Revi wrote:We aren't going to pay more for oil because what it does isn't worth it any more.
I hope you don't take this personally Revi, but that is a crock.
It is simply
*Preperation Justification© —
Rationalizing preps by insisting what we prepped for is happening/has happened/is going to happen this Tuesday (maybe Wednesday). I only recognize it because I are it! LOL
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I went to the library and a couple of other places yesterday, the unleaded I used did exactly what gasoline did a week/year/decade/century ago. I'm gonna say that pretty well proves oil's intrinsic worth exactly the same as ever, its the law of thermodynamics in action, LOL.
Now, the value of money changes and the value we
receive from oil changes, but the energy in oil is unchanged.
Yesterday I drove a Hyundai that goes twice as far on a gallon as my last car, so the oil I used was actually twice as
useful in that case. I did a couple of errands instead of just one in the same trip so actually the
value of the oil I used doubled again.
The "worth" of oil, the heat available in combustion, is the same as it ever was, how we elect to use it decides its value. The value of oil is not falling, criminy, we just spent 4 years paying the highest average price ever for oil, how can it's value be falling?
I don't know how many ways to explain it, not that explanations alter belief, or counter Preparation Justification, but oil is priced on supply and demand—exaggerated 10 or 100 fold by speculation— but S&D nonetheless; excess demand means higher price, excess supply means lower price.
$100/bbl for 100mmb/d may be the limit this economy can afford to pay. That doesn't mean the heat available in oil is falling, that is the highest average price ever, it means the
utility we receive is not rising fast enough to compensate for the difficulty of increasing flow rates.
This economy can't afford to pay much more that $100 for THIS AMOUNT of oil.
But cut out a little "waste" — add a few more errands to each trip, halving the number of trips, and we could afford more: $150 for 75mmb/d perhaps?
The supply is slightly higher than demand at the moment and oil is half the price it was a year ago, less than lifting costs in places and much less that the cost of adding additional volume, all things being equal the excess supply will disappear and the price will rise to balance demand — that is "Marginal Barrel Pricing" in textbook form.