Wolf At The Door - Barron's Article On Matt Simmons' Calling A 2005 Peak

[hatrack]

EDIT

Oil eased off its peak toward week's end, as buyers took a breather and concerns arose that the awful jobs report for December represented a harbinger of recession that would curb demand for all that crucial stuff like gasoline and heating oil that's squeezed out of a barrel of crude. And no doubt it will.

But, as we've said before (like George Bernard Shaw, we quote ourselves to spice our conversation), should oil suffer a slide, it'll probably be only to $80 a barrel, $75 at worst, not the $30-$40 the petro bears fantasize. And looking out a piece, prospects get increasingly bleak, not least because OPEC seems to have gotten its evil act together and China's inexorably growing thirst for oil shows no sign of being slaked.

Matt Simmons, boss man at Houston-based Simmons & Co., which covers energy the way Willie Mays used to cover center field, put out one of his rare personal reports on oil, and it doesn't make for pleasant reading. Matt lays out the case quite persuasively that global production peaked in 2005 at 74,298,000 barrels a day and is now a couple of million below that, while daily consumption has continued to climb and is rapidly approaching 88 million barrels. To fill the gap, he reports, various sources are being tapped, all of which share one quality -- they're not sustainable.

That suggests to him, among many more horrific things, that we'd better get used to $100-a-barrel oil, which he reassuringly reflects "is the equivalent of only 15 cents a cup." Somehow, that doesn't make us feel any better, even if it isn't "social chaos and widespread geopolitical conflict or war," possibilities he also alludes to if we don't get off our butts and do something about finding new energy sources, seriously pushing conservation and weaning ourselves from "a chronic addiction" to fossil fuels.

EDIT

http://online.barrons.com/article/SB119949084836468909.html

[phantom power]

1. Only 15 cents a cup!

WTF?

[Bigmack]

2. Hey, that's only 60 cents a quart -

WAY cheaper than milk. No problemo there folks....... Ms Bigmack

[happyslug]

3. 100/42/4/4= just under 15 cent a cup

$100 a Barrel

42 gallons in a Barrel

4 Quarts in a Gallon

4 Cups in a quart

100/42/4/4=0.14880952380952380952380952380952

Rounded up, that makes it 15 cents a cup at the pump. You have to add distribution costs and Federal and Local taxes to get it up to $3.19 per gallon.

15 cents a cup times 4 cups to a Quart times 4 Quarts to a Gallon = $2.40 per gallon.
Average Gasoline tax is about 42 cents, that makes it $2.82 per gallon which leaves about 38 cents per gallon for refining and distribution costs. The closer you are to the coast the less the distribution costs are, thus the gasoline I get comes up the Mississippi then the Ohio then the Monongahela by Barge, then by Truck to Johnstown. The closer you are to New Orleans the less distribution costs and thus the lower the price of Gasoline. The problem is the lowest the price can go is 38 cents a gallon (and rarely more than 20 cents). Please note the further south you go, the lower the gasoline tax, which also lowers the price of Gasoline at the pump.

[phantom power]

4. Oh... I don't dispute his number. It's just such a complete nonsequitor.

Like, if he quotes a small enough volume, that makes the price-tag for the small volume small, and so everything is OK!

In related news, gold is still only three cents per milligram!
:eyes: