$8.00 a gallon for gas?

[RustyJC]

The US is a net importer of crude oil by a wide margin. We do export some refined products where imbalances in demand exist - for instance, in Europe over 50% of the new vehicles sold are diesel powered, whereas the percentage in the US is in the low single digits. Therefore, Europe has more demand for diesel fuel, while the US has more demand for gasoline. We will ship tankers loaded with diesel fuel from the Gulf Coast refiners to Europe, and these tankers will return to the Gulf Coast carrying gasoline from the European refiners.

Yes, we deal in a global market, but supply and demand still have a real and significant impact on prices. As happened a few years ago, let a product pipeline go down and see what happens to gasoline and diesel prices in Phoenix, AZ, or let a hurricane shut down the Gulf Coast refineries and see what happens to US fuel prices!! If we produce more oil and natural gas, the global supply increases which affects the worldwide crude oil prices and we also have to import less which positively impacts the US balance of payments, thus strengthening the US dollar.

Rusty

[HD4Mark]

We use our rig primarily to snowbird south each winter. The trip is about 1600 mile one way. I did a little quick calculation of the difference between storing the unit at the campground we spend most of the winter at and driving a car down and $8 for diesel.

The CG charges $75 a month for basic storage. Using 10MPG for the diesel and 30 for a car, both optimistic here is what I figure.

MH would be 3200 miles @ 10MPG $2560 for fuel. That's it. We usually stay at a FLying J or something so no overnight cost.

With a car the gas at $8 (yes I know it would be less for gas) would be $856 plus $450 to store the RV, 6 nights at a hotel if we travel at the same pace at around $60, also optimistic because we will not stay in a flea bag motel, another $360 all adding up to $1666.

That is a difference of $894 not counting the fact that we could not prepare our own meals going by car and it would be difficult to do some of the routine maintenance I do without getting the MH back to my sticks and bricks where most of my tools are.

Some of the places we stop along the way for fun would be terribly expensive for a decent hotel compared to a nice CG also. So as long ans the wallet supports it, we go in the MH.

Two more thoughts. We bring along our two dogs and finding pet friendly hotels can be challenging. Also making reservations limits driving time to a preset amount. Sometimes we go 12 hours, sometimes 6 according to what we feel like.

[Ramblin]

Originally Posted by clyon51

I have a friend who is a drilling supervisor, presently working in N.D. He says the US has enough oil to last us hundreds of years. Although they could pump (not exact figures here) 10,000 barrels a day, the govt only allows them to pump 5,000.... And this is only on one site.

I'm interested to know how the government can disallow a (presumably) private company from producing whatever they want to bring to market. This seems to fly in the face of free-market capitalist ideals.

Originally Posted by clyon51

So to me, this is keeping prices higher because of keeping the supply lower. It also cause the US to import oil at much higher prices. He says we could be completely oil independent if the govt would allow it.

It's not up to the government. It's up to the companies who own the oil and bring it to market. I imagine their interests lie in their balance sheets rather than US oil independance.

Even if they did, they could not produce enough oil to overcome the cartels who control supply on the world market. If OPEC, for instance, notices supplies on the increase, they can reduce their production to offset the glut and keep prices high.

All that said, it's always better to buy oil produced here rather than buy it from poeple who hate us and want to kill us. No doubt, increased domestic production can result in decreased dependance on Middle East product (assuming our demand stays the same).

Originally Posted by clyon51

Here's something I've thought for a few years. If we kept drilling years back and never imported oil, how long would ours last? There is certainly a point where we would run out. However, if we kept a large portion in the ground and just used other countries until their's was gone, we would still have oil.

The USA has about 21 billion barrels of proved reserves, not including the government's strategic reserve. The USA consumes 19 million barrels of oil per day. Do the math. We'd last three years. (This actually surprises me, am I seeing this right?) Keep in mind, these are PROVED reserves, and do not account for unfound oil, so continued exploration might improve this outlook.

Originally Posted by clyon51

Is this the govts plan? It's the only thing that makes any sense to me.

I'd say, yes, it makes sense to not increase production to 100% for a short term gain just to run our reserves out and be 100% dependent in the (near?) future. Again, I'd like to know more about how government has control over this.

I'd guess it's more the oil company's plan to sit on their product and bring it to market when it's most profitable to do so. Oil in the ground is money in the bank. If that oil stands to increase in value faster than the cash it would bring on todays market, it makes sense to leave it there.

IMO, strategically, it makes more sense to work on the demand side of the equation, because we have 100% control over that, and almost no control over the supply side. If we can reduce our demand, we also will reduce our dependance and increase the lifespan of our reserves.

[RustyJC]

Originally Posted by Ramblin

I'd guess it's more the oil company's plan to sit on their product and bring it to market when it's most profitable to do so. Oil in the ground is money in the bank. If that oil stands to increase in value faster than the cash it would bring on todays market, it makes sense to leave it there.

It's more complex than that. Producers must look at the lifting cost to produce oil from each well. In old oil fields where production has played out, there are many wells that may produce only 1-2 barrels per day - these wells are called "scraper wells" (since they're scraping the bottom of the barrel) and have very high lifting costs. During periods of low crude oil prices, lifting costs are higher than the market value of the crude oil, and these scraper wells are shut in. When crude oil prices rise, the producers can justify operating the scraper wells again, and they come back on line. That's only one example of how prices affect supply. Another is the Hughes Rig Count - if you analyze the Hughes Rig Count (the number of active drilling rigs at a point in time), as prices go up, the rig count goes up since there's more justification for companies expending the exploration dollars to search in high production cost areas such as deep offshore waters - supply and demand at work again, as higher prices drive an increase in supply to meet the demand.

Rusty

[Aguyfromcalg]

When we had high inflation and oil shortages in the 70's RVers were still on the road.
It doesn't matter if there is oil supplies for a week or a thousand years , producers want to maximise their profits and investors want to maximise their returns. Government control of any sort will only result in produces closing up shop and moving to countries where they can operate at a profit.
The only thing we can do is buy our fuel at the gas station that has the lowest price at the pumps. That is why people shop at Wal Mart.
We can only use our pocket books and votes to enact changes.

[Ramblin]

Originally Posted by RustyJC

It's more complex than that. Producers must look at the lifting cost to produce oil from each well. In old oil fields where production has played out, there are many wells that may produce only 1-2 barrels per day - these wells are called "scraper wells" (since they're scraping the bottom of the barrel) and have very high lifting costs. During periods of low crude oil prices, lifting costs are higher than the market value of the crude oil, and these scraper wells are shut in. When crude oil prices rise, the producers can justify operating the scraper wells again, and they come back on line. That's only one example of how prices affect supply. Another is the Hughes Rig Count - if you analyze the Hughes Rig Count (the number of active drilling rigs at a point in time), as prices go up, the rig count goes up since there's more justification for companies expending the exploration dollars - supply and demand at work again, as higher prices drive an increase in supply to meet the demand.

Rusty

But the basic premise of my statement is correct, no? In general, if oil companies deem it more profitable to leave the oil in the ground, they will reduce production. If they think it'll be more profitable to bring it to market, they'll pump it.

I'd still like to know where government comes into play in this equasion. There seems to be the perception that government is controlling production somehow, yet I have not seen any evidence to support that common belief. Can government tell me my oil well is only allowed to produce 5000 bbl/day when I want to bring its maximum capacity to market? Maybe through denial of subsidies or incentives?

Once again Rusty, very informative. I learn something new from every one of your posts. Thanks!

[RustyJC]

Originally Posted by Ramblin

But the basic premise of my statement is correct, no? In general, if oil companies deem it more profitable to leave the oil in the ground, they will reduce production. If they think it'll be more profitable to bring it to market, they'll pump it. Basically, yes, but please read my scraper well example again. They ain't a'gonna produce it at a loss, and I daresay no reasonable observer would expect them to. The principle of supply and demand still holds true, though - higher prices will drive more supply, while price decreases will reduce supply as higher production cost oil leaves the market.


I'd still like to know where government comes into play in this equasion. There seems to be the perception that government is controlling production somehow, yet I have not seen any evidence to support that common belief. Can government tell me my oil well is only allowed to produce 5000 bbl/day when I want to bring its maximum capacity to market? Maybe through denial of subsidies or incentives? Yes, the government can do exactly that. An example is the Texas Railroad Commission who (despite their name) regulate the oil and gas industry within the state of Texas. Among their other duties/powers is the setting of production allocations (ceilings) for what each well can produce. From Wikipedia (I know, I know, but it's handy and had the best brief overview):

• Established by the Texas Legislature in 1891, it is the state's oldest regulatory agency and began as part of the Efficiency Movement of the Progressive Era. From the 1930s to the 1960s it largely set world oil prices, but was displaced by OPEC (Organization of Petroleum Exporting Countries) after 1973. In 1984 the federal government took over transportation regulation for railroads, trucking and buses, but the Railroad Commission kept its name. With an annual budget of $79 million it now focuses entirely on oil, gas, mining, propane, and pipelines, setting allocations for production each month.[1]

Please see my comments above.

Rusty

[Trudinator]

Originally Posted by George Miklas

I've already begun to think about such things even after rising above $3.00/gallon again. Now that we are near $4.00/gallon, I'm definitely making plans to move in that direction.

My realistic consumption is @ 10 MPG pulling the trailer, and @ 17 not pulling the trailer. The difference is @ 41%

Since my van already has a sofabed in rear, I'm considering leaving the trailer at home. I will remove a piece of rear door glass and build in a 5000 BTU air conditioner. The kids will sleep in their tent on the ground.

I don't get your logic. Let's look at this scenario. Let's say you get 15 mpg and you're going on a 1500 mile trip. You'd obviously need 100 gallons of gas. With gas at $3 a gallon, you'd pay $300 and with gas at $4 a gallon you'd pay $400. Would you really leave your camper at home for $100? There are many, many, many ways to cut costs when camping. Leaving my TT at home is NOT going to happen. I bought it to USE, not to gather dust sitting at home. Camping is my escape from the every rat race. I'm not going to sacrifice my sanity or well being for $100 or so.

[RVluvin]

Seems to me that in a free market, the market sets the price, regardless of where its drilled from or who owns it. The only thing our govt. can do is subsidize the cost. Only problem is, our govt. doesn't have it's own money, it only has our tax dollars. Supply & Demand, fuel will always be sold to the highest bidder, regardless of who selling or who's buying.

The only thing we can do as a nation, is use less. The less we use, the lower the price will go down. BUT, the lower the price goes down, the more we use, which drives the price back up. Ok, my head hurts now.

As for me and my family, seems if we don't spend it on one thing, we spend it on something else. Load up the RV and lets go!!!

[Ramblin]

Originally Posted by RustyJC

Please see my comments above.

Interesting. So in Texas, there is a government entity that can tell oil well owners how much they can produce. Really, it's just another cartel manipulating supplies. In fact (if wikipedia is to be believed) OPEC was modeled after its current design, which was originally to keep oil supplies flowing in support of WWII. I guess if the oil company owners got together to fix prices, they'd all go to jail, but it's OK for the government to do it for them.

Now that we know there is a government entity that CAN control production, the next question is if they HAVE been throttling production.

I got some reading to do.

Thanks again.

[RustyJC]

As was stated in the Wikipedia article, the RRCT (Railroad Commission of Texas) effectively set the world price of crude oil by raising or lowering allocations (supplies) until 1973 when OPEC gained enough strength to take over. Just how effective this was is shown in the following graph (note pre-1973 versus post-1973):



I guess if there's such a thing as a benevolent regulatory agency, the RRCT would fall under that heading as their actions were ultimately good for the oil companies, good for the owners of the mineral rights (by preventing overproduction of and damage to the reservoirs) and good for the consumer by providing price stability.

Rusty

[donandmax]

I get a chuckle out of the few of you who stated: "We need to use less" Im sure those who intend on rv'ing are going to use less. Come on folks lets face it. We are part of the problem by using these fuel hogs. I mean get real here...

[sevenmacs]

Originally Posted by Ramblin

But the basic premise of my statement is correct, no? In general, if oil companies deem it more profitable to leave the oil in the ground, they will reduce production. If they think it'll be more profitable to bring it to market, they'll pump it.

I'd still like to know where government comes into play in this equasion. There seems to be the perception that government is controlling production somehow, yet I have not seen any evidence to support that common belief. Can government tell me my oil well is only allowed to produce 5000 bbl/day when I want to bring its maximum capacity to market? Maybe through denial of subsidies or incentives?

Once again Rusty, very informative. I learn something new from every one of your posts. Thanks!

The Government is controling production very simply by limiting where we can access our oil from, restricting drilling or access in oil rich areas, stopping oil shale production, making it harder and more costly for oil companies to produce, we have the oil and it is obtainable, people are quite blind if they don't see this. If you think the oil companies won't produce, then why doesn't the government call thier bluff and open all areas for production. The fact is we can be self sustaining if we wanted to be and yes your vote & pocketbook can have an impact.

Back to the point, I hope we don't see $ 8.00 or even $6.00

Oh well I better go put air in my tires and get a tune up so I can save all the fuel as our president says

[ulric]

Number 1, those of us who have large motor coaches that get 7 mpg (such as my 400 hp Monaco Dynasty), are kind of living in glass houses as far as motor fuel consumption goes. That said, we do live in a free country where each individual gets a choice how to exhaust a resource/ spend our money. I personally don't feel guilty, just very fortunate!

However, I do wish that we could propel the same level of luxury around more economically and more cleanly. I see nothing at all wrong with government subsidies for any forms of energy that benefit us, the people. After all, we are the world's first government "of the people, by the people, and for the people."

As 2 of the people and by extension a member of the government, if and when motor fuel goes to $8.00 per gallon, my wife and I will continue to do more of what we do now. We don't just roam around - we tend to camp in the same place in FL all winter, and we have 2 "home" campgrounds in the NE, where we stay 2 or 3 weeks at a time in the summer.

If fuel does go that high suddenly, like by this summer, I'd be really worried about the rest of the economy. It would be hard not to view that rapid a price increase as a stupid ploy by oil companies and speculators to profit before political change or to influence the election this fall. But I think we should all be concerned and aware that it is going to go up at some point regardless of what anyone does, drilling, fracking, or whatever, because demand is going up really fast in developing countries. At some point it may not be price that will be what we have to worry about, it may be availability, and lack of viable alternatives because we have not explored technology to the fullest. That's where the rubber meets the road for those of us who use a lot of fuel for recreational purposes!