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Charlie Munger has mentioned the same "use theirs first" approach: "The imported oil is not your enemy, it's your friend. Every barrel that you use up that com

by stephen 11y ago

Charlie Munger has mentioned the same "use theirs first" approach: "The imported oil is not your enemy, it's your friend. Every barrel that you use up that comes from somebody else is a barrel of your precious oil which you're going to need to feed your people and maintain your civilization." http://seekingalpha.com/article/1631292-charlie-munger-thinks-oil-is-absolutely-certain-to-become-incredibly-short-in-supply http://seekingalpha.com/article/1631292-charlie-munger-think...

lukeschlather 11y ago
The disingenous (or ignorant) thing about that sort of thing is that it makes no mention of alternative fuel prices. Coal and natural gas can be refined into gasoline. This is obviously not a great idea from an environmental standpoint, but from a cost standpoint it becomes economically viable when oil hits about $70/barrel. Electrolysis-refined hydrogen becomes economical when oil hits $200/barrel, and that has a lot of environmental benefits. I would bet if oil stayed over $120/barrel for several years the economic incentives would kick in and someone would find a way to make hydrogen cost-competitive, probably even eventually bringing the cost down so it's similar to current oil prices. http://www.greencarcongress.com/2014/06/20140609-lux.html http://www.greencarcongress.com/2014/06/20140609-lux.html
- TheCowboy 11y ago
  It seems more than optimistic to put the cost at $70/barrel for coal liquefaction, and it makes me question the validity of the source. It's an energy intensive process that is usually seen as much higher than $70, and the alternative economic uses of the energy used in production are usually going to be better. Not only do you still have to spend energy mining and transporting coal, but the energy spent refining the coal is immense compared to what refinable products you get out of it. There is also market evidence where people are more willing to put their money into technological development of fracking than liquefaction. It's best to be suspicious whenever a source suggests that coal liquefaction, and other processes like it, are that simple. A good book on the topic is Oil 101 by Morgan Downey.
  - lukeschlather 11y ago
    $70/barrel is just the figure for natural gas, I couldn't find a figure for coal. In any case, it sounds like $150/barrel is a pretty solid ceiling.
- logfromblammo 11y ago
  The US tapped out its highest-profit traditional oil wells a long time ago, and used the export profits to grow its economy. Now the US is awash in fracked gas. The "sit on it" strategy assumes that the resource held in reserve will not become obsolete. It makes more sense to me to pull it all out of the ground as fast as you can, so you can sell more of it when the global price is highest, rather than being forced to buy at that time. Didn't China learn anything from its rare earths play? The supply curve never really hits a brick wall. As long as the price keeps going up, the market keeps producing more to sell. And even if you hit a hard limit, such as by exhausting all the cheap wells and mines, human ingenuity often produces an acceptable substitute. Many countries are burning the petroleum as fast as they can, keeping the computers running for the engineers researching wind, solar, nuclear fission, geothermal, hydrogen, fracking, cellulose enzymes, algae oils, nuclear fusion, radioisotope thermal, external combustion engines, generator-electric hybrids, fuel cells, denser batteries, more efficient motors and transmissions, and a whole host of other technologies that will finally be ready to take over, once the last oil on Earth is being burned by China to keep its lights on and tractors running. Everyone else will be running their tractors with fuels mixed up from agricultural waste, and keeping the lights on with a dozen different competing technologies. It seems like a bad strategy to me, but I'm not Chinese.
  - selestify 11y ago
    What was China's rare earths play?
    - logfromblammo 11y ago
      After China became practically the sole supplier of rare earth elements to the entire world, they restricted exports in 2011, creating shortages everywhere outside of China. It caused a lot of companies to reexamine their supply chains, this time considering factors other than just price per ton. Several nations started subsidizing domestic production from mothballed facilities for strategic economic reasons. China went from 95% share of that market to less than 80%. Essentially, they were expecting to get higher prices by restricting output as a monopoly supplier, but it blew up in their faces.

by stephen 11y ago

lukeschlather 11y ago

The disingenous (or ignorant) thing about that sort of thing is that it makes no mention of alternative fuel prices. Coal and natural gas can be refined into gasoline. This is obviously not a great idea from an environmental standpoint, but from a cost standpoint it becomes economically viable when oil hits about $70/barrel. Electrolysis-refined hydrogen becomes economical when oil hits $200/barrel, and that has a lot of environmental benefits. I would bet if oil stayed over $120/barrel for several years the economic incentives would kick in and someone would find a way to make hydrogen cost-competitive, probably even eventually bringing the cost down so it's similar to current oil prices. http://www.greencarcongress.com/2014/06/20140609-lux.html http://www.greencarcongress.com/2014/06/20140609-lux.html

TheCowboy 11y ago
It seems more than optimistic to put the cost at $70/barrel for coal liquefaction, and it makes me question the validity of the source. It's an energy intensive process that is usually seen as much higher than $70, and the alternative economic uses of the energy used in production are usually going to be better. Not only do you still have to spend energy mining and transporting coal, but the energy spent refining the coal is immense compared to what refinable products you get out of it. There is also market evidence where people are more willing to put their money into technological development of fracking than liquefaction. It's best to be suspicious whenever a source suggests that coal liquefaction, and other processes like it, are that simple. A good book on the topic is Oil 101 by Morgan Downey.
- lukeschlather 11y ago
  $70/barrel is just the figure for natural gas, I couldn't find a figure for coal. In any case, it sounds like $150/barrel is a pretty solid ceiling.
logfromblammo 11y ago
The US tapped out its highest-profit traditional oil wells a long time ago, and used the export profits to grow its economy. Now the US is awash in fracked gas. The "sit on it" strategy assumes that the resource held in reserve will not become obsolete. It makes more sense to me to pull it all out of the ground as fast as you can, so you can sell more of it when the global price is highest, rather than being forced to buy at that time. Didn't China learn anything from its rare earths play? The supply curve never really hits a brick wall. As long as the price keeps going up, the market keeps producing more to sell. And even if you hit a hard limit, such as by exhausting all the cheap wells and mines, human ingenuity often produces an acceptable substitute. Many countries are burning the petroleum as fast as they can, keeping the computers running for the engineers researching wind, solar, nuclear fission, geothermal, hydrogen, fracking, cellulose enzymes, algae oils, nuclear fusion, radioisotope thermal, external combustion engines, generator-electric hybrids, fuel cells, denser batteries, more efficient motors and transmissions, and a whole host of other technologies that will finally be ready to take over, once the last oil on Earth is being burned by China to keep its lights on and tractors running. Everyone else will be running their tractors with fuels mixed up from agricultural waste, and keeping the lights on with a dozen different competing technologies. It seems like a bad strategy to me, but I'm not Chinese.
- selestify 11y ago
  What was China's rare earths play?
  - logfromblammo 11y ago
    After China became practically the sole supplier of rare earth elements to the entire world, they restricted exports in 2011, creating shortages everywhere outside of China. It caused a lot of companies to reexamine their supply chains, this time considering factors other than just price per ton. Several nations started subsidizing domestic production from mothballed facilities for strategic economic reasons. China went from 95% share of that market to less than 80%. Essentially, they were expecting to get higher prices by restricting output as a monopoly supplier, but it blew up in their faces.