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Originally Posted by Baraka_Guru
But, relatively speaking, oil is cheap. I understand that you want cheaper oil, but how cheap can you go given all the variables?
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I think excessive regulation and counter productive government policy has inflated the price of oil far beyond what is reasonable. I agree there are many variables affecting the price other than the two factors I mention, but I think we could have an energy policy that gives us "cheap" oil, protects the environment, gives incentives for cost effective alternatives, and reduces our dependence on importing oil.
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We cannot repeat what we did in the second half of the 20th century to increase capacity. How do you think the world economy will change over the next 40 years?
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I think we can increase capacity. Technology applied properly has made a measurable impact on maximizing oil produced from older wells and our ability to produce oil from locations not accessible in the past.
I think the key to a sound energy policy is to encourage the development of alternatives and incrementally lowering demand while maintaining fair and reasonable prices for oil. Incremental changes in fuel efficiency standards in vehicles has lead us to a wide selection of vehicles that are safe, powerful, produce little pollution and are fuel efficient. If we removed 10% or 20% of the oldest vehicles currently in operation that would have a bigger impact on what we could do for the environment and overall fuel efficiency than any other reasonable idea in my opinion. Another example In the areas of urban development, the trend towards mixed use (residential, commercial, recreational development in a condensed urban setting) in an effort to stop suburban sprawl can have a material impact on our national oil consumption. These and other ideas can be done in addition to using wind, nuclear, biofuels, natural gas and solar, without panic, without excessive taxes, or excessively high oil prices. I think the next 40 years can be dynamic and exciting in terms of the possibilities.
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Seriously: I think oil is as cheap as it's getting for at least the next 10 or 15 years before supply can catch up again, and this will only happen when alternatives kick in and demand moves to meet it half way (figuratively speaking). I could see it maybe dropping as far as $100/barrel in the near future, but that may only be a result of volatility. There is a lot of investment in oil right now, so you'll see many things come out of the industry to help production, refinement, and new sources, but this growth of output will be slow compared to the growth of short-term demand. We cannot indefinitely expand capacity. There is only one Saudi Arabia and only one Athabasca Oil Sands. We might get lucky in some of the sea beds around the world, but I wouldn't bet on it.
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Do we know what the true price of oil is? Given all the factors that make up the price of oil, if we simply looked at the costs of production, refining, shipping, and reasonable profit those costs might less than 50% of the current cost. Have those costs materially changed in the past 12 months? I don't think they have.