric rates in the next 10-15 years.

QUOTE]

Mike, this statement caught my eye. Since I'm in the HVAC field, i get complaints from customers all the time regarding their electric bill. So I check their systems, duct, insulation, etc and sure there are problems, but sometimes not. I started noticing these new digital meters mounted on the homes, and got me to wondering someabout it. Got busy and basically never resolved my questions. Lo and behold, my electric rates went up almost double overnight. Walked around the house, and sure nuff...they had installed a new dig. meter. My stepson was with me (master electrician) and he said that that was one of their biggest complaints from customers.. Have you any injput on these new meters? Are they running higher averages or something? If a load is not phase balanced will it affect the reading? 'Preciate any input
I have not done anything different to raise my usage, matter of fact, should be less, but the bill still shows an increase in kw used from last year. Checked all circuits, no stuck contactors or switches .Thanks

If your kilowatts have doubled from the same historic time period, and there have been no upgrades that could cause it. I would be contacting your utility provider, and asking them to check the operation of the meter. That's a huge step change. One more thing you can do is have your stepson check the current load on each breaker with a clamp-on ampmeter. The breaker box cover has to be removed, and these checks done hot. I wouldn't normally advise this, but since he is an electrician, it's safe for him to do it.
You may have something running continuously that you are unaware of, ie refrigerators and hot water heaters are big loads. A defective 2nd element on my electric water heater cost me an extra $80.00 one month, before I figured it out.

As far as a "phase imbalance". We would need to define that a little more. We had a discussion along similar lines here on the board, a year or so ago, that started going south quick due to lack of commonality in expressive(colloquial) terms.

[Kyle Kraft]

Are you sure the fancy digital meter isn't an off peak meter? My mom requested one of those installed on her house. The meter has a display that scrolls the day, date, time, kwh @ off peak rate, kwh @ peak rate. There is definite "penalty" for using peak rate electricity. This penalty results in the electric meter dictating Moms activities, eg. electric water heater timer to shut the w/h off during peak hours, Mom using the electric oven only after 9pm, Mom washing clothes after 9pm, limited A/C use during the day, etc. She stated that the off peak kwh are dirt cheap, and they rake her over the coals for peak kwh.

[Mike Cutler]

There is definite "penalty" for using peak rate electricity. This penalty results in the electric meter dictating Moms activities, eg. electric water heater timer to shut the w/h off during peak hours, Mom using the electric oven only after 9pm, Mom washing clothes after 9pm, limited A/C use during the day, etc. She stated that the off peak kwh are dirt cheap, and they rake her over the coals for peak kwh.

Wow!!! I knew it was going to start, but I didn't realize it was already in the implementation phase in some states.
Some states and local munincipalities are also trying to figure out how to tap into the " electrical revenue stream" with penalties of their own, independent of the utility. All under the thinly veiled guise of "Conservation".

[Curt Harms]

I totally agree with Ed, I believe the price will fall again as it did in the past, for all the reasons Ed state. Back in the 70s and early 80s, people didn't believe the price would drop, and it did.

What I do hope for is, that when prices do fall, alternative energies will still be explored. It would be fantastic to have a choice of which energy source will be used to power my next vehicle.

I'm all for more nuclear facilities, but when will we see another built. Just let me know when I can put in my own pebble bed reactor. :)

That nukes may not be such bad things after all. We all know Hollywood has the expertise to make such decisions so nuke plants are now chic.:rolleyes: I did hear that there was a swedish reactor design that was inherently incapable of pulling a TMI or worse yet, chernobyl.

If I have my facts right, fusion produces few or no long lived radioactive byproducts compared to fission reactors. The problem with fusion is that it takes a BIG spark plug and spiffy containment. I was at Oak Ridge last summer and went to the museum there. One exhibit claimed that there is now a experimental fusion setup that produces more energy than it consumes. I hadn't heard or seen that anywhere else. Any one know anything about it?

Curt

[Lee DeRaud]

If I have my facts right, fusion produces few or no long lived radioactive byproducts compared to fission reactors. The problem with fusion is that it takes a BIG spark plug and spiffy containment. I was at Oak Ridge last summer and went to the museum there. One exhibit claimed that there is now a experimental fusion setup that produces more energy than it consumes. I hadn't heard or seen that anywhere else. Any one know anything about it?One can hope.

But it's a long running joke, among people who care about such stuff, that fusion power reactors are about 25 years from becoming operational...and have been for the last fifty years.

[Curt Harms]

One can hope.

But it's a long running joke, among people who care about such stuff, that fusion power reactors are about 25 years from becoming operational...and have been for the last fifty years.

about these things, but how much effort and resources have been devoted? I wonder to what extent the freeze on nuclear power in the U.S. at least has made fusion research a low priority? They're all that evil nuclear power, doncha know?

Curt

[Lee DeRaud]

about these things, but how much effort and resources have been devoted? I wonder to what extent the freeze on nuclear power in the U.S. at least has made fusion research a low priority?It's certainly partly due to that, but mainly it's a classic case of a theoretically simple concept colliding face-first into intractable physical reality, in the form of some really nasty implementation details. Maybe a "Manhattan Project" approach would speed things up...then again maybe not.

[Curt Harms]

It's certainly partly due to that, but mainly it's a classic case of a theoretically simple concept colliding face-first into intractable physical reality, in the form of some really nasty implementation details. Maybe a "Manhattan Project" approach would speed things up...then again maybe not.

That's true. I recently read Richard Rhodes book about building the atomic bomb. Great book, yeah I was about 20 years late:rolleyes:. The Manhattan Project was largely a massive engineering project, the basic science was mostly in place prior to the inception of the Manhattan Project. We probably don't know enough about those "intractable physical realities"yet (love your phrase). Even lignum vitae probably wouldn't contain 100 million degrees for long:D.


Curt

[Randy Denby]

That's true. I recently read Richard Rhodes book about building the atomic bomb. Great book, yeah I was about 20 years late:rolleyes:. The Manhattan Project was largely a massive engineering project, the basic science was mostly in place prior to the inception of the Manhattan Project. We probably don't know enough about those "intractable physical realities"yet (love your phrase). Even lignum vitae probably wouldn't contain 100 million degrees for long:D.


Curt

100 million degrees? Is this the temp a reactor reaches? Or are you just joshin:) If so and even if not ....there are some very very smart people in this world. I am amazed by technology.

[Curt Harms]

100 million degrees? Is this the temp a reactor reaches? Or are you just joshin:) If so and even if not ....there are some very very smart people in this world. I am amazed by technology.

Hi Randy-
I was wrong. According to http://www.jet.efda.org/pages/content/fusion1.html to produce fusion requires in excess of 100,000,000 degrees Kelvin. That works out to
179999540 degrees Fahrenheit, a touch warm.

[Brian Kent]

As for the emmisions from a Nuke Plant; We primarily worry the most about effluent waste, specifically water. The last 10 years or so have really seen a dramatic increase in regulatory scrutiny considering discharges.
I wish I could prove to folks how much cleaner they are now, versus 20 years ago. It's difficult though. Most folks don't have the math and science background to allow us to speak the same language.


Mike, can you recommend any reading material about that, whether articles or books or textbooks?