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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: Lane3 who wrote (25215)	7/26/2006 8:30:05 AM
From: thames_sider	Read Replies (3) \| Respond to of 541731

How, pray tell, does an increase in price increase the supply of oil in the ground? That's reasonable, from a purely economic POV. If the ppb is $40, then oil that would cost $50/barrel to extract and process is not worth getting. If the ppb goes to$70 then suddenly it's economically viable (and counted in reserves). It doesn't necessarily address the 'energy cost' of extraction, however - in other words, whether it requires more energy to extract and process the oil than that oil can provide; this occurs because different energy forms may be priced differently (and also there may be concealed 'sunk' costs of energy, for example in the manufacture of equipment or the construction of plant, where due to tax and other distortions the costs are concealed). But you may end up burning the equivalent of 110 barrels of oil for every 100 you extract, for example. I'm not an expert so I can't tell for myself if this is correct...

To: Lane3 who wrote (25215)	7/26/2006 10:20:07 AM
From: Ilaine	Read Replies (1) \| Respond to of 541731

Increase in oil price doesn't increase the amount of this commodity in the earth, but makes it economically attractive to recover. The operative word here is "recoverable."

To: Lane3 who wrote (25215)	7/26/2006 11:42:10 AM
From: DavesM	Read Replies (2) \| Respond to of 541731

re: "How, pray tell, does an increase in price increase the supply of oil in the ground?" There is a limited supply of oil, if all you are willing to do is stick a hole in the ground then pump the oil out. Now that the price of oil has increased to the level that tar sand operations make economic sense, Canada has the world's second largest oil reserves. If oil stays this expensive, it may become economic to exploit America's rather large shale deposits. The oil shale deposits in the United States amount to about 1 trillion barrels of oil (Wikipedia has an article on the subject that claims that Shell oil has a method of recovering oil from shale deposits that works economically, if the world price of oil stays above $30 a barrel).