Some questions to ponder...
1. How does the Deepwater Horizon Disaster (DHD) compare to historic unscheduled and scheduled releases of oil into the environment?
2. What was special about the Deepwater Horizon before it exploded?
3. Why did the Deepwater Horizon fly a Marshallese flag?
4. What series of events contributed to the blowout and eventual unscheduled release? How is it possible that BP, Transocean, Haliburton, Cameron, Anadarko, MOEX (MOECO), and Weatherford were all (potentially) liable in the DWD?
5. What was the rate of discharge from the well during the release? How did the reported discharge change as a function of time? How did the actual discharge change as a function of time? Why was it so difficult to estimate the discharge of the spill? What are the potential incentives to underestimate the discharge and total volume of the spill?
6. What happened to all of the oil?
7. How much money does BP estimate the spill will cost? How has money been already spent? Where is BP getting (some of) the money that will go into operational response and compensatory funds?
8. What are some of the recent developments in offshore drilling in and around the USA (in Cuba, AK, and along the border between the EEZs of the USA and Mexico?)
Slides from today are up on Sakai. Tomorrow, we will begin our discussion of coal. Your reading assignment for Friday is Mountaintop Mining Consequences by Palmer et al. (2010) from Science Magazine. Also, our reading assignment for Monday will be Full cost accounting for the life cycle of coal by Epstein et al. (2011) in the Annals of the New York Academy of Sciences. This is a longer article and so I wanted to get it to you with plenty of lead time.
Wednesday, February 29, 2012
Monday, February 27, 2012
Lecture 18 Summary and Notes
After getting through the recent exam and homework, some questions for the day...
1. How will the EU Fuel Quality Directive affect the use of the Canadian tar sands? Why is oil derived from tar sands viewed differently than oil from other sources by the EU Fuel Quality Directive.
2. Judges have recently ruled on fracking cases in Dryden and Middlefield, NY. In whose favor were these rulings? How is this different from recent developments in PA and WV?
3. What specific portions of the ocean have reasonable potential for petroleum reserves?
4. In general, would most offshore reserves be classified as large or small; conventional or unconventional?
5. Where are the high concentrations of offshore platforms right now?
6. Is the US population generally in support of or against increasing offshore drilling? How has this changed over time?
7. What are some of the problems associated with offshore drilling (not just related to massive spills like the Deepwater Horizon Disaster)?
8. What are some of the mitigation and clean-up strategies associated with oceanic oil spills such as the Deepwater Horizon Disaster?
Slides from lecture today are on Sakai. Wednesday, we will finish with offshore petroleum with a closer look at the Deepwater Horizon Disaster and some recent developments in the regulation of offshore activities in US waters. Please read BP Spill Victims Face Economic Fallout Two Years Later by Allen Johnson Jr., Laurel Calkins and Margaret Cronin Fisk published February 23, 2012 in Bloomberg.
1. How will the EU Fuel Quality Directive affect the use of the Canadian tar sands? Why is oil derived from tar sands viewed differently than oil from other sources by the EU Fuel Quality Directive.
2. Judges have recently ruled on fracking cases in Dryden and Middlefield, NY. In whose favor were these rulings? How is this different from recent developments in PA and WV?
3. What specific portions of the ocean have reasonable potential for petroleum reserves?
4. In general, would most offshore reserves be classified as large or small; conventional or unconventional?
5. Where are the high concentrations of offshore platforms right now?
6. Is the US population generally in support of or against increasing offshore drilling? How has this changed over time?
7. What are some of the problems associated with offshore drilling (not just related to massive spills like the Deepwater Horizon Disaster)?
8. What are some of the mitigation and clean-up strategies associated with oceanic oil spills such as the Deepwater Horizon Disaster?
Slides from lecture today are on Sakai. Wednesday, we will finish with offshore petroleum with a closer look at the Deepwater Horizon Disaster and some recent developments in the regulation of offshore activities in US waters. Please read BP Spill Victims Face Economic Fallout Two Years Later by Allen Johnson Jr., Laurel Calkins and Margaret Cronin Fisk published February 23, 2012 in Bloomberg.
Friday, February 17, 2012
Lecture 17 Summary and Notes
Some questions from today's lecture...
1. What important announcements regarding the KXL pipeline were contained in their recent earnings report (released on Tuesday, February 14th)?
2. What were the findings of the 2008 CARA report from the USGS? How was the appraisal conducted? What are the differences between discovered and undiscovered resources? Are these resources of reserves? Where are the big oil discoveries (or undiscoveries?) expected?
3. How have the findings of reports like the CARA affected Greenland?
4. Offshore petroleum exploration and drilling is more expensive than inshore but it expected to be a major (and growing) component of US and world petroleum production in the near future. What are the geologic limitations of off shore drilling (ei why can't you drill in the middle of the ocean and expect to get oil or natural gas)?
5. How have the laws regarding "who owns the sea" changed historically in response to humanity's ability to (and desire to) exploit off shore petroleum reserves?
6. What two environmental disasters in 1969 helped the reorganization and expansion of what would become the Clean Water Act and turned many Americans against off shore oil production? What role did the rate of domestic production in the late 1960s/early 1970s play in this anti-offshore sentiment? What are the current restrictions on offshore exploration and productions in the USA? How are these restrictions expected to change in the near future?
Slides from lecture today are on Sakai. I will begin grading your exams soon and send out an email when they ready. For break, remember to 1. read your book group book and 2. do your Feb Break homework assignment. Have a great break.
1. What important announcements regarding the KXL pipeline were contained in their recent earnings report (released on Tuesday, February 14th)?
2. What were the findings of the 2008 CARA report from the USGS? How was the appraisal conducted? What are the differences between discovered and undiscovered resources? Are these resources of reserves? Where are the big oil discoveries (or undiscoveries?) expected?
3. How have the findings of reports like the CARA affected Greenland?
4. Offshore petroleum exploration and drilling is more expensive than inshore but it expected to be a major (and growing) component of US and world petroleum production in the near future. What are the geologic limitations of off shore drilling (ei why can't you drill in the middle of the ocean and expect to get oil or natural gas)?
5. How have the laws regarding "who owns the sea" changed historically in response to humanity's ability to (and desire to) exploit off shore petroleum reserves?
6. What two environmental disasters in 1969 helped the reorganization and expansion of what would become the Clean Water Act and turned many Americans against off shore oil production? What role did the rate of domestic production in the late 1960s/early 1970s play in this anti-offshore sentiment? What are the current restrictions on offshore exploration and productions in the USA? How are these restrictions expected to change in the near future?
Slides from lecture today are on Sakai. I will begin grading your exams soon and send out an email when they ready. For break, remember to 1. read your book group book and 2. do your Feb Break homework assignment. Have a great break.
Wednesday, February 15, 2012
Lecture 16 Summary and Notes
Some important concepts for the day...
What is the big deal about the about the Keystone XL pipeline? Is it just another pipeline? Why are people protesting the construction of the pipeline? How many jobs will construction of the pipeline create (direct, indirect, temporary, and permanent)? How has the proposed pipeline been portrayed in the media? Are Americans generally for or against construction of the pipeline? What is the general location of the proposed pipeline? Are there other pipelines in this area? Is this the first Canada-US trans border pipeline? What is the Oglalla aquifer? Why are groundwater resources particularly valuable in the area atop the Oglalla aquifer? How common are "major" pipeline incidents? What are the historic trends in pipeline construction in the USA? How common are fatal accidents for truck carrying petroleum products? What are the advantages and disadvantages of pipelines? Why is it difficult to compare the relative dangers of pipelines and trucks? What is the likelihood of KXL oil being exported to non-US markets? What does fungible mean? Do individual consumers have the ability to choose where their petroleum products come from? How would the KXL pipeline affect this? Where is Canada? How did investors in TransCanada react to the Jan 18th decision by Obama to "reject" the KXL pipeline? What is the future of the KXL pipeline?
Slides from lecture today are on Sakai. Your reading assignment for Friday is U.S. Geological Survey Fact Sheet 2008-3049: Circum-Arctic Resource Appraisal: Estimates of Undiscovered Oil and Gas North of the Arctic Circle (.pdf) by Bird et al.
Also, the homework assignment for Feb Break is available on Sakai.
What is the big deal about the about the Keystone XL pipeline? Is it just another pipeline? Why are people protesting the construction of the pipeline? How many jobs will construction of the pipeline create (direct, indirect, temporary, and permanent)? How has the proposed pipeline been portrayed in the media? Are Americans generally for or against construction of the pipeline? What is the general location of the proposed pipeline? Are there other pipelines in this area? Is this the first Canada-US trans border pipeline? What is the Oglalla aquifer? Why are groundwater resources particularly valuable in the area atop the Oglalla aquifer? How common are "major" pipeline incidents? What are the historic trends in pipeline construction in the USA? How common are fatal accidents for truck carrying petroleum products? What are the advantages and disadvantages of pipelines? Why is it difficult to compare the relative dangers of pipelines and trucks? What is the likelihood of KXL oil being exported to non-US markets? What does fungible mean? Do individual consumers have the ability to choose where their petroleum products come from? How would the KXL pipeline affect this? Where is Canada? How did investors in TransCanada react to the Jan 18th decision by Obama to "reject" the KXL pipeline? What is the future of the KXL pipeline?
Slides from lecture today are on Sakai. Your reading assignment for Friday is U.S. Geological Survey Fact Sheet 2008-3049: Circum-Arctic Resource Appraisal: Estimates of Undiscovered Oil and Gas North of the Arctic Circle (.pdf) by Bird et al.
Also, the homework assignment for Feb Break is available on Sakai.
Monday, February 13, 2012
Lecture 15 Summary and Notes
Some important concepts for the day...
1. There is an exam this week.
2. Apparently, no one wants to develop the Lewis Shale.
3. PA has a new (less than a week old) fracking law that clearly overrides municipal home rule (large cities exempt), sets a tax rate of ~2.6% (TX = 5.4%) and includes some new environmental regulations. The entire article can be found here.
4. When compared to oil from conventional sources, the production of oil from the tar sands has many characteristics make it interesting:
estimated reserve volume
geographic location
EROEI
water and CO2 pollution
Canadianess
5. EROEI (Energy Returned On Energy Invested) is a useful way to not only compare energy from different types of resources but also different reserves within an energy source. The Alberta Tar Sands have a very low EROEI compared to other sources of petroleum (particularly petroleum from Middle Eastern conventional reserves). Why?
6. "Ethical Oil" is a marketing concept that attempts to distract people from the many environmental problems associated with oil from the Alberta Tar Sands by focusing on some of the very real sociopolitical problems endemic in many non-Canadian oil exporting countries.
7. The Keystone XL pipeline will facilitate the midstream transport of oil from the tar sands to US refineries on the Gulf Coast. Wednesday, we will discuss why the KXL pipeline is such a big deal.
Slides from lecture today are on Sakai. There will be no additional reading assignment for Wednesday.
1. There is an exam this week.
2. Apparently, no one wants to develop the Lewis Shale.
3. PA has a new (less than a week old) fracking law that clearly overrides municipal home rule (large cities exempt), sets a tax rate of ~2.6% (TX = 5.4%) and includes some new environmental regulations. The entire article can be found here.
4. When compared to oil from conventional sources, the production of oil from the tar sands has many characteristics make it interesting:
estimated reserve volume
geographic location
EROEI
water and CO2 pollution
Canadianess
5. EROEI (Energy Returned On Energy Invested) is a useful way to not only compare energy from different types of resources but also different reserves within an energy source. The Alberta Tar Sands have a very low EROEI compared to other sources of petroleum (particularly petroleum from Middle Eastern conventional reserves). Why?
6. "Ethical Oil" is a marketing concept that attempts to distract people from the many environmental problems associated with oil from the Alberta Tar Sands by focusing on some of the very real sociopolitical problems endemic in many non-Canadian oil exporting countries.
7. The Keystone XL pipeline will facilitate the midstream transport of oil from the tar sands to US refineries on the Gulf Coast. Wednesday, we will discuss why the KXL pipeline is such a big deal.
Slides from lecture today are on Sakai. There will be no additional reading assignment for Wednesday.
Wednesday, February 8, 2012
Lecture 14 Summary and Notes
Some important concepts for the day...
1. The USA is unique (or almost unique) in the world oil scene because:
a. our oil production industry was "developed" much earlier than other major producing countries
b. we import way more oil than any other country
c. we are one of the top three producers in the world but the other two are also the worlds biggest exporters
d. we have way more wells that any other nation
e. we have the refinery capacity that allows us to import more refined petroleum (like gasoline and diesel) than we import
f. our domestic production is dominated by public multinational corporations instead of wholly or partially state controlled oil companies
2. Right now, the world's two big oil exporters are KSA and Russia.
3. The interactive map from Marketplace (a daily news show about the economy on Public Radio International) provides an interesting look at historic production (and production peaks) in major producing countries from around the world.
4. The top importers to the USA over the past 38 years have been Canada, KSA, Venezuela, Mexico, and Nigeria (after which there is a big drop). Overall, the USA has imported oil from 120 different countries since the beginning of 1973. Of the major importing countries, imports from Canada, Mexico, Nigeria, Algeria, Angola, Iraq, Colombia, Kuwait, and Russia are up and imports from Canada, Russia, Brazil, and Kazakhstan are expected increase on into the the near future while imports from the UK, Indonesia, and Norway are down and are expected to decrease further in the near future.
5. Since Canada is our #1 importer and will be for the foreseeable future and their petroleum reserves consist mostly of the Alberta tar sands, it is essential to understand what makes the unconventional tar sands different than other petroleum reserves. Today, we looked at how synthetic crude oil is produced from mined tar sands deposits and on Monday, we will look into the controversy surrounding the exploitation of the tar sands as well as the controversy surrounding new pipeline that has been proposed to move more tar sands oil to US refineries.
Slides from lecture today are on Sakai. For Monday, please read a pair of New York Times Articles on the Keystone XL Pipeline: Rejecting Pipeline Proposal, Obama Blames Congress by John Broder and Dan Frosch published January 18, 2012 and For G.O.P., Pipeline Is Central to Agenda by Jennifer Steinhauer published February 1, 2012. My thanks to T. Meric III for bringing the first article to my attention. In addition to the reading (and homework assignment), please watch the following clip from the November, 14, 2011 episode of the Cobert Report during which Stephen Cobert interviews Middlebury College Scholar in Residence and climate activist, Bill Mckibben about the Canadian tar sands and the proposed pipeline. A note to sensitive viewers- this video contains allegorical references to the "bathing suit" areas of human body. Also, if you are unfamiliar with the work of Stephen Cobert, I strongly urge you to spend a few minutes with his Wikipedia page before watching the video.
1. The USA is unique (or almost unique) in the world oil scene because:
a. our oil production industry was "developed" much earlier than other major producing countries
b. we import way more oil than any other country
c. we are one of the top three producers in the world but the other two are also the worlds biggest exporters
d. we have way more wells that any other nation
e. we have the refinery capacity that allows us to import more refined petroleum (like gasoline and diesel) than we import
f. our domestic production is dominated by public multinational corporations instead of wholly or partially state controlled oil companies
2. Right now, the world's two big oil exporters are KSA and Russia.
3. The interactive map from Marketplace (a daily news show about the economy on Public Radio International) provides an interesting look at historic production (and production peaks) in major producing countries from around the world.
4. The top importers to the USA over the past 38 years have been Canada, KSA, Venezuela, Mexico, and Nigeria (after which there is a big drop). Overall, the USA has imported oil from 120 different countries since the beginning of 1973. Of the major importing countries, imports from Canada, Mexico, Nigeria, Algeria, Angola, Iraq, Colombia, Kuwait, and Russia are up and imports from Canada, Russia, Brazil, and Kazakhstan are expected increase on into the the near future while imports from the UK, Indonesia, and Norway are down and are expected to decrease further in the near future.
5. Since Canada is our #1 importer and will be for the foreseeable future and their petroleum reserves consist mostly of the Alberta tar sands, it is essential to understand what makes the unconventional tar sands different than other petroleum reserves. Today, we looked at how synthetic crude oil is produced from mined tar sands deposits and on Monday, we will look into the controversy surrounding the exploitation of the tar sands as well as the controversy surrounding new pipeline that has been proposed to move more tar sands oil to US refineries.
Slides from lecture today are on Sakai. For Monday, please read a pair of New York Times Articles on the Keystone XL Pipeline: Rejecting Pipeline Proposal, Obama Blames Congress by John Broder and Dan Frosch published January 18, 2012 and For G.O.P., Pipeline Is Central to Agenda by Jennifer Steinhauer published February 1, 2012. My thanks to T. Meric III for bringing the first article to my attention. In addition to the reading (and homework assignment), please watch the following clip from the November, 14, 2011 episode of the Cobert Report during which Stephen Cobert interviews Middlebury College Scholar in Residence and climate activist, Bill Mckibben about the Canadian tar sands and the proposed pipeline. A note to sensitive viewers- this video contains allegorical references to the "bathing suit" areas of human body. Also, if you are unfamiliar with the work of Stephen Cobert, I strongly urge you to spend a few minutes with his Wikipedia page before watching the video.
Monday, February 6, 2012
Lecture 13 Summary and Notes
Some important concepts for the day...
1. Short-term prices of crude oil are notably affected by:
a. large-scale economic disruptions (like the late 200s resession or the European economic slowdown
b. armed conflict in the Middle East
c. changes in supply due to KSA or OPEC increasing or decreasing production
d. releases from the strategic petroleum reserve
We will get into long-term prices later.
2. The strategic petroleum reserve is a series of above- and underground storage facilities in TX and LA that have the capacity to hold 30+ days (at current consumption levels) worth of oil.
3. Increases in drilling activity for both oil and natural gas closely follow (in time) increases in the price of oil and natural gas suggesting that increases in drilling activity occur in response to increases in price.
4. Wellhead price of natural gas shows several large spikes after 2000. Prices for natural gas are more susceptible to supply disruption-related increases than oil because of our reliance on domestic production and the concentration of natural gas production facilities in the hurricane-prone GOM states.
5. There is no relationship between the price of oil or natural gas and their consumption in the US
6. Before 1996, there was a positive collection between the price of oil and the % oil oil that the US consumed that was from domestic production. After 1996, imports began to exceed domestic production and we (the US) have been stuck at ~40% domestic production regardless of the price of oil since.
7. The mismatch in the estimated reserve size that is predicted by Hubbert linearization and the actual production curve is a result in the technology and price driven changes in the reserve volume that are evident in a system that is increasingly reliant on petroleum from unconventional sources.
8. This mismatch is not as evident with world oil reserves.
Slides from lecture today are on Sakai. There is no reading assignment for Wednesday.
1. Short-term prices of crude oil are notably affected by:
a. large-scale economic disruptions (like the late 200s resession or the European economic slowdown
b. armed conflict in the Middle East
c. changes in supply due to KSA or OPEC increasing or decreasing production
d. releases from the strategic petroleum reserve
We will get into long-term prices later.
2. The strategic petroleum reserve is a series of above- and underground storage facilities in TX and LA that have the capacity to hold 30+ days (at current consumption levels) worth of oil.
3. Increases in drilling activity for both oil and natural gas closely follow (in time) increases in the price of oil and natural gas suggesting that increases in drilling activity occur in response to increases in price.
4. Wellhead price of natural gas shows several large spikes after 2000. Prices for natural gas are more susceptible to supply disruption-related increases than oil because of our reliance on domestic production and the concentration of natural gas production facilities in the hurricane-prone GOM states.
5. There is no relationship between the price of oil or natural gas and their consumption in the US
6. Before 1996, there was a positive collection between the price of oil and the % oil oil that the US consumed that was from domestic production. After 1996, imports began to exceed domestic production and we (the US) have been stuck at ~40% domestic production regardless of the price of oil since.
7. The mismatch in the estimated reserve size that is predicted by Hubbert linearization and the actual production curve is a result in the technology and price driven changes in the reserve volume that are evident in a system that is increasingly reliant on petroleum from unconventional sources.
8. This mismatch is not as evident with world oil reserves.
Slides from lecture today are on Sakai. There is no reading assignment for Wednesday.
Friday, February 3, 2012
Lecture 12 Summary and Notes
Some important concepts for the day...
1. The Marcells Shale thickens to the East and dips to the East.
2. When estimating the size of a reserve (in the case of our discussion, an oil reserve), accuracy is difficult because:
a. subsurface geology is very complex and even if an area has been thoroughly surveyed/studied, it is difficult to know how much oil there is in place, how productive the wells will be, etc.
b. there are incentives to misrepresent oil reserves (both understating reserve volume and overstating reserve volume)
c. a reserve is, by definition, based on the volume of technically and economically recoverable oil within some defined area; therefore, the volume of a reserve changes with technological improvements and changes in price.
2. In 1956, M. King Hubbert published a method for estimating reserve volumes by looking only at production. The Hubbert Method is based on the observation that a graph of production as a function of time for an oil field is a bell-shaped curve and by looking at annual production and cumulative production in an oilfield (or country or planet) you can estimate the volume of a reserve, the timing of the peak of production, as well as future production decline rates. This production peak is the "peak" in "peak oil" which we will discuss next week. Our method for calculating the Hubbert peak uses a mathematical simplification developed by Kenneth Deffeyes.
3. There is a clear correlation between the price of natural gas and the number of active drill rigs in the US in the past 35+ years.
4. In the case of crude oil, the relationship between price and the number of active drill rigs in not as obvious. If the data are segregated temporally, however, some clear trends begin to emerge... During the time period that world crude oil prices were effectively controlled by OPEC (up to 2003), the number of active drill rigs increased slightly with increases in crude oil price. After OPEC lost control of world oil prices (after 2003), we also see an increase in the number of active wells with increasing price but now drilling activity is much more sensitive to fluctuations in the price of crude oil (small increases in price correlate with more substantial increases in the number of active drill rigs.) During the late 2000s recession, a new relationship emerged, still with a positive correlation between price and drilling but now we are seeing lots more drilling and a reduction in sensitivity.
5. OPEC is a consortium of countries that have worked together in the past to stabilize (control) the price of oil; this worked well until around 2003 and less well after that.
6. The mechanism to affect the price of a desired commodity is to control the demand (and please keep in mind that I am a geology professor, not an econ professor...) The standard supply and demand curves occupy price-time space such that they intersect at an equilibrium price and quantity (or rate of consumption. If demand remains constant (and we have good evidence that it does), then a reduction in supply will result in a reduced quantity sold at a greater price (equilibrium 2). If demand falls and the supply remains constant, then the price will decrease with a reduction in quantity (equilibrium 3)
If on the other hand, your equilibrium price is unacceptably high, you can increase the supply and a new equilibrium price (with increased quantity) will result.
In short, if you reduce the supply, the price goes up and if you increase the supply, the price comes down. Historically, the best example of this are OPEC raising and cutting production, KSA raising output, and drawdowns of the US strategic petroleum reserve. We will continue with this on Monday.
Slides from lecture today are on Sakai. For Monday, please read Scraping Bottom: Once considered too expensive, as well as too damaging to the land, exploitation of Alberta's oil sands is now a gamble worth billions by Robert Kunzig in the March, 2009 issue of National Geographic Magazine.
1. The Marcells Shale thickens to the East and dips to the East.
2. When estimating the size of a reserve (in the case of our discussion, an oil reserve), accuracy is difficult because:
a. subsurface geology is very complex and even if an area has been thoroughly surveyed/studied, it is difficult to know how much oil there is in place, how productive the wells will be, etc.
b. there are incentives to misrepresent oil reserves (both understating reserve volume and overstating reserve volume)
c. a reserve is, by definition, based on the volume of technically and economically recoverable oil within some defined area; therefore, the volume of a reserve changes with technological improvements and changes in price.
2. In 1956, M. King Hubbert published a method for estimating reserve volumes by looking only at production. The Hubbert Method is based on the observation that a graph of production as a function of time for an oil field is a bell-shaped curve and by looking at annual production and cumulative production in an oilfield (or country or planet) you can estimate the volume of a reserve, the timing of the peak of production, as well as future production decline rates. This production peak is the "peak" in "peak oil" which we will discuss next week. Our method for calculating the Hubbert peak uses a mathematical simplification developed by Kenneth Deffeyes.
3. There is a clear correlation between the price of natural gas and the number of active drill rigs in the US in the past 35+ years.
4. In the case of crude oil, the relationship between price and the number of active drill rigs in not as obvious. If the data are segregated temporally, however, some clear trends begin to emerge... During the time period that world crude oil prices were effectively controlled by OPEC (up to 2003), the number of active drill rigs increased slightly with increases in crude oil price. After OPEC lost control of world oil prices (after 2003), we also see an increase in the number of active wells with increasing price but now drilling activity is much more sensitive to fluctuations in the price of crude oil (small increases in price correlate with more substantial increases in the number of active drill rigs.) During the late 2000s recession, a new relationship emerged, still with a positive correlation between price and drilling but now we are seeing lots more drilling and a reduction in sensitivity.
5. OPEC is a consortium of countries that have worked together in the past to stabilize (control) the price of oil; this worked well until around 2003 and less well after that.
6. The mechanism to affect the price of a desired commodity is to control the demand (and please keep in mind that I am a geology professor, not an econ professor...) The standard supply and demand curves occupy price-time space such that they intersect at an equilibrium price and quantity (or rate of consumption. If demand remains constant (and we have good evidence that it does), then a reduction in supply will result in a reduced quantity sold at a greater price (equilibrium 2). If demand falls and the supply remains constant, then the price will decrease with a reduction in quantity (equilibrium 3)
If on the other hand, your equilibrium price is unacceptably high, you can increase the supply and a new equilibrium price (with increased quantity) will result.
In short, if you reduce the supply, the price goes up and if you increase the supply, the price comes down. Historically, the best example of this are OPEC raising and cutting production, KSA raising output, and drawdowns of the US strategic petroleum reserve. We will continue with this on Monday.
Slides from lecture today are on Sakai. For Monday, please read Scraping Bottom: Once considered too expensive, as well as too damaging to the land, exploitation of Alberta's oil sands is now a gamble worth billions by Robert Kunzig in the March, 2009 issue of National Geographic Magazine.
Wednesday, February 1, 2012
Lecture 11 Summary and Notes
Some important concepts and questions for the day...
1. More win-win-win from the 2012 State of the Union Address
2. An EPA report of Pavillion, WY shows frac fluid in deep monitoring wells and methane in drinking water wells- the distinction here is important
3. First 1/2 of 2011 in the PA Marcellus:
7729 permitted wells
1647 producing wells
3.6% of US production (I said 1.8% in lecture but this was a comparison of 6 months of PA Marcellus 1 year of US consumption)
lots of gas, lots of money, not very much waste...
what is the waste and where does it end up?
how do you compare oil and natural gas, anyway?
4. Fracking bans and moratoriums (or moratoria): national, state (US), local... Why is Bulgaria's ban more surprising that France's ban? How is fracking regulated at the (US) federal level? How will it (probably) be regulated in the future? What are the National and State- level bans and moratoria? What are some important/interesting local bans/moretoria? What is municipal home rule and why is it important in the discussion of fracking?
5. Estimating natural gas reserves: Is there really 100 years' worth of natural gas beneath the United States? What assumptions have to be made for our president (and anyone else to make such a statement?
Slides from lecture are on Sakai. Friday, we will finally get around to discussing Monday's HW assignment on how the price of oil drives certain behaviors and look forward to next Monday's homework on estimating oil reserves. Your reading assignment for Friday is Barrel Fever: Does anyone know how much oil there is in the world? by Yves Smith posted Wednesday, June 25, 2008 on Slate Magazine.
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1. More win-win-win from the 2012 State of the Union Address
2. An EPA report of Pavillion, WY shows frac fluid in deep monitoring wells and methane in drinking water wells- the distinction here is important
3. First 1/2 of 2011 in the PA Marcellus:
7729 permitted wells
1647 producing wells
3.6% of US production (I said 1.8% in lecture but this was a comparison of 6 months of PA Marcellus 1 year of US consumption)
lots of gas, lots of money, not very much waste...
what is the waste and where does it end up?
how do you compare oil and natural gas, anyway?
4. Fracking bans and moratoriums (or moratoria): national, state (US), local... Why is Bulgaria's ban more surprising that France's ban? How is fracking regulated at the (US) federal level? How will it (probably) be regulated in the future? What are the National and State- level bans and moratoria? What are some important/interesting local bans/moretoria? What is municipal home rule and why is it important in the discussion of fracking?
5. Estimating natural gas reserves: Is there really 100 years' worth of natural gas beneath the United States? What assumptions have to be made for our president (and anyone else to make such a statement?
Slides from lecture are on Sakai. Friday, we will finally get around to discussing Monday's HW assignment on how the price of oil drives certain behaviors and look forward to next Monday's homework on estimating oil reserves. Your reading assignment for Friday is Barrel Fever: Does anyone know how much oil there is in the world? by Yves Smith posted Wednesday, June 25, 2008 on Slate Magazine.
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