How Fast Can We Get Offshore Oil?

Since John doesn't monitor the Daily Show, I've taken the responsibility. Check out the flip flops and speed with which drilling will come online (from 30 years to "under a year") in this video (around 2:45):

Comments

[Joshua Corning]

I didn't watch the video but i can guess that Jon shows McCain saying drilling will not reduce prices then later saying that they will reduce prices.

I am voting for Barr, but i really can't fault McCain for correcting his stance and being correct now rather then continuing to be wrong. This joke only works if you are like Zetland and have no understanding of markets.

The reality is oil scarcity is based on regulatory hurtles not on peak oil delusions. If there is political movement to remove those regulatory hurtles then one would expect the markets to adjust sooner rather then later.

[David Zetland]

This joke only works if you watch the video.

How about spending a little more time on reading and thinking and a little less time on unfounded blather? Good job shooting your foot -- from the hip -- however.

[odograph]

Joshua might be a phony ... I heard he inflates his tires!

[Silas]

Hold on, David: you're an intelligent economist. Wouldn't you agree that offshore drilling reduces prices quickly because of how it reduces bids for that far-future oil that will come out of it, which then eats back through all the futures prices to the spot price?

Arguably, the price reduction has already partially come through. Simply announcing intent to end the ban has made speculators change their minds about the future of oil availability, changing the spot price.

So, why join the chorus of "omg like, allowing more drilling will TOTALLY do nothing for the price, cuz, it won't come online for MANY years" ?

[David Zetland]

Well -- ending the ban and getting oil to market are two different things. 1) Drilling may *not* result in more oil. 2) Even if it does, that oil will not be available for awhile. If it's going to affect markets, it will affect futures for delivery 5-10 years out. (That's why the video is so funny -- everyone wants the oil NOW so prices fall NOW.)

[joshua corning]

That's why the video is so funny -- everyone wants the oil NOW so prices fall NOW.

Not really considering prices are dropping NOW on news of oil we will get 5-10 years from now.

I really do not understand why this is so hard for you to understand. Prices are determined by perception of future supply. If everyone thinks oil will be scarce in the future prices will be high. If everyone thinks oil will be abundant then prices are low. Stock prices move on news like this all the time. Hell commodity prices do this all the time.

Why do you think oil is somehow magically different?

[odograph]

Not really considering prices are dropping NOW on news of oil we will get 5-10 years from now.

Classic narrative fallacy.

[joshua corning]

Classic narrative fallacy.

Hey Odo i found the perfect article for you:

...immigrants in the United States produce an estimated four times more CO2 in the United States as they would have in their countries of origin.

http://www.cis.org/GreenhouseGasEmissions

Now you can combine your hatred of brown people with your love of a green humanless planet.

[David Zetland]

@JC -- you think the CURRENT drop in oil prices is because of MAYBE offshore drilling that's not even politically approved? Wow.

You must believe that stock markets fall because of "profit taking" too, eh?

[odograph]

That's pretty sick Joshua. I know that you think my (moderate) level of environmentalism implies policies which (you think) punish the poor, and that you'd take that further and not just imply, but claim I "hate."

In fact, I'm a lover, including of future generations of all races.

[joshua corning]

You must believe that stock markets fall because of "profit taking" too, eh?

Huh?

Stocks fell hard in 2001 because people felt the internet was not as big of a money maker as they thought it would be. Changes in opinion over the scarcity of oil has caused drops in oil prices.

McCain, Palosi, Obama and many others flip flopping on this issue on live television have contributed to this change in perception.

"Oh look politicians are doing stuff to increase supply of oil...I guess oil is not so scarce, I should call my broker and tell him to dump my oil futures."

Why do you think oil markets, unlike any other market, are immune to "irrational exuberance"?

Hell, how can you look at massive oil company profits during times of record oil and gas prices and not think oil companies are producing oil cheaply?

[odograph]

Stocks fell hard in 2001 because people felt the internet was not as big of a money maker as they thought it would be. Changes in opinion over the scarcity of oil has caused drops in oil prices.

I'd agree with the internet narrative a bit more, but it is still incomplete ... a lot of non-internet companies rode and crashed on the same bubble.

And the oil narrative neglects the record decline in consumption in the US (and also I think other developed market economies).

For what it's worth, I think emerging economies had more money to throw at oil, and a greater appetite for oil. Oil production could not expand as fast as that appetite. Prices started to rise, but aggressive 'price discovery' was driven by a parallel boom in resource speculation.

As we come out of that cycle we get to see how consumers, producers, and speculators balance each other going forward.

At least that's my narrative. I can't assert that it is "true" only that it makes sense to me, at the moment.

[David Zetland]

I'd take Odograph's narrative over Joshua's any day!

[joshua corning]

For what it's worth, I think emerging economies had more money to throw at oil, and a greater appetite for oil. Oil production could not expand as fast as that appetite.

This in no way conflicts with my narrative.

Yes oil demand increased and that lead to higher prices, just like the internet, which did offer higher productivity and ease of access to consumers and much much more. The idea that internet stocks had value is not in contention here (If you bought Amazon stocks in 1998 and held on to them you are probably pretty happy right now) or that Oil became less abundant in relation to demand. What is in contention is did a bubble form over and above the value of the internet get out of hand. Yes it did. The same is true with oil.

David,

I'd take Odograph's narrative over Joshua's any day!

You might want to reread Odo's narrative.

Prices started to rise, but aggressive 'price discovery' was driven by a parallel boom in resource speculation.

The Daily Show is looking less and less funny.

This should quiet the room.

Oil takes 10 years to develop not because of the difficultly in drilling and extracting but because of regulatory hurtles.

Under current laws, it could indeed take 10 years to produce oil, compared to two or three years for the actual drilling and pumping. Additionally, leasing is done slowly, thanks to laws written when oil was plentiful. Such laws were designed to gain maximum upfront money for the government, not for speed.

http://reason.com/news/show/128096.html

[odograph]

The Daily Show piece wasn't bad. I think the speculators were betting on, and profiting from, contracts only months ahead though.

If it had been long-term speculation, it would have taken storage ... the famous "missing storage" from this year's speculation arguments.

The Daily Show piece covered an admirable amount of ground, but the didn't really enunciate the tension between their drill and benefit in 10-20 years, and their replacements ready in 2050.

That leaves 30 years with "reserved reserves" to be opened? A production decline possibly starting sooner rather than later?

End game indeed.

[Glyn]

Why do you keep saying "hurtle" JC? Look in the dictionary.

And your comment re Odo and race is offensive and should be removed.