Bicycle Diaries: Got oil?

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Got oil?

not for much longer

After seeing worldwide production rise an average of 2.3 percent annually since 1965, we may be approaching a plateau beyond which production will not climb. According to the Wall Street Journal, that ceiling could be 100 million barrels a day, and said we could hit it as early as 2012.

Most of the world's biggest oil fields are aging, and their production is falling. There is widespread speculation that the Ghawar oil field in Saudi Arabia, the world's largest, is petering out, which is significant because it likely has produced more than half the oil that has flowed out of the kingdom.

At the rate oil fields are being depleted, simply maintaining our current production of 85 million barrels a day will require producing at least another 4 million daily barrels every year. That, according to the Journal, is roughly five times the daily production in all of Alaska, and doesn't account for any increase in demand at all.

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Blogger Fritz said...

I don't know if anybody's mentioned this yet, but $100/bbl works out to $2.40/gallon. Refinery production costs run about 40 cents/gallon, and distribution and marketing runs another 30 cents/gallon. So $100 oil costs a minimum of $3.10 to turn into gasoline and ship it to your local neighborhood filling station. Add to this the 18.4 cent federal excise and whatever your state and other local taxes are, and the cheapest gasoline should sell for about $3.50/gallon or more if everybody is just breaking even.

$100 is for futures, but refiners are paying $90+ now for contracts purchased in November and December. The refiners are losing money right now.

8/1/08 16:10  

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